General Comments:
The following table lists the performance of the grains on a percentage basis for April 2. For the second day in a row, corn was at the top the list and new crop soybeans and soybean meal were also at the top. Wheat slumped dramatically on April 2 in contrast to its performance on March 30 when wheat was the top performer of the group.
May corn……………………….+2.02%
November soybeans…………+1.95%
December soybean meal……+1.71%
May soybeans…………………+1.30%
May soybeans meal……………+.59%
May wheat………………………..-.53%
Corn:
May corn closed 11 cents higher on relatively heavy volume of 423,711 contracts. Open interest increased by 3,968 contracts. The May-July bull spread continued to widen with May selling at a 4 cent premium to July. This is bullish, and if the market’s daily low is above the pivot points of $6.47 1/2 and $6.50 7/8, a buy signal will be generated. This is not to say that long positions should be instituted, rather it is an indication that the market should be traded primarily from the long side. It is also a signal that short positions should be avoided.
Soybeans:
May soybeans closed 18 cents higher on relatively heavy volume of 331,933 contracts. Open interest skyrocketed by 21,337 contracts. Open interest by speculators is now at a record level. As I pointed out in the April 1 weekend wrap, the soybean market is very volatile and major moves in either direction should be expected. I suggest that readers review the April 1 weekend wrap in order to get a fuller understanding of how the market traded last year. The major action in the coming season will be in the November soybean contract.
Sugar #11:
May sugar closed 13 points lower on volume of the hundred and 1312 contracts. Open interest increased by 5,847 contracts. Stand aside.
Crude oil:
May crude oil closed $2.21 higher on light volume of 526,360 contracts. Open interest increased by 11,731 contracts. The high to low range for crude oil on April 2 was $3.43 which is significantly greater than the 21 day average true range of $2.31. What I find striking is that despite a 50% increase in the range, and the market closing a couple of dollars higher, volume is so lackluster. Although the open interest increase was respectable, it was about average in relation to the volume. The market continues to be on a short term sell signal, but this does not mean speculators should be short the market. Stand aside.
Gasoline:
May gasoline closed 7.41 cents higher on volume of 220,841 contracts. Open interest increased by a minuscule 301 contracts. I have a couple of observations about the gasoline trade on Monday. First, the range on Monday was 11.43 cents, which is 80% higher than the 21 day average true range of 6.37 cents. Second, although the range was significantly higher than on March 30 (7.57 cents), volume on Monday was only 2,571 contracts above the volume of March 30. The very small increase of open interest on such a large move is actually a negative. The day’s action can be summed up by observing that on a big range day when the market closed sharply higher, volume expanded meagerly and open interest increased meagerly. This is not the kind of market action speculators want to see if they want to trade gasoline on the long side. If you look at the soybean or corn market, and contrast that with gasoline, you can readily see the difference between grain markets that are rising in price and have healthy increases in volume and open interest, and gasoline, which has minuscule increases in volume and open interest as price dramatically increases.
Gold:
June gold closed $7.80 higher on very light volume of the 122,298 contracts. Open interest increased by a healthy 4,653 contracts. Volume on Monday was lighter than on Friday, which was the lowest volume since February 13, 2012. In short, the market has risen $24.80 during a two day timeframe, and volume on those two days are the lowest in a month and a half. If you combine the open interest for the two days, the increase is a minuscule 2,945 contracts, which is a dismal showing. Also of note is that on April 2 gold advanced to a high of $1685.40, which was $12.70 above the high on March 30, yet volume declined on the April 2 advance by 5,583 contracts. Since the gold market went to a sell signal on March 15, it is been trading in the sideways pattern. The generation of a sell signal is not a sign to go short, but rather an opportunity to acquire gold at lower prices.
Silver:
May silver closed 61 cents higher on volume of 45,897 contracts. Open interest increased by 3,342 contracts. This is the first day in quite a while that price and open interest moved in tandem. The volume remains weak, but I am getting friendlier to the market for a number of different reasons. Unlike gold, silver has never generated a sell signal, and as I pointed out in the April 1 weekend wrap, silver’s 50 day moving average has crossed above the 150 day moving average. For the market to generate a buy signal, the low of the day has to be above $32.86. A secondary signal would be generated if the low for the day was above $33.82.
Euro:
The June Euro closed 10 points lower on volume of 241,012 contracts. Open interest increased by 3,561 contracts. Market looks steady here. Stand aside.
Australian dollar:
The June Australian dollar closed 84 points higher on volume of 112,513 contracts. Open interest declined on the price increase by 622 contracts. The market remains on a short term sell signal, but at this juncture stand aside until I get more confirmation.
S&P 500 E mini:
The S&P 500 E mini closed 9.25 points higher on relatively strong volume of 1,721,575 contracts. Open interest increased by 30,982 contracts. The market made a new closing high of 1412.50, but did not make a new high for the move. The high of 1419.75 was made on March 27. Long put protection should be in place.
Interest Rates:
The June 10 year treasury note closed seven points higher on light volume of 979,805 contracts. Open interest increased by a modest 17,391 contracts. Volume for the day was the lowest since March 27 when notes traded 973,130 contracts. For those who are in bearish positions, stops should be placed in the 130-02 area.
