Tomorrow, the results of the two day meeting of the Federal Open Market Committee be released at 2:00 p.m. Eastern daylight Time and this should be a major market mover. Clients should know where they want to exit positions in the event of adverse moves. This week we will suspend reporting activity on currency futures due to the expiration of the June contract at the end of this week because open interest stats are distorted due to switching out of June into September contracts.
July corn lost 10.50 cents on heavy volume of 735,257 contracts. Volume was the strongest since June 8 when the July contract gained 1.00 cent on volume of 825,629 contracts and total open interest increased by 3,314. On June 12, total open interest declined by 8,924 contracts, which relative to volume is approximately 50% below average. A total open interest decline on yesterday’s loss is normal bullish price and open interest action. The July contract accounted for a loss of 36,763 of open interest.
Yesterday, in the report for June 9 written on June 12, we recommended that clients initiate bullish positions in corn because the July contract pulled back to our target for purchases (3.75-3.78). If you took this advice, the trade is now solidly profitable on June 13 with the July contract trading 5.75 above yesterday’s close and has made a daily high of 3.83 3/4. As we pointed out in yesterday’s note, our concern is the impact on the market after the results of the FOMC meeting are known, which will almost certainly raise interest rates.
It is possible the language in the announcement and discussion afterward could be far more hawkish than what is being priced in markets. If this is the case, the euro will finally correct and the dollar index would generate a short term buy signal. A strong dollar may adversely impact corn prices, and if you are concerned about this, we recommend using penetration of yesterday’s low of 3.76 1/4 as an exit point.
From the June 9 note on corn:
“In our June 7 note on corn, we recommended that clients wait for a pullback to the 3.75-3.78 area before initiating bullish positions. As this report is being compiled on June 12, the July contract is providing the pullback we discussed and currently is trading 9.25 cents lower or -2.39% and has made a daily low of 3.76 1/4.”
From the June 7 note on corn:
“Now that corn is on short and intermediate term sell signals, we are waiting for a set-back before recommending bullish positions. A correction between 3.78 and 3.75 would be a reasonable entry point. ”
Silver: July New York silver will generate a short term sell signal on June 13 if the daily high remains below OIA’s he pivot point for June 13 of $16.992
The weekly moving averages for silver remains in a distinctly bearish set up with the 10 week standing at $17.171, 20 week of 17.479, 50 week of 17.829 and the 100 week moving average of 16.623. The long term monthly moving averages remain in a bullish set up with the 10 month standing at 17.586, 20 month of 16.948.The 100 week moving average of 16.623 should provide support for July silver.
If silver generates a short term sell signal as we expect on June 13, gold will likely follow. Silver has been unable to generate an intermediate term buy signal and therefore remains on an intermediate term sell signal. We recommend a stand aside posture in silver.
AUD/CAD: AUD/CAD will generate a short term sell signal on June 13 and remains on an intermediate term sell signal, which was generated on May 22.
The weekly moving averages of show slightly bearish set up with the 10 week standing at 1.0094, 20 week of 1.0099, 50 week of .99925, and the 100 week, of .98250. The monthly moving averages show a solid bullish set up with the 10 month standing at 1.0033 and the 20 month of .98888. We have no recommendation.
Nasdaq 100 (cash index): On June 12, the NASDAQ 100 cash index generated a short term sell signal and remains on an intermediate term buy signal.
This is the first time a short term sell signal has occurred in the NASDAQ 100 during calendar year 2017. During mid-May, the S&P 400, New York Composite, Russell 2000 and Dow Jones Industrial Average generated short term sell signals, but, the NASDAQ 100 and S&P 500 remained on buy signals.
For confirmation, we want to see the June/September NASDAQ 100 futures generate a short term sell signal. This will occur in the June contract if the daily high is below OIA’s key pivot point for June 13 of 5725.67. The reason futures has not generated a sell signal is because they trade almost 24 hours a day, which enables the index to expand its range in the overnight session.
If a sell signal in NASDAQ 100 futures is confirmed, in our view it would be extremely negative for the market as a whole. The NASDAQ 100 cash index should find support at the 50 day moving average of 5620.49, which is approximately 126 points below the current price of 5746.70.