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Soybeans:

July soybeans advanced 18.00 cents on heavier than normal volume of 282,640 contracts.Volume exceeded that of June 19 when the July contract lost 6.50 cents on volume of 239,311 contracts and total open interest declined by 11,455. However, volume was below that of June 18 when the July contract gained 8.75 cents on volume of 307,400 contracts and total open interest declined by 5,395.

On June 22, total open interest declined by 2,702 contracts, which relative to volume is approximately 50% below average, but a total open interest decline on the advance seen in yesterday’s trading clearly indicates that short sellers are driving prices higher, not new buying. The July contract accounted for loss of 18,974 of open interest, which means there were insufficient open interest increases in the forward months to offset the decline in July.

From June 16 through June 22, July soybean prices have advanced 51.50 cents, but total open interest has declined by 28,405 contracts and total open interest declined each day of the advance. Although the price advances have been impressive without much of a setback, the open interest action is telling us that distressed short-sellers are funding the gains.

This makes soybeans highly vulnerable to a very sharp setback. On June 17, July soybeans generated a short-term buy signal and will generate an intermediate term buy signal on June 23 if the low of the day is above OIA’s key pivot point for June 23 of 9.72 1/4.

As this report is being compiled on June 23, the July contract has made a high of 9.96, which is the highest print since 9.95 made on April 30, but has reversed and is now trading 5.75 cents lower on the day. We view this rally as temporary and it may continue for another couple of days as the June 30 report approaches, but after a sufficient number of short sellers have been blown out, we would expect the market to resume its downtrend, unless there is a major weather event.

Soybean oil:

July soybean oil advanced 37 points on volume of 119,144 contracts. Total open interest declined by 4,566 contracts, which relative to volume is approximately 25% above average meaning that liquidation was heavy on advance. The July contract lost 9,696 of open interest. As this report is being compiled on June 23 the July contract is trading 16 points lower.

On June 18, July and August soybean oil generated short-term sell signals, but have remained on intermediate term buy signals. As is typical after the generation of a sell signal, the market rallied for two days (June 19 and 22) and has likely resumed its downtrend. The sell signal will only be reversed if the August contract makes a daily low above OIA’s key pivot point for June 23 of 33.66. An intermediate term sell signal will be generated is the daily high is below OIA’s key pivot point for June 23 of 32.01. We think rallies should be sold.

Soybean meal:

July soybean meal advanced $10.50 on heavy volume of 150,577 contracts. Volume exceeded that of June 16 when the July contract gained 7.60 on volume of 148,214 contracts and total open interest increased by 1,558.On June 22, total open interest increased by 2,176 contracts, which relative to volume is approximately 40% below average, however the July contract lost 9,050 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 very positive.

From June 16 through June 22, July soybean meal prices have advanced $20.40 while total open interest has increased by 3,365. Keep in mind that from June 16 through June 22, the July contract lost 36,376 of open interest and despite this total open interest increased.

Compared to soybeans, open interest action in soybean meal have been the complete opposite. And the most recent COT report confirms why. In the report that was tabulated on June 16 managed money was long soybean meal by a ratio of 1.20:1 while they were short soybeans by 1.72:1. As this report is being compiled on June 23, the July contract is trading $2.80 lower on the day and has made a daily high 335.90, which is slightly above yesterday’s high of 335.30, and is the highest print since 333.00 made on March 9. On June 16, July soybean meal generated a short-term buy signal and an intermediate term buy signal on June 19. We think soybean meal will continue to rally for the next couple of days, but may stall as the June 30 report approaches.

Corn:

July corn advanced 6.75 cents on heavier than normal volume of 417,983 contracts. Volume exceeded that of June 19 when the July contract lost 4.75 cents on volume of 356,560 contracts and total open interest increased by 9,015.Additionally, volume was the highest since June 17 when the July contract advanced 5.25 cents on volume of 438,277 contracts and total open interest declined by 11,594.

On June 22, total open interest declined by 7,872 contracts, which relative to volume is approximately 25% below average. The July contract accounted for loss of 36,291 of open interest. From June 16 through June 22 July corn has rallied on three occasions (June 16 +5.75 June 17 +5.25, June 22 +6.75) and open interest has declined each day: 8,497, 11,594 and 7,872 respectively.

