On June 30, the USDA will release its quarterly grain stocks and acreage report. We recommend that all positions be liquidated prior to the report.

Soybeans:

August soybeans advanced 4.00 cents while the new crop November contract gained 4.50 on volume of 150,156 contracts. Volume shrank from the 178,192 contracts traded on June 24 when August soybeans lost 7.75 cents and November – 9.25 while total open interest increased by 7,748 contracts.On June 25, total open interest declined by 3,795 contracts, which relative to volume is average. The July contract lost 15,342 of open interest, which means there was open interest increases in the forward months that brought down total open interest to an average number. Since the August contract bottomed on June 17 through June 25, the August contract has gained 13.25 cents or +0.98% while November has added 17.00 cents, or +1.40%. As result, the November contract likely will generate a short-term buy signal in the next day or so, and for this to occur the low of the day must be above OIA’s key pivot point of $12.36 7/8. As this report is being compiled On June 26, August soybeans are trading 20.50 higher while the November contract is +15.75.Both August and November soybeans are on short-term sell signals, but intermediate term buy signals. Stand aside.

The USDA reported extraordinarily high sales of 317.16 thousand metric tons of soybeans bringing total commitments to 1.670.9 billion bushels versus USDA projections for the season of 1.600 billion bushels. The current export figure is the highest since early March, and explains the rally on Thursday.

Soybean meal:

August soybean meal advanced $3.90 on volume of 67,496 contracts. Total open interest declined by 737 contracts, which relative to volume is approximately 50% below average. The July contract lost 6,754 of open interest, which makes the total open interest decline more impressive (potentially bullish). As this report is being compiled on June 26, soybean meal is rallying sharply, up $9.90 on low volume. August soybean meal remains on a short term sell signal, but an intermediate term buy signal. Stand aside.

The USDA reported soybean meal sales of 66.33 thousand metric tons bringing total commitments to date of 9730.6 thousand metric tons versus USDA projections for the season of 10,433 thousand metric tons. Current sales were the highest since May 22.

Soybean oil:

August soybean oil lost 31 points on volume of 77,863 contracts. Total open interest declined by 4,815 contracts, which relative to volume is approximately 140% above average. The July contract lost 7,964 of open interest. As this report is being compiled on June 26, August soybean oil is trading unchanged on the day and is not participating with the rally in soybeans and soybean meal. On June 25, November palm oil generated a short-term buy signal and August soybean oil generated a short term buy signal on June 23, but remains on an intermediate term sell signal. We have no recommendation.

The USDA reported soybean oil sales of 1.91 thousand metric tons bringing total commitments to date of 738.99 thousand metric tons versus USDA projections for the season, which ends on September 30 of 793.8 thousand metric tons.

Live cattle:

August live cattle advanced 92.5 points on fairly light volume of 49,585 contracts. Volume shrank from the 56,438 contracts traded on June 24 when August live cattle advanced 2.80 cents and total open interest increased by 4341 contracts. On June 25, total open interest declined by 231 contracts, which relative to volume is approximately 70% below average. The June contract lost 961 of open interest and August -2,459. Market participants  have been extremely cautious about the price advance, and the open interest stats along with volume confirm it. This makes perfect sense considering that cattle prices are near their highest level in history. As this report is being compiled on June 26, August cattle has made another contract high of 1.52250, which is just shy of the all-time high made in February of 1.53000. There is no telling where this market will make its top, and we continue to advise a stand aside posture if not long from significantly lower levels.

WTI crude oil:

August WTI crude oil advanced 47 cents on fairly heavy volume of 617,233 contracts. Volume was the highest since June 19 when 781,559 contracts were traded and August WTI advanced 46 cents while total open interest declined by 8830 contracts. On June 25, open interest increased by healthy 15,698 contracts, which relative to volume is approximately average. For the past 2 days, total open interest has increased 28,999 contracts while August WTI has advanced only 33 cents. It is likely that trade selling is on the other side of speculative buying,  and this is keeping a lid on prices, at least temporarily. As this report is being compiled on June 26, August WTI is trading 81 cents lower and has made a new low for the move at 105.03, which takes out the previous low of 105.11 made on June 19. August WTI remains on a short and intermediate term buy signal, and OIA recommends a stand aside posture.

Brent crude oil:

August Brent crude oil lost 46 cents on volume of 607,016 contracts. Total open interest declined by 19,883 contracts, which relative to volume is approximately 35% above average, which means that liquidation was fairly heavy on a modest decline. The August contract accounted for loss of 11,345 of open interest. As this report is being compiled on June 26, August Brent is trading 61 cents lower on the day. August Brent crude oil remains on a short and intermediate term buy signal. Stand aside.

