For Bloomberg access:{OIAR<GO>}

Soybeans: 

July soybeans lost 2.00 cents on heavy volume of 347,658 contracts. Volume was the strongest since April 28 when 340,242 contracts were traded and the July contract closed at 9.77 1/4.On June 23, total open interest declined by 10,636 contracts, which relative to volume is approximately 10% above average, meaning that liquidation was heavier than normal on the modest decline. There were open interest declines across the board with July losing 13,694 of open interest, August 2015 -67, September 2015 -260, and new crop November -3,823.

On June 23, July soybeans generated an intermediate term buy signal after generating a short term buy signal on June 17.

The July contract made a new high for the move yesterday at 9.96, which is the highest print since 9.95 made on April 30. What we saw yesterday in soybeans is what we have been seeing through the rally is massive liquidation as soybeans move higher. With prices at the highest level in nearly 2 months, short-sellers are hurting badly, and it is difficult to ascertain how much more short covering remains.

From June 16 through June 23, July soybean prices have advanced 49.50 cents, but total open interest has declined by 39,041 contracts and total open interest declined  on each day’s advance. Gains have been impressive without much of a setback, and it is panicked short-sellers who are pushing prices higher, not new buyers.

This is a very important concept because after the wave of short covering dissipates, it will take new buyers to push prices ever higher. We do not think this is in the cards unless there is a major weather event or a major surprise in the June 30 report. As this report is being compiled on June 24, the July contract is trading 2.75 cents lower, and has not taken out yesterday’s high.

Soybean oil

July soybean oil lost 10 points on volume of 126,148 contracts. Total open interest declined by 6,100 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the fractional decline.The July contract lost 12,098 of open interest. As this report is being compiled on June 24, the August contract has rallied 52 points and has made a daily high of 33.65, which is 1 point below OIA’s key pivot point for the generation of a short term buy signal. For a short-term buy signal to occur, the low of the day must be above OIA’s key pivot point of 33.66.

On June 18, August soybean oil generated a short-term sell signal, and as is typical after a sell signal, a counter trend rally ensues, which lasts from 1-3 days. Today, is the third day of the counter trend rally and this should be the extent of it. We recommended the initiation of bearish positions on rallies and would take advantage of today’s move to initiate a light bearish position. This should be exited upon the penetration of the June 11 high of 34.07.

From the June 18 report:

“Now that soybean oil is on a short-term sell signal, the market should have a countertrend rally lasting 1-3 days and this will be the opportunity to initiate bearish positions.”

Soybean meal: Yesterday’s huge volume accompanied by a massive increase of open interest may signal a major top or temporary top in soybean meal.

July soybean meal lost $1.70 on very heavy volume of 166,571 contracts.Volume traded on June 23 was the highest of 2015. On June 23, total open interest exploded higher by 9,162 contracts, which relative to volume is approximately 120% above average meaning huge numbers of new longs and shorts were making heavy commitments and shorts had the edge by moving the market modestly lower. The July contract lost 8,482 of open interest, which makes the total open interest increase neutral, but indicates that both longs and shorts had strong feelings about the direction of the market.

As this report is being compiled on June 24, the July contract is trading 2.20 lower on the day. Due to the very strong recent advances in addition to huge volume and a massive open interest increase in yesterday’s trade, we strongly encourage a cautious approach to the long side of this market. As we have pointed out in many reports in the past, very often, markets top on major volume spikes, especially when they are accompanied by massive increases of open interest.

Corn:

July corn advanced 7.50 cents on very heavy volume of 581,701 contracts.Volume was the strongest since June 10 when 699,375 contracts were traded and the July contract closed at 3.57 1/4. On June 23, total open interest declined by 8,487 contracts, which relative to volume is approximately 40% below average, but the total open interest decline indicates that short seller liquidation was powering the market higher, not new buying. The July contract lost 27,513 of open interest.

