On June 30, the USDA will release its quarterly grain stocks and acreage report. We recommend that all grain positions be liquidated prior to the report.
August soybeans advanced 20.00 cents while the November contract gained 15.25 on total volume of 192,690 contracts. Total open interest declined by 3,546 contracts, which relative to volume is approximately 25% below average. The July contract accounted for loss of 12,336 of open interest, and there were sufficient open interest increases in the forward months to partially offset the decline in the July contract. The August contract made a high of $13.82 3/4, which was the highest price since June 12 (13.89 3/4). As this report is being compiled on June 27, August soybeans are trading 2.25 cents lower after making a new high for the move at 13.92 1/4.
The November contract made a high yesterday of 12.46 1/4, which is its highest print since May 30 of 12.48 3/4. On June 27, the November contract made a high of 12.45, but has taken a tumble and is now trading 15.00 cents lower on the day. As we said in yesterday’s report, for the November contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point of 12.36 7/8.On June 27, the November contract has made a low of 12.26 1/4.We strongly encourage clients to remain on the sidelines prior to the USDA report. Both August and November soybeans remain on short term sell signals and intermediate term buy signals.
August soybean meal gained $8.80 on volume of 84,019 contracts. Total open interest declined by 1,126 contracts, which relative to volume is approximately 45% less than average. The July contract lost 6,092 of open interest and there were sufficient open interest increases in the forward months to offset a good portion of the decline in the July contract. As this report is being compiled on June 27, August soybean meal is trading 30 cents lower on the day. We strongly encourage clients remain on the sidelines prior to the USDA report. August soybean meal remains on a short-term sell signal and an intermediate term buy signal.
Soybean oil: we are suspending reporting on soybean oil until such time as we see a trading opportunity. August soybean oil remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.
August live cattle gained 2.10 cents on volume of 55,985 contracts. Volume rose from June 25 when August cattle advanced 92.5 cents on volume of 49,585 contracts and total open interest declined by 231 contracts. On June 26, total open interest increased by 2,583 contracts, which relative to volume is approximately 75% above average meaning that new longs were entering the market at a very aggressive pace and driving prices to new all-time highs (1.53025). This is fractionally above the all-time high made in February of 1.53000. June cattle accounted for loss of 1,043 and the August contract resumes pattern of losing open interest on strong advances – 954. As this report is being compiled, August cattle is trading 1.375 cents lower and has not taken out yesterday’s all time high. Stand aside.
WTI crude oil:
August WTI crude oil lost 66 cents on light volume of 416,809 contracts. Total open interest increased by 10,501 contracts, which relative to volume is average. The August contract accounted for loss of 4699 of open interest, which makes the total open interest increase more impressive (bearish).For the past 3 days, total open interest has increased 39,500 contracts while August WTI has declined 33 cents. As we said yesterday, it is likely that trade selling is keeping a lid on prices, at least temporarily.
From June 13 Through June 26, the August contract has been trading in a sideways pattern, and open interest during this time frame has increased by 30,771 contracts. On June 13 the August contract closed at $106.17 and on June 26 the closing price was 105.84.The increase of open interest during the sideways pattern tells us that WTI is going to breakout of the range of the past 2 weeks.While the increase is not overly large considering the build has occurred over 11 trading days, it does reveal a difference of opinion between longs and shorts about the direction of the market. We continue to recommend a stand aside posture.
Natural gas: On June 27, August natural gas will generate a short and intermediate term sell signal.
August natural gas lost 12.8 cents on volume of 278,490 contracts. Volume was the highest since June 19 when natural gas lost 7.5 cents on volume of 366,960 contracts and total open interest declined by 1441 contracts. On June 27, total open interest increased by 1237 contracts, which relative to volume is approximately 75% below average. The July contract accounted for loss of 4457 of open interest. As this report is being compiled, August natural gas is trading 5.4 cents lower and has made a new low for the move at $4.375, which is the lowest print since May 27 (4.353). Nearly 2 weeks ago, we expressed our reservations about natural gas based upon the negative spread action in the July-November 2014 contracts. As a result, OIA recommended a stand aside posture.
From the June 15 Weekend Wrap:
“Beginning with the May 11 Weekend Wrap, we wrote about the nearby months inverting over the distant months, in particular the November contract. We said that this was an indication of higher prices in the offing, which occurred prior to natural gas generating a short-term buy signal on June 6. The market has rallied, but we are concerned that the July 2014-November 2014 spread has moved from a premium to a discount. For example, on Friday, the spread closed at 3 cents premium to November, which broke below the most recent low of 2.8 cents premium to November on June 11, which was support going back to May 12 when the spread closed at 2.8 cents.
September copper gained 60 points on volume of 78,903 contracts. Total open interest declined by 1892 contracts, which relative to volume is approximately 5% below average. The July contract lost 6583 of open interest. As this report is being compiled on June 27, copper is trading 20 points lower on the day however, it has made a new high for the move at 3.1895, which is the highest print on the continuation chart since May 27 when the May contract made a high of $3.2000. Additionally, the high on June 27 touches the 200 day moving average of 3.1890. Copper has support at the 20, 50, 100 day moving averages of $3.0917, 3.0912, 3.0914 respectively. On June 23, September copper generated a short and intermediate term buy signal. We continue to recommend a stand aside posture.
August gold lost $5.60 on low volume of 141,957 contracts. Total open interest increased by 1499 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on June 27, August gold is trading $3.00 higher on the day, but has not taken out the high of the move made on June 24 of 1326.60.Although we are friendly to gold, key moving averages continue to be in a bearish set up. For example the 20 day moving average is 1280.50, 50 day 1285.80, 200 day 1289.30.We continue to prefer silver to gold.
September silver lost 9 ticks on heavy volume of 106,246 contracts. Total open interest declined by 667 contracts, which relative to volume is approximately 70% below average. The July contract accounted for loss of 11,902 of open interest and there was sufficient open interest increases in the forward months to offset most of the decline in the July contract. As this report is being compiled on June 27, September silver is trading 2.2 cents lower and has made a daily low of 21.010, which is above yesterday’s low of 20.845 and the June 25 low of 20.760.The moving average set up for silver is more favorable than gold.
For example, the 20 day moving average stands at 19.895 while the 50 day moving average is 19.609. The 100 day moving average is 20.145 and the 200 day, 20.509. Year to date, the moving average stands at 20.106, which means that silver prices currently are slightly above their year to date moving average.In short, silver is trading at or slightly below longer term moving averages, which means it is not significantly overbought. It will be interesting to see this week’s COT report and whether managed money has increased their long positions.Continue to hold bullish positions recommended in the June 16 report. Use the June 25 low of 20.760 as an exit point, or to give the trade more room, 20.630, the low made on June 20. Exiting at either point will provide clients with a healthy profit on the trade.