The Federal Reserve will make its announcement on interest rates on June 15 at 2:00 p.m. EDT. This will be the prime driver of prices for equities, interest rates, currencies and commodities for the next couple of days.
July corn advanced 6.50 cents on volume of 544,940 contracts. Volume declined substantially from June 13 when the July contract gained 7.00 cents on volume of 691,876 contracts and total open interest increased by 2,400. On June 14, total open interest declined by 13,016 contracts, which relative to volume is average. The July contract accounted for a loss of 31,512 of open interest, which means there were insufficient open interest increases in the forward months to offset the decline in July.
Yesterday’s action was negative and follows the disappointing open interest increase on June 13.On June 10, the July contract lost 3.50cents on volume of 615,677 contracts and total open interest increased by 6,682, which indicates that new short-sellers were entering the market and driving prices lower (4.20).
In summary, for the past 3 days open interest action relative to price is advances and declines has been bearish. This confirms our belief that corn prices are topping. As this report is being compiled on June 15 the July contract is trading 3.25 cents lower and has made a daily high of 4.39, which takes out yesterday’s print of 4.36 3/4, the June 13 high of 4.38 and is the highest since 4.39 1/4, the high for the move made on June 8.
The first sign that July corn is about to generate a short-term sell signal will be if it makes a daily high below OIA’s pivot point for June 15 of $4.22. July corn remains on short and intermediate term buy signals. New bullish positions should not be initiated at current levels and clients should have sell parameters in place. Do not attempt to pick a top in this market.
WTI crude oil:
July WTI crude oil lost 39 cents on volume of 931,251 contracts. Volume declined slightly from June 13 when the July contract lost 19 cents on volume of 954,809 contracts and total open interest increased by a massive 37,552. On June 14, total open interest declined by 21,293 contracts, which relative to volume is approximately 10% below average, and yesterday’s open interest decline indicates that longs liquidating were pressuring driving prices lower (47.84). The July contract accounted for loss of 56,876 of open interest.
As this report is being compiled on June 15, the July contract is trading 31 cents lower and has made a daily low of 47.55, which is the lowest print since 47.40 made on May 23. Yesterday’s high of 48.69 left a 19 cent gap between the June 13 close of 48.88 and the June 14 high. Thus far on June 15, the gap has not been closed. The July WTI contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for June 15 of 48.41 and we expect this to occur within the next day.
The August Brent crude oil contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for June 15 of $49.19. Furthermore, we expect heating oil to generate a short-term sell signal and gasoline generated a short-term sell signal on June 13 and is likely be on an intermediate term sell signal within a day or two. This means that crude oil will no longer have support of the products. Stand aside.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 531.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.6 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.8 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.1 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 0.7 million barrels last week
August gold advanced $1.20 on volume of 202,310 contracts. Total open interest increased by 6,182 contracts, which relative to volume is approximately 10% above average. The June contract accounted for loss of 346 of open interest. From June 8 through June 14 total open interest has increased every day for a total of 49,027 while August gold has advanced by $41.10.
While open interest increases during the past several days on price advances is very positive, we think it has been overdone relative to the price advance. To put this in perspective consider that for each dollar increase in the price of gold from June 3 through June 14 it has taken an open interest increase of 1,193 contracts. This tells us there are massive hedging operations taking place at the high end of the trading range.
While this does not preclude gold from continuing to advance, we think there are dangers particularly when it comes to the Brexit vote on June 23. Namely, if there is a vote to exit, we believe the dollar will advance dramatically, which will crush precious metal prices and this will be occurring at a time when speculators are massively long, especially managed money. Stand aside.
The September euro lost 90 pips on volume of 176,793 contracts. Total open interest increased by 3,211 contracts, which relative to volume is approximately 25% below average, but an open interest increase on yesterday’s strong decline is negative. As this report is being compiled on June 15, the September contract is trading 35 pips above yesterday’s close and has made a daily low of 1.1228, which is 1 pip above yesterday’s low. The September euro remains on short and intermediate term buy signals. We have no recommendation other than to stand aside.
The September British pound lost 1.21 cents on surprisingly light volume of 143,347 contracts. Total open interest increased by 3,649 contracts, which relative to volume is approximately average. However, yesterday’s open interest increase is bearish. On June 13, the September contract generated short and intermediate term sell signals. We have continually reminded clients to stand aside in the British pound and euro-centric currencies due to the upcoming vote on June 23.