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Lean Hogs: It appears increasingly likely that August lean hogs will reverse short and intermediate term sell signals and this could come as early as June 2. We have no recommendation.

WTI crude oil:

July WTI crude oil lost 23 cents on light volume of 722,207 contracts. Total open interest increased by 13,000 contracts, which relative to volume is approximately 25% below average. The July contract accounted for gain of 504 of open interest. As this report is being compiled on June 1, the July contract is trading 25 cents lower on the day and has made a daily low of 47.75, which is the lowest print since 47.40 made on May 23.

The July contract is in a bullish moving average set up with the 20 day moving average standing at 47.50, 50 day 44.62, 100 day 41.02 and the 200 day moving average of 44.14. Despite this, we are getting an early indication that crude oil may be losing momentum. The first indication will be if the July contract makes a daily high below our June 1 pivot point of $48.63. A confirmed short term sell signal will occur if the daily high is below OIA’s key pivot point for June 1 of 46.24. No recommendation.

Natural gas: Yesterday, we stated that July and August natural gas generated short-term buy signals. This was incorrect and the buy signal will occur today. We apologize for the error.

July natural gas advanced 11.9 cents on strong volume of 394,957 contracts. Total open interest declined by 206 contracts, which is minuscule and a definite disappointment to the bulls. The July contract accounted for a loss of 10,168, which means there were insufficient open interest increases in the forward months to offset the decline in July.The bearish open interest action is not a total surprise based upon last Friday’s COT report, which showed managed money is short natural gas by a ratio of 1.53:1, up from the previous week of 1.33:1 and the ratio two weeks ago of 1.30:1.

As this report is being compiled on June 1, the July contract is trading sharply higher, up 8.4 cents or + 3.67% and has made a daily high of $2.374, the highest print since 2.427 made on April 25. For natural gas to continue to advance, two things need to occur: warmer temperatures, which will kick up demand for air conditioning and new buyers willing to enter the market at ever increasing prices. Now that natural gas is on a short-term buy signal today, the July contract should experience a pullback lasting 1-3 days and this is the opportunity to initiate bullish positions.

Gold:

August gold advanced 80 cents on volume of 256,501 contracts. Total open interest increased by 1,241 contracts, which relative to volume is approximately 75% below average. The June contract accounted for a loss of 4,554 of open interest. As this report is being compiled on June 1 the August contract is trading $6.90 lower and has made a daily low of 1208.20, which is the lowest print since 1207.70 made on May 31. The low for the move occurred over the Memorial Day weekend in a holiday shortened session when the August contract printed 1201.50. 

Despite, the sharp move lower after the August contract topped out at 1308.00 on May 2, it remains in a bullish moving average set up: 20 day moving average $1257.00, 50 day 1250.40, 100 day 1219.00 and the 200 day moving average stands at 1166.70. The year-to-date moving average is 1214.10 and currently as this report is being compiled the August contract is trading at 1212.40.

Although, there are many analysts who are predicting a resumption of the bear market in precious metals, we are not ready to join this camp. As we pointed out weeks ago, the summer months tended the negative for precious metals and when gold was trading near the highs, we advised clients to stand aside and this continues to be our recommendation.

Silver:

July silver lost 27.5 cents on heavy volume of 74,865 contracts. Volume was the strongest since May 19 when the July contract lost 63.9 cents on volume of 80,890 contracts and total open interest declined by 2,302. On May 19, OIA announced that July silver generated a short-term sell signal.

On May 31, total open interest declined by 1,554 contracts, which relative to volume is approximately 20% below average, and speculators continue to flee silver as it probes lows last seen in mid April. As this report is being compiled on June 1, the July contract is trading 6.4 cents lower and has made a daily low of $15.830, which is the lowest print since 15.800 made on April 12.

Remarkably, July silver has not generated an intermediate term sell signal and this will occur if the daily high is below OIA’s key pivot point for June 1 of $16.014. Continue to stand aside.

Dollar index: On May 31, the June and September dollar index generated intermediate term buy signals after generating short term buy signals on May 16.

The June dollar index advanced 37.8 points on volume of 19,331 contracts. Total open interest declined by a massive 2,458 contracts, which relative to volume is approximately 450% and this was due to the imminent expiration of the June contract, which lost 2,914 of open interest. As this report is being compiled on June 1, the June contract is trading 40.8 points lower on the day. We have no recommendation.

British pound: The June British pound is getting close to generating a short-term sell signal and this will occur if the daily high is below OIA’s key pivot point for June 1 of 1.4456.

The June British pound lost 1.70 cents on heavy volume of 183,175 contracts. Total open interest declined by 3,475 contracts, which relative to volume is approximately 25% below average. This is a major surprise considering the magnitude of yesterday’s move. As this report is being compiled on June 1, the June contract is trading 49 pips lower and has made a new low for the move of 1.4387, which is the lowest print since 1.4333 made on May 13.

It appears that the June contract has made a double top: the first at 1.4771 on May 3, and 1.4741 made on May 26. Volatility in the pound is off the charts, which makes options very expensive. We see no reason to be involved in this market because one can easily lose money whether long or short.

Yen:

The June yen lost 57 pips on strong volume of 175,733 contracts. Total open interest declined by 2,408 contracts, which relative to volume is approximately 40% below average. Yesterday, the June contract made a new low for the move of. 8982, but the market has reversed course on June 1 and is trading 83 pips above yesterday’s close making a daily high of. 9172, the highest print since .9170 on May 23. On May 19 the June and September yen generated short-term sell signals, but remarkably remain on intermediate term buy signals. We have no recommendation.