For Bloomberg access:{OIAR<GO>}

Soybeans:

July soybeans lost 2.25 cents on very light volume of 99,284 contracts. Total open interest increased by 2,939 contracts, which relative to volume is approximately 10% above average. The May contract lost 1,044 of open interest. As this report is being compiled on May 12 after the release of the USDA report, July soybeans are trading 8.50 lower and have made a low 9.64 1/4, which is the lowest print since 9.62 3/4 made on May 4. Additionally, the high for the day has been 9.81 1/2, which is below yesterday’s high of 9.82. Of the soybean complex, July soybean meal is the weakest on May 12 having lost 1.48% versus soybeans -0.85%. July soybeans remain on a short and intermediate term sell signal. We have no recommendation at this juncture.

Soybean oil:

July soybean oil gained 23 points on volume of 80,426 contracts. Total open interest increased by a massive 4,611 contracts, which relative to volume is approximately 130% above average, meaning that new aggressive buyers were entering the market in large numbers and driving prices higher (33.34), which is below the high for the move of 33.48 made on May 6. The May contract accounted for loss of 221 of open interest. As this report is being compiled on May 12 after the release of the USDA report July soybean oil is trading 11 points higher and has made a daily high of 33.47. On April 16, July soybean oil generated a short-term buy signal and an intermediate term buy signal on May 5. We have no recommendation at this juncture.

Corn:

July corn lost 2.50 cents on volume of 195,760 contracts. Total open interest increased by 1,721 contracts, which relative to volume is approximately 55% below average, however an open interest increase on a price decline is bearish. The May contract lost 400 of open interest, new crop December -1824. As this is being compiled after the release of the USDA on the May 12, July corn is trading 4.00 cents above yesterday’s close and has made a daily low of 3.57 1/4, which is beneath yesterday’s low of 3.59 and is the lowest print since 3.55 3/4, the low for the move made on May 5.

Despite the overwhelming bearishness of market participants, corn has refused to test its contract low of 3.47 made on October 1. Although, July corn remains on a short and intermediate term sell signal, we would avoid the short side of this market. Any kind of weather scare could send corn sharply higher in short order due to the very large short position of speculators.

Live cattle:

June live cattle lost 1.25 cents on heavy volume of 69,817 contracts. Volume exceeded that of May 8 when the June contract advanced 2.125 cents on volume of 66,743 contracts and total open interest increased by 3,858. On May 11, total open interest increased by 2,287 contracts, which relative to volume is approximately 15% above average. The June contract accounted for loss of 4,004 of open interest, December 2015 -552.

At the high for the move yesterday (1.52925), June live cattle was up approximately 1.25 cents and was unable to hold the gain, had a massive reversal, which accounts for the heavy volume. With respect to the open interest increase, it is impossible tell whether the open interest increase occurred at the early part of the session when prices were higher or that it was the result of new short-sellers piling in to drive prices lower, or a combination of the two. Regardless, the market was unable to make a low above yesterday’s pivot point, which means it remains on a short-term sell signal that was generated on April 13.

From the May 8 report:

“If today’s low in June live cattle of 1.51200 holds, the short-term sell signal of April 13 will be reversed and June live cattle will be on a short term buy signal. Also, August cattle will generate a short-term buy signal. Both contracts remain on intermediate term buy signals. “

Lean hogs:

June lean hogs lost 55 points on volume of 45,139 contracts. Total open interest declined by 517 contracts, which relative to volume is approximately 45% below average.The May contract lost 116 of open interest, June -4200, August 2015 -329.The July contract gained 3243 of open interest, October 2015 +774.

As this report is being compiled, the June contract is trading 80 points higher and has made a high of 85.150, which takes out the highs of May 8 and 11 and is a new high for the move. The market is climbing a wall of worry and that the speculative money crowd does not believe in the move. The cocoa market is experiencing the same dynamic. 

From the May 8 report:

“As we pointed out in previous reports and made the point again in the weekend report, price performance has been outstanding while open interest action is abysmal. Despite this, we see prices continuing to advance. On April 24, June and July lean hogs generated short term buy signals and intermediate term buy signals on April 29.”

WTI crude oil:

June WTI crude oil lost 14 cents on volume of 665,652 contracts. Total open interest declined by 13,903, which relative to volume is approximately 20% below average. The June contract accounted for loss of 38,663 of open interest. As this report is being compiled on May 12, June WTI is trading $1.45 higher and is mated daily high at 61.15, which is the highest print since 61.31 made on May 7.

