This report is being written after the release of the USDA WASDE Report.

Soybeans:

July soybeans advanced 5.50 cents while the November contract gained 5.25 on total volume of 205,574 contracts.Volume was the heaviest since May 22 when soybeans advanced 13.50 cents on volume of 229,996 contracts and total open interest increased by 6,113. On June 10, total open interest increased by a massive 10,005 contracts, which relative to volume is approximately 100% above average meaning that aggressive new longs were entering the market and driving prices higher. July soybeans made a high of $14.75 1/4, and sold off to close fractionally higher. The July contract lost 9,246 of open interest and the November contract gained 14,351 of open interest.This explains the massive increase in total open interest. The old crop August contract gained only 1,608 of open interest. As this report is being compiled after the release of the USDA report, July soybeans are trading 1.50 cents lower while the November contract -4.50 and has made a low of 12.20. In yesterday’s report, we said to wait until just before the release of the report before making a decision whether or not to liquidate the put position in the November contract recommended on June 2. Our recommendation is to hold the position.

Soybean meal:

July soybean meal gained $2.30 on strong volume of 91,632 contracts. Total open interest increased by 2,619 contracts, which relative to volume is average. The July contract lost 7,317 of open interest and the large increase of open interest occurred in the December contract (+8202). We still favor the long July 2014-short August 2014 spread, but it should be liquidated if the spread dips to $23.00 premium July. For soybean meal to resume its uptrend, the daily low must be above OIA’s key pivot point of 486.70. Keep an eye on yesterday’s low of 481.00 and the low made on June 9 of 480.00 as potential support. With continued weakness in soybeans, it is going to take an extraordinarily strong soybean meal market to overcome the negative drag of soybeans.It appears that the July contract may generate a short term sell signal today.

Corn:

July corn lost 5.50 cents on volume of 350,008 contracts.Total open interest increased by a hefty 10,762 contracts, which relative to volume is approximately 20% above average, meaning that new short sellers were entering the market and driving prices to a new low for the move ($4.44 3/4). The July contract lost 20,659 of open interest, which makes the total open interest increase much more impressive (bearish). As this report is being compiled after the release of USDA report, July corn is trading 4.25 cents lower and has taken out yesterday’s low.July corn remains on a short and intermediate term sell signal. Stand aside.

Cotton:

July cotton gained 1.75 cents on huge volume of 56,925 contracts. Volume took out the 56,675 contracts traded on April 10. On June 10, total open interest increased by 1648 contracts, which relative to volume is approximately 15% above average meaning that new longs were entering the market and driving prices higher. The July contract lost 8,726 of open interest, which makes the total open interest increase more impressive (potentially bullish).However, cotton remains on a short and intermediate term sell signal and it takes more than a lot more than a one day rally to reverse these signals. As this report is being compiled on June 11 after the release of the USDA report, July cotton is trading 1.01 cents lower. Stay with bearish positions coupled with long calls to offset any potential short-term rally.

Live cattle:

August live cattle gained 12.5 points on volume of 50,825 contracts. Total open interest declined by 1,283 contracts, which relative to volume is average. The June contract lost 2,650 of open interest and the August contract lost 1,787 of open interest. We are becoming concerned about the very negative pattern of open interest declines while August cattle advances. During the past three-day period, August cattle advanced 2.075 cents while total open interest declined by 15,766 contracts. Most important, the August contract lost 3,514 contracts during this time.

We think it may be time to take some defensive measures, to protect the downside while allowing the bull call spread to continue to work if the market moves higher.We recommend initiating an out of the money put position in the August contract, which will reduce profits in the bull call spread, but makes sense when cattle prices are at nosebleed levels. The August contract made a new contract high yesterday at 1.43825, and as this report is being compiled on June 11, August cattle is trading 85 points lower and has not taken out yesterday’s high. Stay with the bull call position and initiate a new long position in out of the money August puts.

WTI crude oil:

July WTI crude oil lost 6 cents on heavy volume of 646,595 contracts. Total open interest declined by 420 contracts. The July contract lost 20,186 of open interest. As this report is being compiled on June 11, July WTI crude oil is trading 4 cents lower on the day. July WTI crude oil remains on a short and intermediate term buy signal. We recommend a stand aside posture.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.6 million barrels from the previous week. At 386.9 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 1.7 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.9 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 3.4 million barrels last week and are in the upper half of the average range. Total commercial petroleum inventories increased by 6.2 million barrels last week.

