On June 18, Chicago and Kansas City wheat are rallying, and we will report on these in the June 18 report. Both Chicago and Kansas City wheat are not close to generating a short-term buy signal.

Soybeans:

July soybeans lost 23.50 and the November contract lost 5.00 cents on total volume of 212,406 contracts. Volume was the highest since June 12 when July soybeans lost 30.25 cents on volume of 279,281 contracts and total open interest declined by 3,777 contracts. On June 17, total open interest declined by 2,668 contracts, which relative to volume is approximately 45% below average. The July contract lost 15,157 of open interest. As this report is being compiled on June 18, July soybeans are trading 9.00  cents higher, and the November contract – 0.50 cents. Both July and November soybeans remain on a short-term sell signal, but have not yet generated an intermediate term sell signal.Continue to hold the long put position recommended on June 2 in the November contract.

Soybean meal:

July soybean meal lost $11.70 on heavy volume of 95,038 contracts. Volume was the strongest since June 12 when July soybean meal lost 13.10 on volume of 147,714 contracts and total open interest increased by 3164 contracts. On June 17, total open interest declined by 2,078 contracts, which relative to volume is approximately 15% below average. Yesterday, the July contract made a low of $450.10, which is the lowest print since March 31, 2014 of 450.60.On June 11, July soybean meal generated a short-term sell signal and will generate an intermediate term sell signal if the high of the day is below OIA’s key pivot point of $455.40. Stand aside.

Corn:

July corn lost 2.25 cents on volume of 265,421 contracts. Volume was below that of June 5 when July corn lost 7.25 cents on volume of 268,354 and total open interest increased by 8,314. On June 17, total open interest declined by a massive 10,779 contracts, which relative to volume is approximately 55% above average. Yesterday, July corn made a  new low for the move at 4.35 1/2, which is close to the January 10, 2014 contract low of 4.21 3/4.Stand aside.

Live cattle:  OIA recommends that clients liquidate bull call spreads and the long put position.

August live cattle lost 72.5 points on light volume of 37,979 contracts. Total open interest increased by a massive 2,606 contracts, which relative to volume is approximately 160% above average meaning that new short sellers were entering the market aggressively and driving prices lower. The June contract lost 1,436 of open interest and August gained 242. The August 2014 through October 2015 contracts all gained open interest. After the market made a new contract high at 1.47750, it sold off to close lower on the day.

The massive increase of open interest on the price decline is very bearish, and it appears the action on June 17 has all the earmarks of a key reversal day. As this report is being compiled on June 18, August cattle is trading 1.050 lower on heavy volume and has made a new low for the move at 1.44025, which is the lowest print since June 12 (1.43125). Although we do not think the bull market is over yet, it appears that market participants have lost their appetite for cattle at current high prices. Additionally, August cattle has violated some of OIA’s immediate term indicators.

WTI crude oil:

August WTI crude oil lost 43 cents on heavy volume of 726,432 contracts. Volume was the strongest since June 12 when WTI advanced $2.13 on volume of 896,614 contracts and total open interest increased by 24,318 contracts. On June 17, total open interest declined by 1,687, which is minuscule and dramatically below average. The July contract accounted for loss of 39,827 of open interest. As this report is being compiled on June 18, August WTI is trading 3 cents higher and has made a daily low of 105.36 and a high of 106.47. August WTI remains on a short and intermediate term buy signal. We recommend a stand aside posture.

Brent crude oil:

August Brent crude advanced 51 cents on light volume of 655,274 contracts. Total open interest increased by 19,542 contracts, which relative to volume is approximately 20% above average. The August contract gained 9,392 of open interest. The advance accompanied by a relatively heavy open interest increase bodes well for higher Brent prices. As this report is being compiled on June 18, August Brent is trading 64 cents higher and has made a new contract high of 114.54, which is the highest price on the continuation chart since September 9, 2013 when the October 2013 contract made a high of $116.10. August Brent remains on a short and intermediate term buy signal. We have no recommendation.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.6 million barrels from the previous week. At 386.3 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 0.8 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are in the upper half of the average range. Total commercial petroleum inventories increased by 6.0 million barrels last week.

