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Soybeans: This will be our last report on soybeans until we announce a signal change or see a trading opportunity. July soybeans remain on a short and intermediate term sell signal.

July soybeans lost 18.50 on volume of 264,628 contracts. Volume was the strongest since April 28 when July soybeans advanced 4.25  cents on volume of 340,242 contracts and total open interest declined by 14,602. On May 12, total open interest increased by 2,764, which relative to volume is approximately 50% below average. The May contract lost 1067 of open interest. The market is headed for the contract low of 9.35 1/4 made on October 1, 2014. 

Soybean oil:

July soybean oil lost 22 points on volume of 108,783. Total open interest declined by 543 contracts, which relative to volume is approximately 75% below average and an open interest decline accompanying lower prices is healthy open interest action. The May, July and August 2015 contracts lost a total of 2518 of open interest. As this report is being compiled on May 13, July soybean oil is trading 5 points lower and has made a daily high at 33.36, which is below yesterday’s print of 33.47 and the high for the move of 33.48 made on May 6.We have no recommendation.

Corn: This will be our last report on corn until we announce a signal change or see a trading opportunity.

July corn gained 0.50 cents on heavy volume of 389,204 contracts. Volume was the strongest since April 30 when July corn lost 1.50 cents on volume of 361,050 contracts and total open interest declined by 7,087. On May 12, total open interest increased by a hefty 10,887 contracts, which relative to volume is average. The May and July contracts lost a total of 886 of open interest.

As this report is being compiled on May 13, July corn is trading 2.50 lower, but has not taken out 3.55 3/4, the low for the move, however we expect this to occur shortly. July corn is headed for the October 1, 2014 contract low of 3.47.

Live cattle:

June live cattle advanced 1.225 cents on strong volume of 65,655 contracts. Total open interest increased by 1,569 contracts, which relative to volume is approximately 5% below average, however the June contract lost 4,672 of open interest, December 2015 -388, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 13, June live cattle is trading 75 points higher and has made a daily low of 1.50825, which is below OIA’s key pivot point for May 13 of 1.51170. In order for June live cattle to reverse the April 13 short-term sell signal, the contract must make a daily low above the pivot point. Until this occurs, June live cattle will trade trade sideways at best.  However, the market should get a lift as the Memorial Day and July 4 holidays approach when the summer grilling season switches into high gear.

Lean hogs:

June lean hogs advanced 77.5 points on volume 56,658 contracts. Total open interest increased by 2,314 contracts, which relative to volume is approximately 55% above average meaning that aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (85.325).The May contract lost 95 of open interest, June -4672, which makes the total open interest increase more impressive (bullish).

The action in yesterday’s trading was outstanding and is the first time since April 30 that June hog prices advanced along with open interest. On April 30, the  June contract advanced 22.5  points on volume of 57,986 contracts and total open interest increased by 1,350. On April 24, June lean hogs generated a short-term buy signal and an intermediate-term buy signal on April 29. As this report is being compiled on May 13, the June contract is trading 20 points lower on the day. We continue to see higher prices ahead.

WTI crude oil:

June WTI crude oil advanced $1.50 on heavier than normal volume of 809,392 contracts. Volume with the strongest since May 8 when the June contract advanced 45 cents on volume of 839,870 contracts and total open interest declined by 13,353. On May 12, total open interest increased by 2,830 contracts, which is minuscule and dramatically below average. However, the June contract lost 31,489 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June. As this report is being compiled after the release of the EIA report, which showed another stock draw, the June contract is trading 61 cents higher on the day. As we stated in yesterday’s report, we wanted to see an open interest decline in yesterday’s trading before recommending writing out of the money calls. Continue to stand aside.

From the May 11 report:

“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.”

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.2 million barrels from the previous week. At 484.8 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 1.1 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.5 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories rose 1.9 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 5.5 million barrels last week.

Brent crude oil:

June Brent crude oil advanced $1.95 on heavy volume of 878,393 contracts. Total open interest declined by 19,317, which relative to volume is approximately 15% below average, but an open interest decline of this magnitude on a major price advance is clearly bearish. The June contract lost 42,715 of open interest and there were insufficient numbers of open interest increases in the forward months to offset the decline in June.

This is a direct contrast to the open interest action in WTI in yesterday’s trading. The open interest action in Brent crude has been consistently bearish whereas the open interest action in WTI has been consistently bullish for the most part. Brent crude remains on a short and intermediate term buy signal. As this report is being compiled on May 13, the July contract is trading 92 cents higher. Stand aside.

