Bloomberg Access:{OIAR<GO>}

Due to the switching out of positions from June into September, the open interest stats in currencies are massively distorted. As a consequence, we will not provide an analysis on currency futures in today’s report.

Corn:

July corn lost 3.50 cents on heavy volume of 615,677 contracts. Volume increased from June 9 when 555,762 contracts were traded and the July contract lost 4.75 cents while total open interest declined only 426 contracts. On June 10, total open interest increased by 6,682 contracts, which relative to volume is approximately 50% below average. However, the July contract lost 35,533 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in July and increase total open interest.

In our view, Friday’s price and open interest action was bearish and indicated that new short-sellers were aggressively entering the market at the high end of the trading range and driving prices lower (4.20). As this report is being compiled on June 13 the July contract is trading 8.00 cents above yesterday’s close and has made a daily high of 4.38, which takes out Friday’s high of 4.37 and is the highest print since 4.39 1/4, (the high for the move) made on June 8.

The COT report released on Friday and tabulated on June 7 showed that managed money increased their net long position substantially by adding 56,220 contracts to their long positions and liquidating 25,073 of their short positions. Commercial interests did the opposite: liquidating 17,333 of their long positions and adding 52,658 to their short positions. As a consequence, managed money is long corn by ratio 3.56:1, up substantially from the previous week of 2.26:1 and more than double the ratio two weeks ago of 1.51:1.

July corn remains on short and intermediate term buy signals, but with the lopsided long position of managed money, we recommend against bullish positions at current levels. Clients should have their sell parameters in place due to the seasonal tendency of corn to top out in late June early July. Do not pick a top in corn,

Soybeans:

July soybeans advanced 2.25 cents on heavy volume of 500,094 contracts. Oddly, volume exceeded that of June 8 when the July contract gained 36.50 cents on volume of 446,592 contracts and total open interest increased by 5,349 contracts. On June 10, total open interest increased by 6,766 contracts, which relative to volume is approximately 45% below average. The July contract accounted for a loss of 24,397 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in July and increase total open interest.

On Friday, the July contract made a new high for the move of $12.08 1/2, which is the highest print since July 2014. The COT report released on Friday showed that managed money remains massively long by ratio of 13.03:1, which is down from the previous week of 13.47:1 and the high ratio thus far of 14.52:1 made two weeks ago. Similar to corn, soybeans have a tendency to top out in the June-July time frame, and we strongly recommend against new bullish positions. Clients should have their sell parameters in place. Do not attempt to pick a top in soybeans.

WTI crude oil:

July WTI crude oil lost $1.49 on heavy volume of 1,129,805 contracts. Volume was the strongest since June 8 when the July contract gained 87 cents on volume of 1,276,655 contracts and total open interest increased only 801 contracts. On June 10, total open interest increased by 8,535 contracts, which relative to volume is approximately 55% below average and a total open interest increase during Friday’s decline is negative. Additionally, the July contract lost 51,418 of open interest, which means there were more than enough open interest increases in the forward months to offset the decline in July and increase total open interest.

We think it is highly likely that Brent and WTI will generate short-term sell signals within the next day or two. For August Brent to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for June 13 of $49.17 and the July WTI contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for June 13 of $48.24.

As we pointed out in last week’s research notes on crude oil, our concern has been the weakness of gasoline when on a seasonal basis it should be strong. July gasoline is trading 2.51 cents lower today and will generate a short-term sell signal on June 13. The COT report reveals that managed money added 8,007 contracts to their long positions and also added 26,062 to their short positions. Commercial interests liquidated 1,193 of their long positions and also liquidated 6,297 of their short positions. Currently, the long ratio for crude oil held by managed money stands at 3.16:1, down from the previous week of 4.33:1 and the ratio two weeks ago of 4.00:1.

Gasoline: July and August gasoline will generate short-term sell signals on June 13. Both contracts remain on intermediate term buy signals. The COT report reveals that managed money continues to lack enthusiasm for gasoline and liquidated 3149 of their long positions and added 342 to their short positions. This leaves managed money long gasoline by ratio of 1.50:1, down from the previous week of 1.64:1 and the ratio two weeks ago of 1.87:1.We have no recommendation.

Copper: On June 10, July and September copper generated short-term sell signals and remain on intermediate term sell signals. We have no recommendation.

Gold: On June 10 August and October gold generated short-term buy signals after intermediate term buy signals on June 9. These reverse the May 23 and May 25 short and intermediate term sell signals respectively.

August gold advanced $3.20 on volume of 178,417 contracts. Total open interest increased massively, up 10,675 contracts, which relative to volume is approximately 140% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of 1280.90.

As this report is being compiled on June 13, the August contract is trading $10.50 higher and has made a new high for the move of 1290.20,which is the highest print since 1290.40 made on May 16.The COT report revealed that managed money substantially increased their net long position and added 19,901 to their long positions and liquidated 8,854 their short positions and this leaves managed money long by a ratio of 6.11:1, up substantially from the previous week of 4.41:1 and the ratio two weeks ago of 4.21:1. Commercial interests liquidated 21,091 of their long positions and added 5,367 to their short positions.

Ever since the COT tabulation date of June 7, total open interest in gold has increased each day from June 8 through June 10. This means that the net long position of managed money has increased substantially since the last COT report. This makes us cautious, especially from a seasonal point of view, gold tends to be on the weak side during the month of June through mid July.We recommend holding off on initiating new bullish positions at current levels, even though there may be a test of the May 2 high of 1308.00.

Silver: On June 10, July and September silver generated short-term buy signals, which reversed the May 19 short-term sell signals. Both contracts remain on intermediate term buy signals.

July silver advanced 6.2 cents on volume of 66,106 contracts. Total open interest declined by 63 contracts.The July contract accounted for a loss of 5,952 contracts and there were insufficient open interest increases in the forward months to offset the decline in July. While open interest action in gold has been extremely positive, the action in silver  leaves much to be desired. For example on June 8, total open interest increased by only 597 contracts when the July contract advanced 59.1 cents on volume of 90,537.

The COT report also reflects the lack of enthusiasm on the part of manage money for silver and in the current report tabulated on June 7, managed money liquidated 2,529 of their long positions and added 2,226 to their short positions. This leaves managed money long by ratio 3.59:1, down from the previous week of 4.22:1 and the ratio two weeks ago of 4.06:1. Several weeks ago, the long ratio stood at a record 9.21:1.

We think there will be a tremendous opportunity on the bullish side of silver, and we like that much of the selling pressure is being squeezed out due to its volatility and seasonal weakness. We recommend a stand aside posture at this juncture and think there will be a better opportunity to initiate bullish positions during the next couple of weeks.

British pound: the June and September British pound will generate short and intermediate term sell signals on June 13.

We recommend strongly against trading the pound due to the upcoming Brexit vote on June 23. This market is much too volatile.