Natural gas:

July natural gas closed unchanged on very light volume of 177,157 contracts and total open interest declined by 120 contracts. The July contract lost 9,528 of open interest. As this report is being compiled on June 18, July natural gas is trading 4.7 cents lower and has made a daily low of $4.649, which is the lowest print since 4.520 made on June 12. As we have written before, our concern has been the very bearish action of the July-November 2014 spread. As a result, we have advised a stand aside posture. Natural gas has a tendency to make its seasonal low in July, and if natural gas follows this pattern, there may be a terrific opportunity on the long side in the next month.

From the June 15 Weekend Wrap:

“Beginning with the May 11 Weekend Wrap, we wrote about the nearby months inverting over the distant months, in particular the November contract. We said that this was an indication of higher prices in the offing, which occurred prior to natural gas generating a short-term buy signal on June 6. The market has rallied, but we are concerned that the July 2014-November 2014 spread has moved from a premium to a discount. For example, on Friday, the spread closed at 3 cents premium to November, which broke below the most recent low of 2.8 cents premium to November on June 11, which was support going back to May 12 when the spread closed at 2.8 cents premium to November.”

Gold:

August gold lost $3.30 on light volume of 116,630 contracts. Total open interest increased by 1,692 contracts, which relative to volume is approximately 40% less than average. Despite the strength in silver, gold has been unable to muster much enthusiasm. In order for gold to generate a short-term buy signal, the low for the day must be above OIA’s key pivot point of $1283.50. Gold remains on a short and intermediate term sell signal. Stand aside.

Platinum:

July platinum gained $4.20 on heavy volume of 15,641 contracts. Volume was the heaviest since June 12 when July platinum lost 39.80 on volume of 30,820 contracts and total open interest increased by 2,064 contracts. On June 17, total open interest declined by 1,100 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy on the advance.The July contract accounted for loss of 2,419 of open interest. For the past 3 days, there has been a significant amount of liquidation totaling 4,371 contracts, which is in great part due to the expiration of the July contract, but is healthy because the market was loaded with speculative longs. We expect to see a significantly lower ratio in this week’s COT report

Although, we thought it was likely that platinum would generate a short-term sell signal, the market has shown a tremendous amount of resilience, and though it made a low of 1426.10 June 17, the market rallied and closed higher on the day. As this report is being compiled on June 18, platinum is trading $6.20 higher. The fact that platinum has been able to hold its own, bodes well for the rest of the precious metals complex. In order for July platinum to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point of $1438.80.

Silver:

July silver gained 1.7 cents on volume of 51,594 contracts. Total open interest increased by 984 contracts, which relative to volume is approximately 20% below average. The July contract lost 3,160 of open interest, which makes the total open interest increase much more impressive (bullish). Remarkably, from June 2 through June 17, July silver has advanced every day with the exception of June 6.

We consider silver to be a stealth bull market and at this juncture, the financial press is not talking about it , nor are commodity speculators involved in silver to any great extent. This bodes well for higher prices, in addition to the outstanding price and open interest performance of the past several sessions. On June 13, July silver generated a short-term buy signal, and it remains on an intermediate term sell signal, but we think it is likely to generate an intermediate term buy signal shortly. In order for July silver to generate an intermediate term buy signal, the daily low must be above OIA’s key pivot point of 20.133. In the June 16 report, we recommended that clients initiate bullish positions in silver and suggested that options be used because of very low volatility, which makes options inexpensive. 

Australian dollar:

The September Australian dollar lost 60 pips on volume of 66,183 contracts. Total open interest declined by 4,004 contracts, which relative to volume is approximately 140% above average meaning that liquidation was fairly heavy on the decline. The Australian dollar remains on a short and intermediate term buy signal. We have no recommendation.

10 Year Treasury Notes:

The September 10 Year Treasury Note declined by 14.5 ticks on volume of 1,112,748 contracts. Total open interest declined by 20,053 contracts 25% below average. On June 10, September notes generated a short-term sell signal, and they remain on an intermediate term buy signal. As this report is being compiled after the release of the FOMC minutes, September notes are trading 8 ticks higher on the day. We have no recommended position.