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Soybeans:

July soybeans advanced 19.75 cents on heavier than normal volume of 303,334 contracts. Volume exceeded that of June 10 when the July contract lost 2.00  cents on volume of 296,722 contracts and total open interest declined by 5,874. On June 16, total open interest declined by 3,030 contracts, which relative to volume is approximately 50% below average. The July contract lost 15,592 of open interest.

Considering the magnitude of yesterday’s advance accompanying the total open interest decline, the dominant activity in yesterday’s trade was short covering. Keep in mind that managed money in short soybeans by a ratio of 2.10:1, and we think short-sellers will continue to power the market higher. Also, volume was a disappointment and we would have expected to have seen much more activity considering the size of the move.

In order for the market to have a sustained advance, new buyers must be willing to make commitments at ever higher prices. For example, it will be important to see open interest increase in today’s trading. As this report is being compiled on June 17, the July contract is trading at the highs of the day, up 10.25 cents and has made a daily high of 9.72, which is the highest print since 9.81 1/2 made on May 12.

July soybeans will generate a short-term buy signal on June 17, if the daily low is above OIA’s key pivot point of 9.50 3/4.The downtrend will resume in earnest if the July contract makes any daily high below OIA’s key pivot point for June 17 of 9.36 3/4.

Unless there is a major reversal in today’s trading, a short-term buy signal appears to be a certainty. Clients must keep in mind that a buy signal is not a call to take a position. Rather it is a condition that represents an extended move to the upside and as a result, there is generally a pullback lasting from 1-3 days after the generation of the buy signal. In summary, clients should expect a pullback tomorrow and possibly the next day.

Soybean oil:

July soybean oil gained 21 points on volume of 165,659 contracts. Volume fell from June 15 when the July contract lost 45 points on volume of 223,015 contracts and total open interest declined by 1,401. On June 16, total open interest increased by 2,070 contracts, which relative to volume is approximately 45% below average, however the July contract lost 8,915 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest. This is positive.

As this report is being compiled on June 17, the July contract is trading 1 point higher and has made a daily high of 33.22, which is the highest print since 33.56 made on June 12. July soybean oil remains on a short and intermediate term buy signal and the firm tone in the market should be supportive to soybeans.

Soybean meal: On June 16, July soybean meal generated a short-term buy signal, but remains on an intermediate-term sell signal.

July soybean meal gained $7.60 on volume of 148,214 contracts. Volume declined from June 15 when the July contract lost 4.20 on volume of 155,560 contracts and total open interest declined by 5,113. On June 16, total open interest increased by 1,558 contracts, which relative to volume is approximately 50% below average, however, the July contract lost 7,443 of open interest, which means there was sufficient open interest increases in the forward months to offset the decline in July and increase total open interest. This is positive.

As this report is being compiled on June 17, the July contract is trading 4.50 higher and has made a daily high at 325.60, which is the highest print since 324.70 made on April 30. For July soybean meal to generate an intermediate term buy signal, the low of the day must the above OIA’s key pivot point for June 17 $319.80 and the low on June 17 has been 319.40. Expect a 1- 3 day pullback now that soybean meal has generated a short term buy signal.

Corn:

July corn gained 5.75 cents on heavy volume of 558,334 contracts. Volume exceeded that of June 15 when the July contract lost 4.75 cents on volume of 564,924 contracts and total open interest increased by 3,794.On June 16, total open interest declined by 8,497 contracts, which relative to volume is approximately 40% below average, but an open interest decline on yesterday’s price advance indicates that short covering is powering the market higher, not new buying. The July contract lost 29,528 of open interest.

According to the latest COT report, managed money short corn by a ratio of 1.50:1, which means there is plenty firepower left by short-sellers to boost prices higher. Like soybeans, in order for a sustained move higher to occur, new buyers have to be willing to step up and make commitments at ever higher prices.

Ideally, we want to see open interest increase in today’s trading as the July contract is trading 5.75 cents above yesterday’s close and has made a daily high at 3.61 1/4, which is the highest print since 3.60 made on June 11.In order for the July contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for June 17 of 3.62 3/8. If corn is unable to generate a short-term buy signal, the market will trade sideways to lower.

