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Note: The USDA supply demand report will be issued Tuesday morning June 12. This report will have a major impact on the grain and oilseed complex. Positions should not be taken prior to the report.
Soybeans:
July soybeans closed 41.75 cents higher on volume of 238,732 contracts. Volume was approximately 16,000 contracts higher than June 6 when soybeans gained 36.75 cents. Total open interest declined by 6,469 contracts and open interest in the July contract declined by 14,096 contracts on volume of 113,429. Since the market bottomed on June 1 at $13.17 1/2, through June 7, July soybeans have gained 88 cents and open interest has declined by 4,854 contracts. This is bearish open interest action in relation to price. On June 6, open interest increased by 6,655 when the market gained 36.75 cents. Yet, when the market had a greater rally on June 7, open interest declined. Although I am bullish soybeans and soybean meal, this kind of open interest action cannot be ignored. For the first time since May 17, soybeans closed over its 50 day moving average. The market remains on an intermediate term buy signal and a short-term sell signal. Stand aside.
Soybean meal:
July soybean meal closed $10.90 higher on heavier than normal volume of 80,736 contracts. Volume was approximately 9,000 contracts higher than the previous day when the market closed $14.60 higher. Additionally, volume was above average daily volume for May and average daily volume on a year-to-date basis. Total open interest increased by 264 contracts and open interest in the July contract declined by 4,143 contracts on volume of 47,884. The open interest action between soybean meal and soybeans could not have been more different. Despite a decline of open interest in the July contract, the amount of buying in the back months in soybean meal was enough to offset the decline in the July contract, which enabled total open interest to increase. On the other hand, buying in the back months in soybeans was not sufficient to turn negative open interest in the July contract into a positive total number. Since bottoming out on June 1, through June 7, soybean meal has gained 7.86% and soybeans gained 6.57%. On a year-to-date basis, soybean meal has gained 33.39% and soybeans have gained about half that amount at 16.38%. Although soybean meal advanced $31.00 since June 1, the bad news is total open interest has declined by 1,674 contracts. Like soybeans, the open interest action is bearish. Despite the disappointing open interest action, as I write this post, it is highly likely that July soybean meal will generate a short-term buy signal. Stand aside.
Corn:
July corn closed 7.75 cents higher on relatively heavy volume of 378,307 contracts. Total open interest declined by 5,387 contracts and open interest in the July contract declined by 16,597 contracts on volume of 161,002 contracts. Since bottoming out at $5.51 on June 1 through June 7, open interest has declined by 7,088 contracts while July corn has gained 38.75 cents, or 6.98%. Like soybeans and soybean meal, open interest action in corn is acting in a bearish fashion relative to price. The July-December bull spread narrowed by 9.25 cents. Stand aside.
Wheat:
July wheat gained 17.50 cents on heavy volume of 180,096 contracts. Total open interest declined by 4,256 contracts. Since bottoming on June 1 at $6.11 through June 7, open interest increased by 5,077 contracts, and during this time, July wheat gained 29.50 cents. Although not wildly bullish, this is the most positive price and open interest action of the four agricultural commodities I cover. I continue to think that wheat will run into resistance at the $6.60 level. On the wheat continuation chart, the 50 day moving average is above the 150 day moving average and the 200 day moving average is at $6.39 1/2. On the July chart, the 50 day moving average is: $6.37 3/4, 150 day: $6.53 1/2, 200 day: $6.75. Stand aside.
Crude oil:
July crude oil lost 20 cents on heavy volume of 684,204 contracts. Open interest increased by a very meager 284 contracts. The market had a rally in the early going and made a high at $87.03, sold off and closed more than $2.00 down from the high. Much of the excitement was generated by the 25 basis point rate cut by China, but the enthusiasm soon faded. Stand aside.
Gasoline:
July gasoline lost .53 cents on volume of 249,685 contracts. Open interest increased by 753 contracts. Stand aside.
Copper:
July copper lost .85 cents on extremely heavy volume of 118,978 contracts. Open interest increased by 1,418 contracts. The market rallied to a high of $3.4305 on news of the Chinese rate cut, but that soon faded and the market closed at $3.3705, or 6 cents off its high. Copper’s performance was abysmal and underscores the weakness in the metal. As I write this on June 8, July copper has declined by 7.75 cents. Stand aside.
Gold:
August gold closed $46.20 lower on heavy volume of 267,219 contracts. Open interest declined by 10,267 contracts. The open interest decline was fairly heavy in relation to the volume. I think what we saw on Thursday was a garden-variety shake out. Mr. Bernanke downplayed the immediate possibility of more quantitative easing and this may have led speculators to sell. Regardless, readers should be consulting with their investment advisor or broker regarding accumulating gold for the long term. Gold remains on a short term buy signal and intermediate term sell signal.
Silver:
July silver closed 95.9 cents lower on extremely heavy volume of 91,554 contracts. Open interest declined by 1,871 contracts. Relative to volume and open interest, silver outperformed gold. Stand aside.
Euro:
The June Euro gained 57 points on heavy volume of 349,720 contracts. Open interest declined by 2,206 contracts. The market made a new high for the move at 1.2627 and has rallied 3.39 cents from the low made on June 1 (1.2288) to Thursday’s high. This market rises and falls on rumors, or alleged actions of Germany and the European Central Bank. There is no reason to be involved in the Euro. Stand aside.
S&P 500 E mini:
The June S&P 500 E mini closed 1.25 points higher on huge volume of 3,574,264 contracts. Open interest increased by a whopping 91,125 contracts. It is very difficult to determine at this juncture whether the market will continue to rally, or be stopped in its tracks by some negative news out of Europe over the weekend. I still believe caution is the order of the day, and therefore I suggest that readers maintain their long put protection.
