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Soybeans: On June 17, July soybeans generated a short-term buy signal, but remains on intermediate term sell signal.

July soybeans advanced 11.50 cents on heavy volume of 316,773 contracts.Volume exceeded that of June 16 when the July contract gained 19.75 cents on volume of 303,334 contracts and total open interest declined by 3,030. On June 17, total open interest declined again, this time by 5,823, which relative to volume is approximately 25% below average. The July contract lost 19,481 of open interest, September 2015 -403.

The rally is being fueled by short sellers who are powering the market higher, not by new buyers. This is an important point to keep in mind when making buying and selling decisions. As this report is being compiled on June 18, the July contract is trading 6.50 cents above yesterday’s close and has made a new high for the move of 9.76, which is the highest print since 9.81 1/2 made on May 12.

Undoubtedly, there are large numbers of speculators who are suffering some financial pain as a result of the rally, and at this juncture the question is: how much farther can soybeans rally before substantial numbers of spec shorts are blown out thereby forming a top. As pointed out in yesterday’s report, ideally,we want to see open interest increase on price advances and decline on lower closes for the move to have sustainability.Again, we want to remind clients that soybeans have a strong seasonal tendency to top in June or July.

Now that soybeans have generated a short-term buy signal, the market should have a pullback lasting 1-3 days before resuming the uptrend, with the caveat that a pullback lasting longer than three days would likely be a reversal of the buy signal. For July soybeans to generate an intermediate term buy signal, the low of the day must be above OIA’s key pivot point for June 18 of 9.71 3/8.

Soybean oil: July soybean oil will generate a short-term sell signal on June 18 if the high of the day continues to be below OIA’s key pivot point for June 18 of 32.96 The July contract remains on an intermediate term buy signal

July soybean oil lost 5 points on volume of 143,942 contracts.Total open interest increased by 1,278 contracts, which relative to volume is approximately 55% below average. The July contract lost 10,780 open interest, which means there was sufficient open interest increases in the forward months offset the decline in July and increase total open interest.

We view the price and open interest action on June 17 as neutral. As this report is being compiled on June 18, the July contract is trading 41 points lower on the day. Now that the July contract is likely to generate a short-term sell signal on June 18, there is one less leg of support for soybeans.

Soybean meal:

July soybean meal advanced $2.90 on volume of 131,692 contracts. Total open interest increased by 1,356, which relative to volume is approximately 50% below average, however, the July contract lost 6,314 of open interest, which means that there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest. This is the second day in a row that we have seen this pattern. On June 16 the July contract gained $7.60 on volume of 148,214 contracts and total open interest increased by 1,558, while the July contract lost 7,443. It is very positive to see this kind of action two days in a row.

As this report is being compiled on June 18, the July contract is trading 1.10 higher and has made a daily high of 325.90, which is only slightly above yesterday’s high of 325.60. On June 16, the July contract generated a short-term buy signal, but will not generate an intermediate term buy signal on June 18. If soybeans are to continue their rally,  they will need help from soybean meal because soybean oil is clearly headed lower.

Corn:

July corn advanced 5.25 cents on volume of 438,277 contracts. Volume was the lowest since June 9 when the July contract lost 0.25 cents on volume of 437,402 contracts and total open interest declined by 4,844. On June 17, total open interest declined by 11,594 contracts, which relative to volume is average, but the total open interest decline on yesterday’s price advance is bearish because it indicates that the market was being powered higher by short sellers, not new buying.

Also, volume was substantially lower than what we have seen during the past several days and this shows that many potential market participants were on the sidelines.During, the past two sessions July corn has advanced 11.00 cents while total open interest declined by 20,091 contracts.

As this report is being compiled on June 18, July corn is trading 0.50 cents lower after making a daily high of 3.61 1/4, which matches yesterday’s high. Corn does not have the animal spirits and willing participants to trade significantly higher and has not been able to touch the key pivot point for the generation of a short-term buy signal, let alone make a daily low above it For a short-term buy signal to occur, the low of the day must be above OIA’s key pivot point 3.62 3/8.

