In tomorrow’s report, OIA will provide coverage on the June 5 trading action of major currencies.

Soybeans:

July soybeans lost 1.25 cents and the November contract lost 4.50 on total volume of 141,417 contracts. Total open interest increased by 634 contracts, which relative to volume is approximately 75% below average. The July contract lost 7,088 of open interest. As this report is being compiled on June 5, July soybeans are trading 16.50 cents lower and November -13.00. In the report of June 2, we recommended that clients initiate long puts in the November 2014 contract, because we thought it was on the verge of generating a short-term sell signal. Although the sell signal has not been generated as of June 5, we think it is likely to occur tomorrow. The put position is profitable on June 5. Additionally, it appears likely that the July contract will soon generate a short-term sell signal. As we stated in the June 3 report: “In order for July soybeans to resume its uptrend, the daily low must be above OIA’s key pivot point of $14.90 1/8″. The July  contract has not shown the strength to resume the uptrend, which would have likely resulted in new contract highs taking out the former contract high of 15.36 3/4 of May 22. Continue to hold long puts in the November 2014 contract.

The USDA reported soybean sales of 41.3 thousand metric tons bringing total commitments to 1.652.5 billion bushels versus USDA projections for the season of 1.600 billion bushels.

Soybean meal:

July soybean meal lost $3.10 on volume of 50,648 contracts. Total open interest increased by 1,427 contracts, which relative to volume is average. The July contract lost 1,009 of open interest. As this report is being compiled on June 5, July soybean meal is trading $3.40 lower and has broken below the May 28 low of 492.70. This was the original exit point for bullish positions, before we advised moving the exit point up to $494.10 in the May 30 report. .As a result, clients should have exited bullish positions and be on the sidelines with the exception of the Long July 2014 short August 2014 spread.Exit the spread if it dips below $23.00. The new crop December contract is likely to generate a short-term sell signal on June 5.

The USDA reported meal sales of 65.8 thousand metric tons bringing total commitments to 9550 thousand metric tons versus USDA projections for the season of 10,070 thousand metric tons.

Corn:

July corn lost 2.00 cents on volume of 208,589 contracts. Total open interest increased by 2,581 contracts, which relative to volume is approximately 40% below average. The July contract accounted for loss of 15,112 contracts, which makes the total open interest increase very bearish. As this report is being compiled on June 5, July corn is trading 5.75 cents lower and has made a new low for the move at $4.50, which is the lowest print since $4.48 1/4 made on February 14, 2014. Corn remains on a short and intermediate term sell signal. Stand aside.

The USDA reported corn sales of 550.7 thousand metric tons bringing total commitments to date of 1.816.8 billion bushels versus USDA projections for the season of 1.900 billion bushels.

Wheat: The USDA reported abysmal sales of 2 thousand metric tons bringing total commitments as of May 29 to 1.166.2 billion bushels, which is below USDA projections for the season, which ended on May 31 of 1.185 billion bushels.

Cotton:

July cotton lost 1.28 cents on volume of 29,170 contracts. Total open interest declined by a substantial 1,335 contracts, which relative to volume is approximately 75% above average, meaning that liquidation was heavy. The July contract accounted for loss of 4,568 of open interest. As this report is being compiled on June 5, July cotton is trading 42 points lower and is trading on the lows of the day. Continue to hold bearish positions coupled with long calls to offset a potential rally in cotton.

Coffee: on June 3, July coffee generated an intermediate term sell signal after generating a short-term sell signal on May 12. We have no recommendation and are suspending reporting on coffee until we see a trading opportunity and/or a change of signal.

Live cattle:

August live cattle gained 10 points on volume of 57,356 contracts. Total open interest declined by a hefty 4073 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy even though August cattle traded in a relatively narrow range.The June contract accounted for loss of 6,815 of open interest.As this report is being compiled on June 5, August cattle is trading 85 points higher and has made a new contract high of 1.41500, which takes out the previous contract high of 1.40550.On May 29, OIA recommended the initiation of bull call spreads and these are currently profitable. Continue to hold the spread.