Natural gas:

July natural gas lost 11.5 cents on heavy volume of 378,865 contracts.Volume was higher than the 378,764 contracts traded on May 22 when July natural gas lost 12.1 cents and total open interest declined by 11,104 contracts. On June 10, open interest increased by 4,908 contracts, which relative to volume is approximately 45% less than average, but an open interest increase on a price decline is bearish. Adding to this was the July contract which lost 22,246 of open interest. In other words, there was sufficient open interest increases in the forward months to offset the loss in the July contract.

Additionally, June 10 was the 2nd day in a row when natural gas prices declined and total open interest increased. Our concern at this juncture is that open interest is acting bearishly after generating a short-term buy signal on June 6. Tomorrow, is the EIA storage report, and this will undoubtedly impact the market and will confirm the buy signal, or possibly indicate the signal is going to reverse. For this to occur, the high of the day must be below OIA’s key pivot point of $4.533. The natural gas storage report is released at 9:30 a.m CDT.At this juncture, we have no recommended position.

Euro:

The June euro lost 40 pips on heavy volume of 307,522 contracts. Volume was the highest since June 5 when the euro advanced 59 pips on volume of 527,863 contracts and total open interest increased by 4,961. On June 10, total open interest increased by a massive 27,467 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 lower. As this report is being compiled on June 11, the June euro is trading 13 pips lower and has taken out yesterday’s low of 1.3533.We have recommended a stand aside posture in the euro due to massive bearishness, which sets up a potential sharp short covering rally. Continue to stand aside.

British pound:

The June British pound lost 40 pips on huge volume of 230,176 contracts.Volume was the highest since March 13 when 230,069 contracts were traded and the June pound closed at 1.6604.On June 10, total open interest increased by a massive 14,867 contracts, which relative to volume is approximately 150% above average, meaning that aggressive new short sellers were entering the market and driving prices lower. This is the first time that we have seen a massive open interest increase on a price decline accompanied by heavy volume. On May 29, the June British pound generated a short-term sell signal and continues to be on an intermediate term buy signal.

For the British pound to resume its advance, the low the day must be above OIA’s key pivot point of 1.6815, and a resumption of the downtrend will occur when the daily high is below OIA’s key pivot point of 1.6782. We are far more comfortable being on the bearish side of the British pound than the euro at this juncture . The reason: manage money remains heavily long the pound and this will provide fuel for a downside move.

Platinum:

July platinum advanced $27.90 on heavy volume of 19,017 contracts. Volume was the highest since June 6 when July platinum advanced 7.90 on volume of 20,998 contracts and total open interest declined by 23 contracts. On June 10, total open interest increased by a massive 1361 contracts, which relative to volume is approximately 185% above average meaning massive numbers of new longs were entering the market and driving prices higher ($1485.80). Even though the market has been acting well, we remain concerned about the massive speculative long position held by managed money. Platinum remains on a short and intermediate term buy signal. Stand aside.

Silver:

July silver advanced 17.9 cents on volume of 56,145 contracts.However, the big news is that open interest increased by a hefty 2,357 contracts, which relative to volume is approximately 55% above average. This is the first time that we have seen an open interest increase on a price advance in quite some time. Additionally the increase was considerably above average.With managed money significantly short, we would have expected an open interest decline. We have not reported on silver lately because there has not been anything worth mentioning. Additionally, silver is not close to generating a short-term buy signal. However, we wanted to provide this alert to let clients know that silver may be in the process of turning around.

10 year Treasury Notes: On June 10, the September Treasury Note generated a short-term sell signal, but remains on an intermediate term buy signal. 

The September 10 year Treasury Note lost 5.5 ticks on volume of 1,054,794 contracts. Total open interest increased by 17,757 contracts, which relative to volume is approximately 30% less than average, but this is the 2nd open interest increase in a row on a price decline.This is bad news for anyone long the market, and is one more confirmation the September note is headed lower. Wait for a countertrend rally , which should last from 1-3 days before initiating bearish positions.