Crude oil:
July WTI crude gained $1.27 on volume of 871,598 contracts. Volume was the highest since January 23 when 950,328 contracts were traded and WTI closed at $96.67. On June 7, open interest increased by a massive 24,058 contracts, which relative to volume is average, but a large number nonetheless considering the massive volume. Making the total open interest increase much more impressive is that the July contract lost 25,546 of open interest. The total open interest increase is the largest since April 30 when crude oil declined $1.04 and open interest increased by 26,186 contracts. We examined our records going back to March 1 and could find only one day (March 5) when open interest increased (35,824 contracts) by a greater amount than on June 7 (+24,058 contracts) and June 6 (+23,563 contracts) on a price advance. During the past 4 trading sessions beginning on June 4, open interest has increased every every day for total of 64,765 contracts. During this time, crude oil has advanced $2.54. This is a large open interest increase considering the size of advance. In short, the open interest increase along with the price advance is something to be taken seriously. As we said in the pertinent part of the June 5 report, we think crude can rally to the $97.00 area, but believe it will struggle to move significantly beyond this level.
Brent crude oil:
July Brent crude oil advanced 95 cents on heavy volume of 739,135 contracts. This was the highest volume since June 4 when 847,598 contracts were traded. On June 7, open interest increased by 4,136 contracts, which relative to volume 65% below average. For the first time since late March, Brent closed decisively above its 50 day moving average. As this report is being compiled on June 10, Brent crude is trading 63 cents lower and has made a low for the day of $103.73. Conceivably, it could generate a short-term buy signal, but even this isn't certain. Based upon the differential of the open interest increase on June 7 between WTI and Brent, it is apparent that market participants much prefer WTI and this has been the case for a number of months.
Heating oil:
July heating oil gained 2.17 cents on volume of 146,330 contracts. Open interest declined by 2,473 contracts, which relative to volume is 30% below average. The July contract accounted for loss of 9,198 of open interest. We thought heating oil might generate a short-term buy signal, but this is not going to occur on June 10.
Gasoline:
July gasoline gained 2.06 cents on volume of 145,145 contracts. Volume was the highest since May 30 when 178,268 contracts were traded and July gasoline closed at $2.8073. On June 7, open interest increased by 5,519 contracts, which relative to volume is approximately 50% above average. The July contract accounted for loss of 4,734 of open interest, which makes the total open interest increased much more impressive. During the past 4 sessions beginning on June 4, open interest has increased each day and totals 20,992 while July gasoline has advanced 8.64 cents. Although the four day performance is respectable, the fact remains that gasoline has been unable to successfully test the May 17 high of $2.9054. It was on May 17 that gasoline generated a short-term buy signal, but its performance since then has been disappointing to say the least. As this report is being compiled on June 10, July gasoline is trading 1.48 cents lower.
Natural gas:
July natural gas closed unchanged on heavier than normal volume of 373,759 contracts. Open interest declined by 17,572 contracts, which relative to volume is approximately 85% above average, meaning that liquidation was extremely heavy. The July contract accounted for loss of 22,566 of open interest. As this report is being compiled on June 10, natural gas is made a new low for the move at $3.779. It appears likely that natural gas will move to $3.71, which is the 150 day moving average on the natural gas continuation chart. We remain friendly to natural gas, however since generating a short-term sell signal on May 31, natural gas has been in the doldrums.
The World Agriculture Supply Demand Report (WASDE) will be released on June 12.
Soybeans:
July soybeans gained 1 cent on heavy volume of 228,780 contracts. Volume was the highest since May 23 when 307,139 contracts were traded and July soybeans advanced 5.25 cents while open interest increased by 3,772 contracts. On June 7, open interest increased by 5,089 contracts, which relative to volume is approximately 10% below average. The July contract accounted for loss of 11,954 of open interest, which makes the total open interest increase that much more impressive.
As this report is being compiled, July soybeans are trading 12.25 cents lower and have made a low of $15.0 2 1/2. We expect that soybeans will continue to advance, and the catalyst for this may be the WASDE report released by the USDA on June 12. It is certainly possible, that the current USDA projection of ending stocks of 125 million could be reduced. Within the next week or two, the 50 day moving average in July soybeans will cross above the 200 day moving average. The 50 day moving average of $14.16 1/2 will cross above the 150 day moving average of 14.17 during the next couple of days.
