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Tech Guy Weekend Update 9/3/23

The commitment of traders report is published every Friday for the previous week - a Tuesday to Tuesday reporting period. It details which trader categories (funds, commercials) did what - buy, sell, cover shorts, liquidate longs.

The report also tallies the total open interest change for the week - were contracts added or subtracted from the total? Open interest is the total number of contracts held overnight.

Soybean open interest increased and corn OI decreased. The reporting period is valid for August 22nd to August 29th. During this interval, soybeans rallied about +49 cents. The funds increased their net long position by +33,151 contracts

Generally speaking when soybeans rally and open interest increases, this tells us there is new buying happening - the funds are committing new longs and covering shorts because they are bullish.

Conversely, when soybeans rally, and open interest decreases, this is a warning that the bulls are running out of steam and the funds are liquidating their long positions.

2 additional factors occurred last week in the soybean market which is supportive for the bulls. The daily chart printed a Doji bar, where the open and close are equal or close to the same. Just as it is normal for bull market's open interest to increase during the rally, it's also normal for the OI to decrease during the corrections until the last day of the selling.

Therefore, there is open interest evidence that the bean correction has run its course - it increased over +7000 contracts on Friday, after decreasing the previous 3 days during the sell off. This usually indicates stopping volume from the bulls who are ready to take the market back up. These numbers indicate that the funds started to add back on to their long position.

Check out the daily soybean continuation chart. Please note that the COT reporting days are shown between the arrows.

Here are the websites for the commitment of traders and the soybean volume and open interest.

December Corn managed a small up day on Friday, staying on course with the bottoming pattern, higher lows and Elliot wave count. Corn traded sideways to a little higher from August 22nd through August 28th - the COT reporting period.

Specifically, corn open interest decreased 80,000 contracts while the funds covered 22,011 short contracts. Much of this OI decrease was due to the September contract going into first notice day and traders are leaving the corn market, but a bit over one quarter of the decrease was due to the exiting of fund shorts.

What seems significant is after mass liquidation and short covering (OI decrease) in corn for the previous approximately 8 trading days, open interest increased +12,018 on Friday.

While there is no absolute proof of this, this adding of contracts was probably largely due to new fund buying - using the same train of logic as beans increase of OI on Friday.

I would imagine this buying was ultimately due to the funds, on balance, thinking that there is more upside risk on Tuesday, than downside risk. Here is Friday's corn continuation chart, zoomed in, highlighting the commitment of traders reporting period and bottoming formation.

Here is a picture of the precipitation ranks for the corn belt and US for the last half of August going back to the year of 1893. Just another way to define the recent dryness.

Crude Oil marked an emphatic upside breakout on Friday, adding about $2.50 onto price, closing at $86.05. Support is now $83.89 and the next targets above are about $90.00 first, then $93.60.

The $93.60 level represents old swing highs clear back to last October. Check out this crude breakout! A bull market in crude oil is somewhat supportive to the grains.


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