From June 16 through June 23 July corn has rallied on four occasions (June 16 +5.75 June 17 +5.25, June 22 +6.75, June 23 +7.25) and total open interest has declined each day: 8,497, 11,594, 7,872 and 8,487 respectively.

It appears that July corn may generate a short-term buy signal on June 24 because the daily low of 3.63 1/4 is above OIA’s key pivot point for June 24 of 3.62 5/8. After the generation of a short-term buy signal, the market should have a pullback lasting 1-3 days and its ability to resume the uptrend after the pullback will be the key test for the corn market. The rally may last for the remainder of the week before corn weakens as the June 30 report nears. It is important to keep in mind that buy signals can turn out to be false and we are seeing this in the gold market today.

Chicago wheat:

July Chicago wheat gained 20.25 cents on heavy volume of 180,792 contracts. Volume was the strongest since June 11 when the July contract lost 9.25  cents on volume of 180,704 contracts and total open interest increased by 4,684. On June 23, total open interest declined by 7,983 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the strong advance. This is negative and confirms that short seller liquidation is powering the market higher, not new buyers. The July contract lost 14,889 of open interest.

On June 16, July Chicago wheat generated an intermediate-term sell signal and for an intermediate term buy signal to occur, the low the day must be above OIA’s key pivot point for June 24 of 5.16 3/4 and the low thus far on June 24 has been 5.14 1/4. The common trait of rallies in soybeans corn and Chicago wheat is that they are being powered higher by distressed short-seller liquidation.

WTI crude oil:

August WTI crude oil advanced 63 cents on volume of 640,886 contracts. Total open interest increased by massive 37,894, which relative to volume is approximately 140% above average meaning that aggressive new buyers were entering the market in large numbers and moving prices to a high of 61.49, which is the highest print since 61.81 made on June 17. As this report is being compile on June 24, the August contract has made a high of 61.57 and currently is trading 85 cents lower on the day. The August contract remains on a short-term sell signal, but an intermediate term buy signal.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.9 million barrels from the previous week. At 463.0 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 0.7 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 1.8 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.3 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 6.7 million barrels last week.

Gold: On June 24, August gold will generate a short-term sell signal, which reverses the short-term buy signal of June 19.

August gold lost 7.50 on light volume of 128,758 contracts. Total open interest increased by massive 11,094 contracts, which relative to volume is approximately 250% above average meaning that huge numbers of new short-sellers were entering the market and driving prices to a new low for the move of 1175.60. As this report is being compiled on June 24, the August contract is trading 3.70 lower and has made a daily high of 1179.70, which is below OIA’s key pivot point for the generation of a sell signal of 1183.30. We informed our readers that the short-term buy signal generated on June 19 was likely a false one.

Euro:

The September euro lost 1.70 cents on volume of 272,799 contracts. Total open interest increased by 1,680 contracts, which relative to volume is approximately 70% below average, but an open interest increase on yesterday’s price decline is bearish. As this report is being compiled on June 24, the September contract is trading 17 pips higher after making a daily low of 1.1171, which is above yesterday’s low of 1.1146.

The September euro remains on a short and intermediate term buy signal and a short-term sell signal will occur if the daily high is below OIA’s key pivot point for June 24 of 1.1131. The rally will resume if the September contract makes a daily low above OIA’s key pivot point for June 24 of 1.1276.

S&P 500 E mini: On June 23, the September S&P 500 E mini generated a short-term buy signal, which reverses the short-term sell signal of June 8. The September contract remains on an intermediate term buy signal.

The September S&P 500 E mini gained 3.75 points on light volume of 838,429 contracts. Total open interest declined by 14,139 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on June 24, the September contract is trading 13.00 points lower on negative news from Greece.

Usually, after the generation of the buy signal, the market has a pullback that last from 1-3 days before resuming its uptrend. We have consistently advised the use of long option straddles and strangles in the September S&P 500 E mini contract. If the market continues to rally, the gain in the call will offset the loss in the put. However, if there is a market meltdown, the position will generate a substantial profit.