Soybean meal:
July soybean meal lost $1.50 on very heavy volume of 107,801 contracts. Volume was the highest since May 23 when 122,274 contracts were traded and soybean meal closed at $437.00 after losing $3.60 and open interest increased by 4,920 contracts. On June 7, open interest declined by 1,162 contracts, which relative to volume is approximately 50% less than average. The July contract accounted for loss of 10,541 of open interest. As this report is being compiled on June 10, July soybean meal is trading $2.60 lower.
On June 5, July soybean meal reached $462.00, which is the highest price since December 17, 2012 when it reached 460.80. On December 18, 2012, the COT report showed that managed money was long soybean meal by a ratio of 4.89:1. Interestingly, this is about the same as the current ratio of 4.98:1. We think soybean meal has the wherewithal to advance by a greater percentage than soybeans. Soybeans are being crushed for meal and meal demand has been extraordinary. If current ending stocks of soybeans are reduced, there could be a major scramble for supplies of meal. Within the next week or two, the 50 day moving average in July soybean meal will cross above the 200 day moving average. The 50 day moving average of $414.10 will cross above the 150 day moving average of 414.30 during the next day or so.
Corn:
July corn gained 3 cents while the new crop December contract advanced 10.25 on volume of 296,875 contracts. Volume was the highest since May 29 when 378,106 contracts were traded and open interest increased by 3,661 while July corn lost 1.50 cents. On June 7, open interest increased by a massive 14,434 contracts, which relative to volume is approximately 85% above average, meaning that new longs were entering the market aggressively and pushing prices higher. The July contract accounted for loss of 11,258 of open interest, which makes the total open interest increase very impressive.
On June 7, July corn made a new high for the move at $6.74, which is the highest price since March 28, when corn collapsed by nearly a dollar in two days. On April 2 when the carnage caused by the USDA report was over for the most part, the long to short ratio was 2.43:1, or considerably higher than the current ratio of 1.82:1. We think corn will struggle to work its way above the gap left between March 28 and April 1. Do not short corn. It remains on a short-term buy signal, but an intermediate term sell signal.
Wheat:
July wheat lost 1.50 cents on volume of 102,395 contracts. Open interest declined by 2,536 contracts, which relative to volume is average. Every time that wheat appears to be on the verge of generating a short-term buy signal, it pulls back. Wheat remains on a short and intermediate term sell signal. There is no reason to be involved with wheat at this juncture.
Cotton:
July cotton lost 1 point on heavy volume of 45,218 contracts. Open interest increased by a massive 3,651 contracts, which relative to volume 230% above average. As this report is being compiled, cotton is trading 1.88 higher. On May 19, we recommended the initiation of bearish positions, and for those who have not liquidated as yet, we recommend positions be closed out and that speculators move to the sidelines, especially since the USDA is about to release its crop report on June 12.
Platinum:
July platinum lost $26.70 on volume of 16,462 contracts. Open interest declined by 406 contracts, which relative to volume is average. In the June 5 report, we stated: "As is usually the case after the generation of a buy signal, the market has a pullback lasting 1-2 and possibly 3 days. Do not chase the rally." Since generating the short-term buy signal, we had a pullback on June 7 and another one on June 10. Depending upon the currency and equity markets, conceivably a third pullback could occur. The low on June 10 has been $1487.30, and July platinum is currently trading $5.30 higher.
Australian dollar:
The Australian dollar lost 1.11 cents on heavy volume of 189,535 contracts open interest increased by 2,368 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on June 10, the Australian dollar has made a new low at 93.93, but is overdue for a rally. Maintain short calls recommended on April 29 and 30.
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Euro:
On June 6 the euro generated a short-term buy signal and on June 7 generated in intermediate term buy signal.
The June euro lost 23 points on volume of 329,033 contracts. Open interest declined by 2,723 contracts, which relative to volume is approximately 55% below average. Although the euro has yet to have the sharp pullback that we thought would have occurred by now, the market remains treacherous at its current level.
From the June 5 report:
"As the May 31 report shows, we thought the euro would be generating a short-term buy signal as early as June 4. However, our timing was off by 2 days. The euro will definitely generate a short-term buy signal on June 6, but with the kind of market action being seen, the euro is liable to have an extremely sharp pullback."
S&P 500 E mini:
The gained 15.75 points on volume of 2,447,905 contracts. Open interest declined by 37,111 contracts, which relative to volume is approximately 40% less than average. Maintain long put protection.
Copper:
It appears likely that July copper will generate a short-term sell signal on June 10.
By. Garry Stern