As we pointed out in the weekend report (see extract below), WTI may be nearing a temporary peak, and it will be important to see an open interest decline on today’s move. If there is an open interest increase, our trade to write out of the money calls would be off the table.

From the May 10 Weekend Wrap:

“We think that a tradable high for bearish positions may be in place near the May 6 print of 62.58 and a move up to this level could present a relatively low risk proposition for writing out of the money calls. However, this will depend upon market action as it approaches the May 6 high. OIA Direct subscribers should call us for tactical advice if the market nears the $62.00 level. On April 7, June WTI crude oil generated a short-term buy signal and an intermediate term buy signal on April 14.”

Natural gas: June natural gas will generate an intermediate term buy signal if the daily low is above OIA’s key pivot point for May 12 of 2.830. On May 1, June natural gas generated a short-term buy signal.

June natural gas lost 7.8 cents on volume of 313,461 contracts. Volume was below that of May 7 when the June contract lost 4.2 cents on volume of 353,412 contracts and total open interest declined by 1,673. On May 11, total open interest declined by 8,517 contracts, which relative to volume is average and an open interest decline accompanying lower prices is positive open interest action.The June contract accounted for loss of 19,495 of open interest.

As this report as being compiled on May 12, June natural gas trading 10.8 cents above yesterday’s close and has made a daily high of 2.931, which is a shade below yesterday’s high of  2.935. We want to see an open interest increase in today’s trading, which will confirm the strength of the move and put additional pressure on the very large number of short sellers who will be be forced to cover as prices continue to climb.

Euro:

The June euro lost 49 pips on light volume of 216,043 contracts. Total open interest declined by 7,266 contracts, which relative to volume is approximately 25% above average meaning that liquidation was fairly heavy on the decline. As this report is being compiled on May 12, the June euro is trading 77 pips higher on fairly light volume. We continue to think a test of the May 7 high of 1.1398 is on the horizon, and want to see large numbers of managed money shorts get blown out of the market. This is a necessary condition for the formation of a top. On April 29, the June euro generated a short term buy signal and an intermediate term buy signal on May 1

British Pound:

The June British pound advanced 1.38 cents on volume of 119,664 contract. Volume declined substantially from May 8 when the June contract advanced 1.94 cents on volume of 187,619 contracts and total open interest increased by 6,246. On May 11, total open interest increased by 2,252 contracts, which relative to volume is approximately 25% below average, but an open interest increase accompanying a price advanced is positive. During the past three sessions beginning on May 7, the June pound has advanced 3.47 cents and open interest has increased by 9,137 in this time frame.

As this report is being compiled on May 12, the June pound is trading 92 pips above yesterday’s close and has made a new high for the move of 1.5708, which is the highest print since 1.5719 made December 17, 2014. The dramatic move higher began in mid April and on April 17 OIA announced the pound had generated a short-term buy signal (April 17 close 1.4954) and that it generated an intermediate term buy signal on April 28 (April 28 close 1.5331).The pound is a runaway train, and we discourage anyone from trying to pick a top in this market, although it is massively overbought.

10 Year Treasury Note:

The June 10 year treasury note lost 30 points on volume of 343,484 contracts. Total open interest increased by 31,217, which relative to volume is approximately 10% below average, but an open interest increase accompanying a price decline is bearish.As this report is being compiled on May 12, the June contract is trading unchanged after making a new low for the move of 126-065, which takes out the May 7 low of 126-135. Our sentiments regarding the ten-year note have not changed since the weekend report (see below).

From the Weekend Wrap:

“We think the short 10 year note trade is becoming very crowded, and although an aggressive bearish stance made sense after the generation of the short-term sell signal on April 29, it doesn’t make much sense today. The market is highly vulnerable to a good-sized short covering rally. Additionally, the 20 day moving average stands at 128-225, which is above the 50 day moving average of 128-105, and this is above the 200 day moving average of 126-125.”

Cocoa: July cocoa generated a short-term buy signal on April 14 and an intermediate term buy signal on April 24.

July cocoa advanced $61.00 on volume 31,931 contracts. Total open interest declined by 809 contracts, which relative to volume is average. The July contract lost 676 of open interest, September -915. As this report is being compiled after the close of the cocoa market, the July contract has made a new high of 3064 and the market has rocketed through the March 3 high of 3023. The interesting point to be made about cocoa is that managed money is net long, but by the lowest ratio in at least several weeks. The open interest decline in yesterday’s trading confirms the skepticism of the advance, which is similar to the mindset in the lean hog market.