Chicago wheat:

July Chicago wheat advanced 2.50 cents on volume of 136,973 contracts. Total open interest declined by 5,552 contracts, which relative to volume is approximately 55% above average, which means market participants were liquidating on the minor advance. The July contract lost 10,172 of open interest. As this report is being compiled on June 18, the July contract is trading 1.50 cents higher and has made a daily high of 4.98, which is slightly below yesterday’s high of 4.99 3/4 and is above OIA’s key pivot point of 4.92 2/8 for the generation of a short-term sell signal. The high of the day must be below the pivot point to generate a sell signal. On June 16, the July contract generated an intermediate term sell signal.

WTI crude oil:

July WTI crude oil lost 5 cents on heavy volume of 983,983 contracts. Volume was the strongest since June 10 when the July contract gained $1.29 on volume of 960,989 contracts and total open interest increased by 13,723. On June 17, total open interest declined by 17,002 contracts, which relative to volume is approximately 25% below average. The July contract lost 26,332 of open interest. As this report is being compiled on June 18, the July contract is trading 48 cents above yesterday’s close and has made a daily high of 60.89, which is below yesterday’s print of 61.38.The market was unable to take out the June 11 high of 61.53, which was made on a large spike in volume, and has become a major point of resistance for the July contract.

From the June 16 report:

“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.”

Dollar index:

The September dollar index lost 77.2 points on volume of 58,740 contracts. Total open interest increased by 2,488 contracts, which relative to volume is approximately 60% above average meaning that aggressive new short-sellers were entering the market and driving prices to a new low for the move (94.310).

As this report is being compiled on June 18, the September contract is trading 25 points lower and has made a daily low of 93.300, which takes out the previous low of 93.465 made on May 15.On June 4, the September dollar index generated an intermediate term sell signal and a short term sell signal on June 10.

Euro:

The September euro gained 93 pips on volume of 252,151 contracts. Total open interest declined by 113,449 contracts, which was due to the June contract expiring on June 17 and losing 110,712 open interest. However, the September contract lost 2,892 of open interest in yesterday’s trading, which confirms the liquidation of short positions as the market has rocketed higher.

Although, the euro is on short and intermediate term buy signals, we see the rally as essentially a blowout of the spec massive short position and once this is complete, we expect the market to resume its downtrend. As this report is being compiled on June 18, the September contract is trading 31 pips above yesterday’s close and has made a new high for the move of 1.1450 on a spike in volume and is the highest print since 1.1467 made on May 18.

British pound:

The September British pound advanced a huge 1.81 cents on volume of 117,480 contracts.Total open interest declined by 43,810, and this was due to the expiration of the June contract on June 17, which lost 51,038 of open interest. However, the September contract gained 7,207 of open interest indicating that aggressive new buyers were entering the market and driving prices to a new high for the move (1.5838) and for 2015, which takes out the May 14 continuation high for 2015 of 1.5821.

As this report is being compiled on June 18, the September contract is trading 29 pips above yesterday’s close and has made another 2015 high of 1.5924, which is the highest print since the week of November 10, 2014 when the December 2014 contract printed 1.5942. On, June 16, the September pound generated a short-term buy signal and has been on an intermediate term buy signal.

Canadian dollar: The September Canadian dollar will generate a short-term buy signal on June 18 if the daily low is above OIA’s key pivot point for June 18 of 81.43. The September contract remains on an intermediate term buy signal.

The September Canadian dollar advanced 58 pips on volume 68,085 contracts. Total open interest declined by 35,967, which was due to the June contract expiring on June 17, which lost 38,488 of open interest. However, the September contract gained 2,497 as prices moved higher. As this report is being compiled on June 18, the September contract is trading 32 pips above yesterday’s close and has made a daily high of 82.35, which is the highest print since 82.29 made on May 19.