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Soybeans:
For the week, July soybeans gained 66.50 cents, and the new crop November contract gained 61.50 cents. The Commitment of Traders Report, which is tabulated on Tuesday and released Friday, showed that in the managed money category, speculators liquidated 1,134 contracts of their long positions and also liquidated 1,529 contracts of their short positions. Commercial interests added 1,358 contracts to their long positions and also added 4,576 contracts to their short positions. As of the latest report, managed money speculators are long by a ratio of 23.72 to 1.
Soybeans generated a short-term buy signal on June 19 and has been on an intermediate term buy signal. Please see soybean meal commentary because much of it is applicable to soybeans. On June 12, the old crop July-new crop November spread stood at 98 cents premium to July and on June 18 the spread made a low of 45 cents, and closed at 67 cents on June 22. Ideally in a bull market you want to see the spreads widening with the front month gaining on the back months. With respect to soybeans and soybean meal, there are two forces at work that are counteracting each other. First, there is a sharply rising dollar, which is bearish and second there appears to be the possibility of further dry conditions, which could negatively impact a very tight soybean inventory.
Soybean meal:
For the week, July soybean meal gained $11.90, and the December contract gained $18.50. The Commitment of Traders Report showed that in the managed money category speculators added 5,434 contracts to their long positions and liquidated 583 contracts of their short positions. Commercial interests liquidated 3,265 contracts of their long positions and added 1,320 contracts to their short positions. As of the latest report, managed money speculators are long by a ratio of 34.32 to 1.
Soybean meal generated a short-term buy signal on June 8, which reversed the sell signal generated on May 23. Please see last paragraph of soybean meal commentary.
The performance of soybeans was outstanding compared to soybean meal this week. On Friday, there was a tremendous amount of downward pressure in soybean meal, however soybeans held up admirably. This past week’s performance is as follows: soybeans +4.83%, soybean meal +2.90%, soybean oil +2.68%. On a year-to-date basis, soybeans +17.56%, soybean meal +32.29% and soybean oil -6.24%
Despite soybean meal being on a short and intermediate term buy signal, I have reservations about how much higher soybean meal can go. After looking at the chart from the time that soybean meal made its initial top on April 30 and May 1, the market has made eight attempts to move beyond the $434.00 level, and since May 2 has failed to close above it. Also, the USDA supply demand report issued on June 12, showed a greater reduction in carryover than expected, yet the market had no follow through after making a new contract high high of $439.90 on the day of the report.
Another problem is the soybean meal spread between the July contract and back months had narrowed considerably since the report. For example, on June 12, the old crop July-new crop December spread was priced at $41.50 premium to July, but this spread narrowed to $12.80 on June 18 premium to July, and closed at $17.80 on June 22. The narrowing of the spread over a period of nearly 2 weeks after a bullish USDA report is worrisome. Additionally, the weekly USDA export sales report issued on Thursday, June 21 showed extremely heavy sales of soybean meal, and lighter sales of soybeans, yet meal was only able to close fractionally higher than the previous day.
Corn:
For the week, July corn gained 11.50 cents and the new crop December contract gained 48 cents. The Commitment of Traders Report showed that in the managed money category, speculators added 11,250 contracts to their long positions and liquidated 4,059 contracts of their short positions. Commercial interests liquidated 23,277 contracts of their long positions and also liquidated 3,583 contracts of their short positions. As of the latest report, managed money speculators are long by a ratio of 1.52 to 1.
The weekly performance of old crop corn was abysmal and the new crop December was outstanding. There is a considerable amount of concern about possible crop stress due to higher than normal temperatures over certain parts of the corn belt. The market is on a short and intermediate term sell signal. Stand aside.
Wheat:
For the week, July wheat gained 63.75 cents. The Commitment of Traders Report showed in the managed money category, speculators liquidated 488 contracts of their long positions and added 5,013 contracts of their short positions. Commercial interests added 7,655 contracts to their long positions and also added 10,349 contracts their short positions. As of the latest report, managed money speculators are short by a ratio of 1.14 to 1.
Wheat generated a short-term buy signal on June 21, and could likely generate an intermediate term buy signal on June 25. Much of the price advance is attributed to problems with the Australian and Russian wheat crop. As mentioned above, according to the latest Commitment of Traders Report, speculators have increased their net short position to 1.14:1, which is above 1.07:1 ratio in the previous week. During the most recent tabulated period of June 13 to June 19 for the COT report, wheat advanced 33.50 cents. During Wednesday, Thursday, Friday of last week, wheat advanced a total of 23.75 cents. It remains to be seen whether this rally for the new reporting period will be enough to shake spec shorts out of the market. If it isn’t, I think wheat is going higher. On a year-to-date basis, July wheat is 13.00 cents lower or 1.89%, and on the week continuation chart, wheat has advanced 20.50 cents, or 3.14%
Crude oil:
For the week, August crude oil lost $4.57. The Commitment of Traders Report showed that in the managed money category speculators liquidated 5,523 contracts of their long positions and added 2,507 contracts to their short positions. Commercial interests added 11,663 contracts to their long positions and also added 10,649 contracts to their short positions. As of the latest report, managed money speculators are long by a ratio of 2.45 to 1. Stand aside.
