Corn: July and September corn will generate short-term sell signals on June 22, but remain on intermediate term buy signals.
July corn lost 25.00 cents on very heavy volume of 702,297 contracts. Total open interest declined by 11,382, which relative to volume is approximately 35% below average. The July contract accounted for a loss of 31,210 of open interest. Although yesterday’s volume was one of the highest of 2016 the total open interest decline indicates there are huge numbers of speculative longs remaining in the market, which means that when corn prices rally, the advance will be stymied by longs trying to reduce losses or increase profits.
As this report is being compiled on June 22, the July contract is trading 2.00 cents above yesterday’s close and has made a new low for the move of 3.94, which is the lowest print since 3.95 1/2 made on May 23. On June 30, the USDA will release its planning intentions report and this is always a big market mover. Any positions entered into between now and June 29 should be liquidated prior to the report. Now that corn is on a short-term sell signal, the market should have a counter trend rally lasting 1-3 days. We recommend a stand aside posture at this juncture.
Chicago wheat: On June 21, July and should September Chicago wheat generated short-term sell signals and will generate intermediate term sell signals on June 22.
July Chicago wheat lost 14.50 cents on strong volume of 151,462 contracts. Total open interest increased by 5,364 contracts, which relative to volume is approximately 20% above average meaning that aggressive new short-sellers were entering the market in large numbers and driving prices lower (4.57 1/4). The July contract accounted for a loss of 3,182 of open interest.As this report is being compiled on June 22 the July contract is trading nearly unchanged on the day and has not taken out yesterday’s print. Stand aside.
WTI crude oil:
August WTI crude oil lost 11 cents on volume of 862,640 contracts. Total open interest declined by 12,851 contracts, which relative to volume is approximately 40% below average. The July contract accounted for a loss of 20,054 of open interest. As this report is being compiled after the release of the EIA report, the August contract is trading 66 cents lower and has made a daily low of 49.02, which is above yesterday’s print of 48.85 and a high of 50.54, which is 14 cents above yesterday’s high of 50.40.
In yesterday’s report, we recommended the initiation of out of the money short call positions in the nearby months for crude oil and thus far the trade is working well. Continue to hold this position. On June 16, August WTI generated a short-term sell signal and currently remains on an intermediate term buy signal.
The Energy Information Administration announced on June 22 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 530.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.2 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.2 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 5.2 million barrels last week.
Gasoline: On June 21, August gasoline generated an intermediate term buy signal, which reversed the June 16 intermediate term sell signal. August gasoline remains on a short-term sell signal. We have no recommendation.
July natural gas advanced 2.1 cents on volume of 356,250 contracts. Total open interest declined by a massive 17,063 contracts, which relative to volume is approximately 75% above average, and the July contract lost 23,429 of open interest. On June 1, OIA announced that July and August natural gas generated short-term buy signals and had been on intermediate term buy signals since April 20.
Since generating the short-term buy signal on June 1, the July contract has rallied approximately 40 cents yet managed money remains short natural gas by a ratio of 1.19:1, which is down from the previous week of 1.27:1 and the ratio two weeks ago of 1.44:1. We think there could be some major fireworks this winter as natural gas inventories become more balanced. Additionally, moving averages are aligning in a bullish set up. Seasonally, prices tend the top in June-July. Therefore, we advise against long positions at this juncture. Stand aside.
August gold lost $19.60 on relatively light volume of 225,880 contracts. Volume was only 5% above June 20 when the August contract lost 2.70 on volume of 211,454 contracts and total open interest declined by 794. On June 21, total open interest declined by 9,653 contracts, which relative to volume is approximately 55% above average. Yesterday the August contract made a low of 1267.40 and this has been taken out on June 22 with another new low for the move of 1263.80, which is close to the 50 day moving average of 1260.00 and is the lowest print since $1259.40 made on June 9. Stand aside.
July silver lost 19.5 cents on very heavy volume of 109,300 and contracts. Volume was the strongest since June 16 when the July contract gained 10.4 cents on volume of 102,018 contracts and total open interest increased by 172. On June 21, total open interest declined by a massive 4,648 contracts, which relative to volume is approximately 60% above average, however the July contract, which is facing expiration lost 16,741 of open interest.
As this report is being compiled on June 22 the July contract is trading nearly unchanged on the day and has made a daily low of $17.125, which is the lowest print since 17.105 made on June 13. Stand aside.
British pound: On June 21 the September British pound generated short and intermediate term buy signals. This reversed the June 13 short and intermediate sell signals.
The September pound lost 29 pips on volume of 166,100 contracts. Total open interest declined by 7,195 contracts, which relative to volume is approximately 65% above average meaning liquidation was substantial on yesterday’s modest decline. This follows the massive liquidation on June 20 when the pound gained 3.42 cents on volume of 177,672 contracts and total open interest declined by 7,486. In summary, for the past two days market participants are liquidating, which is to be expected with the upcoming vote on the 23rd. Stand aside.