WTI crude oil:

July WTI crude oil lost 2 cents on relatively heavy volume of 480,168 contracts. Volume was the heaviest since May 28 when July WTI lost $1.39 on volume of 497,805 contracts and total open interest declined by 2927 contracts. On June 4, total open interest increased only 650 contracts, which is minuscule and dramatically below average. The July contract accounted for loss of 8,795 of open interest. As this report is being compiled on June 5, July WTI currently is trading 36 cents lower and has made a new low for the move at 101.60, which is its lowest print since $101.52 made on May 19. July WTI remains on a short and intermediate term buy signal. Stand aside.

From the June 1 Weekend Wrap:

“In summary, from April 30 through May 27 (4 COT tabulation periods), commercials have liquidated 53,816 contracts of long positions while liquidating 44,430 contracts of their short positions. During this time, July WTI has advanced $3.78, or 3.77%. This is not a vote of confidence by commercials when they are liquidating en masse as prices advance. July WTI remains on a short and intermediate term buy signal, but we advise clients to avoid the market at this juncture.”

Natural gas:

July natural gas advanced 1.1 cents on light volume of 167,927 contracts. Total open interest increased by a massive 7728 contracts, which relative to volume is approximately 75% above average meaning that both longs and shorts were aggressively entering new positions, but longs had the edge and were able to move prices fractionally higher. As this report is being compiled on June 5, July natural gas is trading 4.2 cents higher and has made a new high for the move the $4.723, which is the highest print since $4.766 made on May 8.

For the past 3 sessions beginning on June 2 through June 4, prices have advanced each day along with open interest. For example, during the 3 day time frame, July natural gas prices have advanced 9.8 cents while total open interest has increased 14,624 contracts. This is very bullish open interest action relative to the 3 day price advance.Additionally, the July 2014-November 2014 spread continues to widen. We have written extensively about the spread going back over 3 weeks and that this was a bullish indicator. We encourage clients to review the weekend reports on natural gas going back to May 11. Another bullish factor is today’s EIA storage report, which showed a stock build of 119 Bcf, and yet the market is rallying to new highs for the move. Although July natural gas will not generate a short-term buy signal on June 5, conceivably this could occur on June 6. For a short-term buy signal to be generated, the low the day must be above OIA’s new pivot point of $4.640. An intermediate term buy signal will be generated if the low of the day is above OIA’s key pivot point of 4.625.

The Energy Information Administration announced that working gas in storage was 1,499 Bcf as of Friday, May 30, 2014, according to EIA estimates. This represents a net increase of 119 Bcf from the previous week. Stocks were 737 Bcf less than last year at this time and 896 Bcf below the 5-year average of 2,395 Bcf. In the East Region, stocks were 423 Bcf below the 5-year average following net injections of 69 Bcf. Stocks in the Producing Region were 367 Bcf below the 5-year average of 942 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 106 Bcf below the 5-year average after a net addition of 19 Bcf. At 1,499 Bcf, total working gas is below the 5-year historical range.

Euro:

The June euro lost 24 pips on volume of 155,989 contracts. Total open interest increased by 1,994 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on June 5, the June euro is trading 60 pips higher and has made a daily high of 1.3671 after making a major low at 1.3502, which is the lowest print since 1.3483 made on February 6, 2014.The euro remains on a short and intermediate term sell signal. Stand aside.

Copper:

July copper lost 4.40 cents on volume of 66,394 contracts. Total open interest increased by 1,909 contracts, which relative to volume is average. Although copper will not generate a short-term sell signal on June 5, it is inevitable. Stand aside.

Platinum:

July platinum lost $1.10 on heavy volume of 13,090 contracts.Volume was the highest since May 28 when platinum gained 40 cents on volume of 15,670 contracts and total open interest increased by 812 contracts. On June 4, total open interest declined by a massive 885 contracts, which relative to volume is approximately 160% above average meaning that liquidation was extremely heavy on the modest decline. On June 4, platinum made a new low for the move at $1421.40, which took out the lowest print since May 12 of 1422.20.

Although it came close, platinum did not generate a short-term sell signal and remains on an intermediate term buy signal.As this report is being compiled on June 5, July platinum is trading 9.20 higher on the day. Additionally, both gold and silver are trading higher as well. For the past 3 trading sessions beginning on June 2, July platinum has lost $20.30, and open interest has declined by a massive 2439 contracts. Managed money was long platinum by a ratio of 14.95:1 in the latest COT report, which explains the massive decline of open interest as prices moved sharply lower from the high of 1497.80 on May 22. Stand aside.