Gasoline:
For the week, August gasoline lost 15.81 cents. The Commitment of Traders Report showed that in the managed money category, speculators added 1,727 contracts to their long positions and liquidated 235 contracts of their short positions. Commercial interests added 4,215 contracts to their long positions and also added 4107 contracts to their short positions. As of the latest report, managed money speculators are long by a ratio of 10.3 to 1. Stand aside.
Copper:
For the week, July copper lost 7.75 cents and made a new low for the move at $3.2565. The Commitment of Traders Report showed that in the managed money category, speculators added 291 contracts to their long positions and liquidated 1151 contracts of their short positions. Commercial interests liquidated 3,875 contracts of their long positions and also liquidated 3,096 contracts of their short positions. As of the latest report managed money speculators are short by a ratio of 1.41 to 1. Stand aside.
Gold:
For the week, August gold lost $61.20. The Commitment of Traders Report showed that in the managed money category, speculators added 1,046 contracts to their long positions and liquidated 4,232 contracts of their short positions. Commercial interests added 2,094 contracts to their long positions and added a massive 15,368 contracts to their short positions. As of the latest report, managed money speculators are long by a ratio of 4.30 to 1.
Gold closed on Friday at $1566.90, which was the lowest close since May 30 when August gold closed at $1563.50. The key low to look for in the coming weeks is the low made on May 16 of $1526.78 and the low of $1523.90 made on December 29, 2011. If the market is able to penetrate and close below $1523.90 then the downside target for support is $1460-$1470, the lows made during May of 2011. If the dollar index continues to move higher, this will have a major negative impact on the precious metals in particular and commodities in general. On June 22, August gold generated a short-term sell signal, which reversed the short term buy signal generated on June 8. Gold remains on an intermediate term sell signal. The 104 week moving average is 1523.40 and the 156 week moving average is 1378.95. Readers should be consulting with their investment advisor or broker regarding the acquisition of gold at lower prices for the long-term.
Silver:
For the week, July silver lost $2.07.9. The Commitment of Traders Report showed that in the managed money category, speculators added 585 contracts to their long positions and added 250 contracts to their short positions. Commercial interests liquidated 82 contracts of their long positions and liquidated just 3 contracts of their short positions. As of the latest report managed money speculators are long by a ratio of 1.47 to 1.
The silver market collapsed last week losing 6.47%, compared to the loss in August gold of 3.48%. On a year-to-date basis, July silver has lost 4.15% and gold lost.07%. The market broke weekly lows going back to May 14 and now is likely to challenge the low of $26.15 made on September 26 and December 27 of 2011. If this low is decisively broken, than the next level of support is the November 16, 2010 low of $25.64. To put the current price of silver in perspective, the 104 week moving average on the continuation chart is $31.07, 156 week moving average $26.32 and the 208 week moving average of $22.97.
Euro:
For the week, the September Euro lost 75 points. The Commitment of Traders Report showed that in the leveraged funds category, speculators liquidated 10,187 contracts of their long positions and also liquidated 34,821 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 2.72 to 1.
S&P 500 E mini:
For the week, the September S&P 500 E mini lost 10.70 points. They Commitment of Traders Report showed that in the leveraged funds category, speculators liquidated 168,336 contracts of their long positions and also liquidated 223,155 contracts of their short positions. As of the latest report, leveraged funds are short by a ratio of 2.69 to 1.
Although the S&P 500 E mini generated a short-term buy signal on June 19 along with the S&P 500 cash index, and the S&P 500 cash index generated in intermediate term buy signal, the stock market picture ahead is unclear. Along with uncertainty from Europe and with faltering economies around the world, the US stock market will begin the second quarter earnings season in earnest on July 9 when Alcoa reports. These are likely to have a major impact on the direction of the market, and if there are meaningful disappointments for a large number of companies, the market could take a turn for the worse.
The Supreme Court decision on the Affordable Care Act, which will be released this coming week, is likely to have a major impact on the healthcare sector. Additionally, as the list below shows, most of the major market indices have bearish moving average crossovers. While the United States may be the strongest of all major markets, the question is: how long will it be before major U.S. indices succumb to weakness exhibited in global markets. Investors should be consulting their investment advisors or brokers regarding the appropriateness of long positions in the S&P 500, and the maintenance or liquidation of long put protection.
Global Markets:
This past week, the Australia All Ordinaries Index, and the Nikkei 225 Index joined the group of major indices whose 50 day moving average crossed under their 200 day moving average. Below, is the complete list of moving average crosses for the major indices as of June 24. I expect in the next week the German DAX, Hong Kong Hang Seng, and Singapore Straits Index will join the group as well.
50 day moving average crossing below the 200 day moving average
Australia All Ordinaries Index
Japanese Nikkei 225
London FTSE 100
Bombay Sensex 30
French CAC 40
Brazilian Bovespa
Shanghai Composite
Italy FTSE MIB
Spain Ibex