Chicago wheat: On June 16, July Chicago wheat generated an intermediate term sell signal, but remains on a short-term buy signal.

July Chicago wheat lost 0.50 cents on volume of 137,921 contracts. Total open interest declined by 3,597 contracts, which relative to volume is average. The July contract accounted for loss of 10,554 of open interest. Although liquidation was at an average rate, it did not move prices much. As this report is being compiled on June 17, the July contract is trading 4.50 higher and has made a daily high of 4.99 3/4, which is above OIA’s key pivot point of 4.92 3/8 for the generation of a short-term sell signal. The high of the day must be below the pivot point.

WTI crude oil:

July WTI crude oil gained 45 cents on volume of 560,423 contracts. Total open interest declined by 2,449 contracts, which relative to volume is approximately 75% below average. The July contract accounted for loss of 17,278. As this report is being compiled on June 17, the July contract is trading 93 cents lower after rallying during the early morning hours and making a high of 61.38.

In the June 10 report, we pointed out the spike in volume at the close of trading in the pit and noted that the high on June 11 had been 61.53. We recommended that clients should make a note of this number as a potential interim high and this has been proven to be correct.

From the June 10 report:

“In the last 10 minutes of trading for the pit close (2:20 p.m.-2:30), volume traded in the July contract was 22,498 contracts (approximately 2 1/4% of total daily volume in all contracts) and the July contract made a high of 61.50.Today’s high has been 61.53 and clients should make a note of this number as a potential interim high.”

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 467.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 0.5 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 0.1 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 1.9 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week.

Natural gas:

July natural gas advanced 5 ticks on volume of 368,420 contracts. Total open interest increased by 2,326 contracts, which relative to volume is approximately 65% below average, but we view the total open interest increase in yesterday’s trade as positive. The July contract lost 12,459 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on June 17, the July contract is trading 4.00 cents lower and has made a daily low of 2.852, which is above yesterday’s print of 2.831.The natural gas market has been trading in a firm manner and open interest action is positive, but it has been unable to generate a short or intermediate-term buy signal. Tomorrow is the EIA storage report, and this should determine whether natural gas has the strength to generate buy signals.

Dollar index:

The September dollar index gained 16 ticks on light volume of 35,929 contracts. Total open interest declined by a massive 21,778, which was to to the expiration of the June contract which lost 22,113 of open interest. As this report is being compiled on June 17, the September contract is trading 14.2 ticks lower and has made a daily low of 94.990, which is above yesterday’s print of 94.810. The September contract remains on a short and intermediate term sell signal.

Euro:

The September euro lost 43 pips on light volume of 189,829 contracts. Total open interest increased by 916 contracts, which relative to volume is approximately 75% below average, but an open interest increase on yesterday’s price decline is bearish. Surprisingly, the June contract had an open interest increase of 76 contracts. As this report is being compiled on June 17, the September contract is trading 25 pips higher and has made a daily high of 1.1307, which is below yesterday’s print of 1.1344

In yesterday’s trading, we saw two major volume spikes, one of which occurred at the high of the day of 1.1344 and on the one-hour chart traded 26,497 contracts while the second volume spike occurred on the one-hour chart trading 25,663 contracts on the low of the day of 1.1218. As we have pointed out before, spikes in volume can reveal the exhaustion of a trend up or down.

Yesterday’s high was 1  pip below the June 11 print of 1.1345. If the September contract can break decisively above these highs, the market is likely to test the 1.1401 high on June 10 and then possibly test of the high for the move of 1.1485 made on May 15. On the other hand, if the September contract takes out yesterday’s low of 1.1218 a move to 1.1165 is likely.

British Pound: On June 16, the September pound generated a short-term buy signal, which reversed the June 1 short-term sell signal. The June pound remains on intermediate-term buy signal.

The September contract advanced 42 pips on light volume of 74,978 contracts. Total open interest increased by a substantial 3,059 contracts, which relative to volume is approximately 55% above average meaning that aggressive new buyers were entering the market and driving prices to a new high for the move (1.5644).As this report is being compiled on June 17, the September contract is trading 77 pips higher and has made a new high for the move of 1.5746, which is the highest print since 1.5780 made on May 15. The high for the move occurred on May 14 (1.5800).