Natural gas:

August natural gas advanced 1.3 cents on volume of 179,965 contracts. Total open interest declined by 6898 contracts, which relative to volume is approximately 50% above average meaning that liquidation was heavier than usual on the modest advance. The July contract lost 9003 of open interest. As this report is being compiled on June 25, August natural gas is trading sharply lower, down 13.5 cents and has made a daily low of $4.405, which takes out the previous low for the move of 4.453 made on June 24. We have been waiting for August natural gas to generate a short-term sell signal, and thus far it is held up well. However it appears that natural gas will succumb to the seasonal tendency of making its low in July. Stand aside.

The Energy Information Administration announced that working gas in storage was 1,829 Bcf as of Friday, June 20, 2014, according to EIA estimates. This represents a net increase of 110 Bcf from the previous week. Stocks were 690 Bcf less than last year at this time and 822 Bcf below the 5-year average of 2,651 Bcf. In the East Region, stocks were 382 Bcf below the 5-year average following net injections of 68 Bcf. Stocks in the Producing Region were 340 Bcf below the 5-year average of 996 Bcf after a net injection of 25 Bcf. Stocks in the West Region were 100 Bcf below the 5-year average after a net addition of 17 Bcf. At 1,829 Bcf, total working gas is below the 5-year historical range.

Dollar index:  On June 25, the September dollar index generated a short-term sell signal, but remains on an intermediate term buy signal.

The September dollar index lost 12.8 points on volume of 27,889 contracts. Volume was the highest since June 13 when 36,363 contracts were traded. On June 25, total open interest declined by 280 contracts, which relative to volume is approximately 50% below average.The generation of a sell signal in the dollar index has enormous bullish implications for the precious metals and commodities in general. Also, with a very large short position held by managed money, the euro looks likely to advance from here, which will further depress the dollar index.

From the June 22 Weekend Wrap:

“Although the ratio of shorts is the lowest that we have seen in a couple of months, it appears that the dollar index is getting close to generating a short-term sell signal. This will occur if the high for the day is below OIA’s key pivot point of 80.452. This has bullish implications for commodities and precious metals in particular. Additionally, the moving average set up is bearish for the cash dollar index with the 50 day moving average at 80.097, 100 day 80.104, 200 day 80.294.”

Copper:

September copper gained 2.10 cents on heavy volume of 86,359 contracts.Volume was the strongest since June 12 when 100,448 contracts were traded and September copper closed at $3.0155. On June 25, total open interest increased by 179 contracts, which is minuscule and dramatically below average. However, the July contract lost 6,646 of open interest, which means there was sufficient open interest increases in the forward months to offset the decline in the July contract. This is positive open interest action relative to the price advance. Remarkably, since June 12, September copper has closed positively every day without a setback.

On June 23, September copper generated a short and intermediate term buy signal, and as this report is being compiled on June 26, copper is approaching the May 27 high of $3.1780. September copper is massively overbought, and unless clients are long from a considerably lower level, we recommend a stand aside posture. Although there is much talk about low stock levels at the major exchange warehouses, when the price is right copper will come out of the woodwork. If copper is not stored in exchange warehouses it is being held in private hands. Remember this, if copper is not being used for building, electronics and automobiles, it is being stored someplace, which makes copper prices vulnerable. Additionally, copper is used as collateral for loans in China, which means copper stocks can increase if this trade unwinds. Stand aside.

Gold:

August gold advanced $1.30 on volume of 148,679 contracts. Total open interest increased by 4,177 contracts, which relative to volume is average. As this report is being compiled on June 25, August gold is trading $5.20 lower on the day. Ever since gold had its large advance on June 19 of $41.40, the market has been trading in a consolidation pattern. We think the path of least resistance is higher, and that gold will climb a wall of worry much like nascent bull markets often do. After generating a short and intermediate term buy signal on June 20, August gold has not has not conformed to the usual 1-3 day correction protocol. This does not mean a correction will not occur, but the longer the market consolidate its gains, the likely outcome is that the advance will continue. If clients are inclined to buy gold at this juncture, our advice is to use the June 25 low of $1305.40 as an exit point for bullish positions. The low on June 26 has been 1306.80.As we have said before, our preference is to be long silver rather than gold. We think silver will outperform gold and platinum.

Silver:

September silver advanced 7.4 cents on heavy volume of 115,682 contracts.Volume was the strongest since June 19 when silver advanced 87 cents on volume of 117,386 contracts and total open interest increased by 1850 contracts. On June 25, total open interest declined by 982 contracts, which relative to volume is approximately 55% below average. The July contract accounted for loss of 11,569 of open interest, and there was sufficient open interest increases in the forward months to offset the decline in the July contract. As this report is being compiled on June 26, September silver is trading 2.5 cents lower on the day after making a daily low of $20.845, which is slightly below the June 24 low of 20.855, but above the June 23 low of 20.780.Maintain bullish positions recommended in the June 16 report. Clients may use the June 23 low as the exit point for bullish positions.