The most recent COT report, which was tabulated on June 16 showed that managed money was short corn by a ratio of 1.69:1, which is close to the ratio of soybeans ((1.72:1). Essentially, corn  and soybeans have the same dynamic: short sellers are powering the markets higher, not new buyers. Although corn is likely to rally irregularly as the June 30 report approaches, once prices have blown out a sufficient number short-sellers, the market is going to need new buyers to push prices higher.

As this report is being compiled on June 23, the July contract is trading 5.25 cents higher and has made a daily high of 3.68 3/4, which is the highest print since 3.68 1/2 made on June 9. For a short-term buy signal to be generated, the low the day must be above OIA’s key pivot point for June 23 of 3.62 3/8. The rally feels labored, and it may be difficult for the July contract to generate a short-term buy signal.

Chicago wheat:

July Chicago wheat advanced 12.75 cents on surprisingly light volume of 123,519 contracts.Volume was below that of June 19 when the July contract gained 0.50 cents on volume of 142,972 contracts and total open interest declined by 3,086. Additionally, volume was the lightest since June 12 when the July contract lost 0.50 cents on volume of 111,192 contracts and total open interest increased by 4505.

On June 22, total open interest declined by 1,590 contracts, which relative to volume is approximately 45% below average. The July contract lost 5,928 of open interest. Similar to corn and soybeans, rallies are blowing out short-sellers not attracting new buyers. Wheat has been the big surprise in the grain complex as it appeared to be headed toward a short-term sell signal and remarkably has remained buoyant despite the dismal fundamentals.

On June 16, July Chicago wheat generated an intermediate-term sell signal and for a short-term sell signal to be generated the high of the day must be below OIA’s key pivot point for June 23 of 4.92 1/8.  The rally will resume in earnest if the July contract makes a daily low above OIA’s key pivot point for June 23 of 5.08. 

WTI crude oil:

August WTI crude oil gained 41 cents on light volume of 496,298 contracts. Volume was the weakest since June 12 when WTI lost 81  cents on volume of 512,150 contracts and total open interest increased by 446. On June 22, total open interest declined by 4,772, which relative to volume is approximately 50% below average. The July contract accounted for loss of 18,739 of open interest.

As this report is being compiled on June 23, the August contract is trading 89 cents above yesterday’s close and has made a daily high 61.42, which is the highest print since 61.81 made on June 17.On May 20, WTI generated a short term sell signal, and has not generated an intermediate term sell signal.For the August contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for June 23 of 61.19.

Gold:

August gold lost $17.80 on surprisingly light volume of 131,751 contracts, although volume rose above that of June 19 when August gold lost 10 cents on volume of 93,207 contracts and total open interest increased by 2,062. As this report is being compiled on June 23, the August contract is trading $6.90 lower, and appears to be headed for a short-term sell signal, which would reverse the short-term buy signal of June 19.

When the short-term buy signal was generated, we said it was likely a false signal, especially since platinum is making new contract lows and silver is far from generating a short-term buy signal.For August gold to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for June 23 of $1183.80.

10 Year Treasury note:

The September 10 year note lost 24 points on light volume of 1,067,060 contracts. Total open interest increased by 23,212 contracts, which relative to volume is approximately 20% below average, however an open interest increase on yesterday’s price decline is clearly bearish.

As this report has been compiled on June 23, the September note is trading 6 points lower and has made a daily low of 125-090, which is the lowest print since 125-060 made on June 17. We stated in the weekend report that the sizable open interest increase on June 19 could the deep Johnny-come-lately’s getting on board at the top, and this has proved to be the case.

From the June 21 Weekend Wrap:

“With leverage funds massively short the 10 year note, this is not a terrible surprise.The massive open interest increases on Friday’s advance could just be Johnny-come-lately’s getting on board at a top or temporary top. This week should tell the story.”

S&P 500 E mini: The September S&P 500 E mini will generate a short-term buy signal on June 23 if the daily low is above OIA’s key pivot point for June 23 of 2108.75. This would reverse the short term sell signal of June 8. The September contract remains on an intermediate term buy signal.