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July soybeans closed 40 cents higher on heavy volume of 297,235 contracts. Open interest declined by 4,528 contracts and open interest in the July contract declined by 18,137 on volume of 52,669 contracts. The old crop July-new crop November beans spread narrowed by 10 cents premium to July. The market made a new high for the move at $14.91 1/4, which was the highest price since the May 2 when July soybeans made its contract high at $15.12 1/2.
The decline of open interest on a move to new high ground on relatively heavy volume is ominous in my opinion. To put this move in perspective, let's examine what occurred on June 19. On that day, July soybeans closed at $14.33 3/4 having advanced 49.50 cents on extremely heavy volume of 376,932 contracts while open interest increased by a whopping 11,857 contracts. Additionally, on the 19th, open interest in the July contract declined by 17,417, yet total open interest was able to increase because there was sufficient buying in the back months, to offset the decline of open interest in the July contract.
Another negative factor was the action in the November soybean contract. Although November closed 50 cents higher, open interest increased by only 12,108 contracts, which was insufficient to overcome the decline of open interest in the July contract. The reason this is important is that the move higher on Monday was attributed to hot dry weather affecting the new crop. But, even this was not enough to attract more new participants in the new crop November contract. In short, the action on June 25 was not indicative of a sustained move higher, but rather suggests the likelihood of topping action. The market remains on a short and intermediate term buy signal, but I strongly suggest that readers exercise caution. Readers that have profits should be consulting with their investment advisor or broker about taking full or partial profits. Under no circumstances should new positions be implemented prior to the June 29 USDA acreage and quarterly stocks report.
July soybean meal closed $10.80 higher on heavy volume of 104,980 contracts. Open interest increased by 4,916 contracts and open interest in the July contract declined by 8,257 on volume of 22,176 contracts. Although the open interest increase was very impressive in relation to volume, I reiterate my caution for the long side of soybean meal, just as I have for soybeans. The old crop July-new crop December bull spread narrowed by $4.50.
In yesterday's post, I mentioned that July soybean meal has not been able to close over $434.00 since early May. Since May 2 through June 25, July soybean meal has penetrated the $434.00 level 7 times, but has not been able to close above it. The failure of soybean meal to close above the $434.00 level is interesting in that there has been a spate of very favorable news about the new soybean crop as well as positive export numbers for soybean meal. Additionally, the weather-related move for corn is nothing but a major positive for soybean meal because it is a competitor corn, and yet what we see consistently are rally failures above $434.00. Soybean meal is on a short and intermediate term buy signal, but I suggest that readers exercise great caution. If readers have profits in soybean meal, they should be consulting with their investment advisor or broker regarding taking full or partial profits. Do not implement new positions prior to the June 29 USDA acreage and quarterly stocks report.
July corn closed up the 40 cent limit on heavy volume of 394,105 contracts. Total open interest declined by 8,503 contracts and open interest in the July contract declined by 23,225 on volume of 113,321 contracts. Since making its low of $5.76 1/4 on June 18 through June 25 when corn closed at $6.31, open interest has declined by 69,806 contracts. This is bearish. Although the corn market has had a very sharp upside move, an intermediate term buy signal has not been generated. As I write this on June 26, an intermediate term buy signal will not be generated today. Corn is going to fluctuate based upon the latest weather reports. There is no reason to be involved with the market at this juncture because the risk on either side of the trade is too great. Stand aside.
Wheat: On June 25 July wheat generated in intermediate term buy signal.
July wheat gained 51 cents on heavy volume of 186,896 contracts and open interest in the July contract declined by 14,951 on volume of 48,234 contracts. Like corn, there wasn't enough buying in the back months to offset the decline of open interest in the July contract. Since making its bottom of $6.07 1/2 through June 25 when the market reached a high of $7.25 1/4, total open interest has declined by 24,101 contracts. This is bearish. The high on Monday was last seen during September 2011. On the weekly continuation chart, the 50 day moving average is $6.34, which means by any standard, the wheat market is massively overbought. Although wheat has generated a short term buy signal on June 21 and an intermediate term buy signal on June 25, do not enter long positions. The market has been loaded with speculative shorts, and they are being run out of the market in large numbers, which is exaggerating the upside move.
August crude oil lost 55 cents on light volume of 425,191 contracts. Open interest increased by 920 contracts. The market remains a sluggish affair and there is no reason to be involved in crude oil. Stand aside.
August gasoline gained 3.06 cents on relatively heavy volume of 172,789 contracts. Open interest declined by 6,664 contracts. Relative to volume, the open interest decline on the rally was significant, and this is bearish. Stand aside.
July copper gained 1.00 cents on heavy volume of 92,583 contracts. Open interest declined by 1,297 contracts. Stand aside.
August gold closed $21.50 higher on light volume of 124,364 contracts. Open interest declined by 266 contracts. As I write this on June 26, August gold is $14.90 lower on the day. The market is on a short and intermediate term sell signal.
July silver closed 85.9 cents higher on extremely heavy volume of 126,413 contracts. Open interest increased by 1,329 contracts. Although volume was extremely heavy, the open interest increase was meager in relation to volume. It is been quite a while since volume in silver exceeded the volume in gold. As I write this on June 26, July silver is 50.5 cents lower. Stand aside.
The September Euro closed 66 points lower on very light volume of 214,472 contracts. Open interest declined by 9,525 contracts. Stand aside.
S&P 500 E mini:
The September S&P 500 E mini closed 19.75 points lower on volume of 1,845,283 contracts. Open interest increased by 60,895 contracts, which in relation to volume was a heavy increase. This indicates a great deal of conviction on the part of longs and shorts about the direction of the S&P 500 E mini. This contrasts with the action on June 22 when the S&P 500 E mini gained 8.50 points and open interest increased by only 3,184 contracts on volume of 1,860,749 contracts, which showed very low conviction by longs and shorts. On June 21, the S&P 500 E mini lost 32.50 points on volume of 2,714,669 contracts, but open interest increased only 30,014 contracts, which in relation to volume showed a lack of conviction by longs and shorts compared to the action of June 25.
On June 25 the S&P 500 E mini generated in intermediate term sell signal. A short-term sell signal has not yet been generated, nor will it on June 26. Consult your investment advisor or broker regarding the maintenance of long put protection.