Bloomberg Access:{OIAR<GO>}

Corn:

July corn advanced 7.00 cents on very heavy volume of 691,876 contracts. Volume increased substantially from June 10 when the July contract gained 2.25 cents on volume of 500,094 contracts and total open interest increased by 6,766 contracts. Additionally, volume was the strongest since June 8 when the July contract advanced 3.50 cents on volume of 747,204 contracts and total open interest increased by 18,358.

On June 13, total open interest increased only 2,400 contracts, which is a major disappointment considering the magnitude of volume traded and the strong advance in yesterday’s trading. The July contract accounted for a loss of 52,094 of open interest and though there were enough open interest increases in the forward months to offset the decline in July, the inability to take out the June 8 high of 4.39 1/4 is beginning to confirm our  belief that corn is in the process of making a top. Stand aside for new positions. Do not pick a top in corn,

Soybeans:

July soybeans lost 9.25 cents on volume of 382,084 contracts. Total open interest increased by 6,417 contracts, which relative to volume is approximately 35% below average, but yesterday’s open interest increase on the price decline is negative. Additionally, the July contract lost 14,594 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.

As this report is being compiled on June 14, the July contract is trading 1.75 cents lower and has made a daily low of 11.52 3/4, which takes out yesterday’s print of 11.67 1/4 and is the lowest since 11.38 made on June 8. As we have said in previous reports, soybeans have a tendency to top out in June or July, We recommend against entering new bullish positions. Do not attempt to pick a top in soybeans.

WTI crude oil: The July WTI crude oil contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for June 14 of $48.35.

The August Brent crude oil contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for June 14 of $49.16.

July WTI crude oil lost 19 cents on volume of 954,809 contracts. Total open interest increased by a massive 37,552 contracts, which relative to volume is approximately 55% above average meaning new short-sellers were entering the market in large numbers and driving prices to a new low for the move of $48.16. Additionally, the July contract lost 18,356 contracts, which means there was more than enough open interest increases to offset the decline in July and increase total open interest substantially.

Yesterday’s action was very bearish and follows the activity of June 10 when the July contract lost $1.49 on volume of 1,129,805 contracts and total open interest increased by 8,535 while the July contract lost 51,418. We have been warning clients  crude was stalling at the upper end of the range and currently recommend that bearish strategies be formulated prior to the confirmation of a short term sell signal.

As this report is being compiled on June 14 the July contract is trading 55 cents lower and has made a new low for the move of 48.02, which is the lowest print since 47.97 made on June 2. Yesterday, July gasoline generated a short term sell signal and it appears likely that heating oil will follow. With weakening product prices, crude oil will lose the support that has kept prices aloft.

From the June 8 research note on WTI:

“Yesterday’s action followed the disappointing activity of June 7 when the July contract gained 67 cents on volume of 995,483 contracts and total open interest declined by 627 while the July contract lost 55,061 on June 7. In summary, during the past two sessions, as the July contract closed in on nearly one year highs, July WTI gained $1.54 while total open interest has increased only 174 contracts. While we are not suggesting that the bull move is over, it is a sign that momentum is stalling.”

Gasoline: On June 13, July and August gasoline generated short-term sell signals, but remain on intermediate term buy signals.

July gasoline lost 2.34 cents on volume of 213,761 contracts. Total open interest declined by 5,003 contracts, which relative to volume is approximately 10% below average.The July contract lost 11,239 of open interest. As this report is being compiled on June 14, the July contract is trading 2.09 lower on the day and has made a new low for the move of 1.5071, which is the lowest print since $1.471 made on May 11. We have no recommendation.

From the June 9 research note on gasoline:

“The COT report released last Friday showed that managed money was long gasoline by a ratio of 1.64:1, however managed money was long heating oil by ratio of 1.78:1 and WTI by 4.33:1. This underscores the lack of enthusiasm for gasoline by professionals and is the first time in memory that heating oil had a higher long ratio than gasoline.”

Gold:

August gold advanced $11.00 on strong volume of 213,014 contracts. Total open interest increased by 12,901 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 1290.20.The total open interest increase yesterday follows three previous days of open interest increases on price advances since the tabulation of the COT report on June 7.

While we are bullish on gold, our concern is the massive number of new participants in the market especially after the massive increase in the net long position according to the latest COT report released last Friday. Currently, according to the report managed money is long gold by ratio of 6.11:1. However this is down from the record ratio made several weeks ago of 8.31:1.

Our concern specifically is about the massive buying in advance of the Federal Reserve meeting, the minutes of which will be released tomorrow at 2:00 p.m. Eastern Daylight Time and Brexit. Gold has been advancing along with the dollar index, and it is highly unusual to see correlation between the two on multiple days.

For example, the August gold contract is trading $2.70 higher on June 14 while the September dollar index is trading 53.9 points higher on the day and has made a daily high of 95.140, which is the highest print since 95.640 made on June 3. For the dollar index to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for June 14 of 95.190.Conceivably, this may occur prior to the vote. We think it is likely that gold speculators will be fooled if there is an exit because the dollar will strengthen massively and in our opinion gold will have sharp decline. Stand aside.

Silver:

July silver advanced 11.3 cents on strong volume of 77,887 contracts. Total open interest increased by a sizable 3,332 contracts, which relative to volume is approximately 55% above average meaning aggressive new buyers were entering the market and driving prices higher, however considering the magnitude of the advance versus the substantial increase of open interest, it appears there may have been some hedging pressure in silver. The July contract lost 1715 of open interest.

As this report is being compiled on June 14, the July contract is trading 2.3 cents lower and has made a daily low of $17.225, which is above yesterday’s print of 17.105. All of what we have said about gold is applicable to silver. We recommend a stand aside posture.

Yen:

The September yen advanced 53 pips on volume of 159,963 contracts. Total open interest increased by 1,329 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on June 14, the September contract has made a new contract high of .9499. This week, the Japanese Central Bank will make an announcement regarding their quantitative easing program, and the central bank is getting desperate to stem the massive appreciation of the yen. We recommend a stand aside posture because it is too volatile to trade.

British pound: On June 13 the September British pound generated short and intermediate term sell signals.

The September British pound lost 36 pips on very heavy volume of 219,207 contracts. Total open interest declined by 2,841 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on June 14, the September pound is trading sharply lower again, down 1.12 cents and has made a new low for the move of 1.4099, which is the lowest print since 1.4112 made on April 14.The September contract is headed for a test of its contract low of 1.3880 made on February 29, 2016. We recommend strongly that clients do not trade the pound or its options. Stand aside.