WTI crude oil:
August WTI crude oil lost 98 cents on heavy volume of 1,705,000 contracts. Volume exceeded that of June 20 when the August contract lost 92 cents on volume of 1,533,507 contracts and total open interest increased by 9,428. On June 21, total open interest increased by a very minor 3,924, a number that is dramatically below average. The July 2017 and August 2017 contracts lost a total of 3,444 of open interest.
As we pointed out yesterday’s note, the big surprise on the crude oil price slide is very light open interest increases on price declines. As we said before, this indicates that would be speculators are reluctant to increase their bearish positions at the low-end of the trading range. This increases the likelihood that more downside action is to come before the market makes a significant bottom.
As we said in the June 20 note, the sign of a bottom may be massive open interest increases at the bottom of the trading range. This would indicate that Johnny-come-lately’s have decided to throw in the towel and join the bearish parade. Ironically, this is likely when the bottom will be made.
From the June 20 note on WTI crude:
“Since generating a short term sell signal on June 2, total open interest increases on price declines have been rare. In our view, this indicates reluctance on the part of would be market participants to become overly bearish at the low-end of the trading range. All this means is that prices have further to go on the downside and the first hint of a bottom may be when total open interest begins to increase massively on further market declines. Stand aside.”
Live cattle: August 2017 live cattle will generate an intermediate term sell signal on June 22 after generating a short term sell signal on June 14.
August live cattle lost 55 points on volume of 43,634 contracts. Total open interest declined by massive 3,393 contracts, which relative to volume is approximately 210% of average indicating that liquidation was extremely heavy on the modest decline.
The COT report released last Friday revealed that managed money added 233 contracts to their long positions and liquidated 1,864 their short positions. Commercial interests liquidated 1,663 of their long positions and also liquidated 2,984 their short positions. As of the June 13 tabulation date, managed money was long live cattle by a stratospheric 10.93:1, up sharply from the previous week of 9.54:1, but down sharply from the ratio two weeks ago at 13.23:1.
As this report is being compiled on June 22, the August contract is trading 1.575 cents lower and has made a daily low of 113.400, which is the lowest print since 112.200 made on April 26. Remarkably, managed money is massively long and many of these players are undoubtedly showing losses, some may be substantial and this will exert continued selling pressure on live cattle.
Corn: On June 21, July and September 2017 corn generated short term sell signals. Both contracts will likely generate intermediate term sell signals in tomorrow’s trading. Stand aside.
British pound: On June 21, the September 2017 British pound generated an intermediate term sell signal after generating a short term sell signal on May 30. Stand aside.