Natural gas: June natural gas will generate an intermediate term buy signal on May 13 if the daily low is above OIA’s key pivot point for May 13 of 2.830. On May 1, OIA announced that June natural gas generated a short term buy signal.

June natural gas advanced 9.5 cents on heavy volume of 427,153 contracts. Volume exceeded that of May 11 when the June contract lost 7.8 cents cents on volume of 313,461 contracts and total open interest declined by 8,517.On May 12, total open interest increased by 6,049 contracts, which relative to volume is approximately 40% below average, but an open interest increase on the price advance is positive. Additionally, the June contract lost 3,648 of open interest, which makes the total open interest increase more impressive (bullish). On May 13, June natural gas is trading 5.9 cents higher and has made a new high for the move of 2.972.

Euro:

The June euro advanced 64 pips on volume of 228,716 contracts. Total open interest declined by 2,336 contracts, which relative to volume is approximately 50% below average.As this report is being compiled on May 13, the June contract is trading 1.51 cents higher and has made a daily high of 1.1387, which is a shade below the high for the move of 1.1398 made on May 7. On April 29, the June euro generated a short-term buy signal and intermediate term buy signal on May 1.

It will be interesting to see what open interest stats show about trading on May 13. Are shorts throwing in the towel and covering? Based upon the relatively low volume traded on May 13, it appears capitulation has not occurred. If this is the case, higher prices are ahead.

From the May 11 report:

“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.”

British Pound:

The June British pound advanced 88 pips on volume of 123,857 contracts. Volume increased somewhat from May 11 when the June contract gained 1.38  cents on volume of 119,664 contracts and total open interest increased by 2,252. On May 12, total open interest increased again, this time by 2,203 contracts, which relative to volume is approximately 25% less than average, but this is the fourth day in a row in which prices and open interest have advanced.

As this report is being compiled on May 13, the June contract is trading 69 pips higher and has made a daily high of 1.5766, which is the highest print since the week of December 15, 2014. The June pound has advanced 8.15% from its contract low of 1.4560 made on April 13. OIA announced the generation of a short term buy signal on April 17 and an intermediate term buy signal on April 28. 

Australian dollar:

The June Australian dollar advanced 88 pips on low volume of 79,138 contracts.Total open interest increased by 1,640 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s price advance is bullish. As this report is being compiled on May 13, the Australian dollar is trading 1.18 cents higher and has made a new high for the move of 81.10, which is the highest print since the week of January 15, 2015 (82.10).

On April 17, OIA announced that the June Australian dollar generated a short-term buy signal and an intermediate term buy signal on April 28. According to the latest COT report, there are large numbers of managed money shorts who need to get blown out of the market, and yesterday’s open interest increase indicates there is more forced liquidation to come.

Canadian dollar:

The June Canadian dollar advanced 67 pips on volume of 49,588 contracts. Total open interest increased by massive 2,979 contracts, which relative to volume is approximately 140% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a daily high of 83.44, which is below the high of the move for the June contract of 83.70, made on May 6.

As this report is being compiled on May 13, the June contract has made a new high for the move of 83.82. On April 16, OIA announced that the June Canadian dollar generated a short and intermediate term buy signal.

Dollar index:

The June dollar index lost 49.4 points on fairly light volume of 32,925 contracts. Total open interest declined by 741 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on May 13, the June dollar index is trading sharply lower, down 93.6 points and has made a new low for the move of 93.505, which takes out the previous low of 93.960 made on May 6 and is the lowest print since 93.385 made the week of February 2, 2015. On April 27, the June dollar index generated a short-term sell signal and an intermediate term sell signal on May 6.

Gold:

June gold advanced $9.40 on fairly heavy volume of 171,346 contracts. Total open interest increased by 4,132, which relative to volume is approximately 5% below average, but an open interest increase on a price advanced is positive. Additionally, the June contract lost 9,544 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 13, August gold is trading 22.40 higher and has made a new high for the move at 1219.40. The market has exploded to the upside in today’s trading, and a short-term buy signal will be generated at the earliest tomorrow if the daily low is above OIA’s key pivot point for May 13 of 1202.20.Tomorrow, the pivot point may change slightly, but this gives clients an idea of what to look for.

Silver:

July silver advanced 21.2 cents on volume of 43,885 contracts. Total open interest declined by 2,177 contracts, which relative to volume is approximately 100% above average meaning that large numbers of market participants were liquidating as prices advanced. As this report is being compiled on May 13, July silver is trading sharply higher, up 59.9 cents and has made a new high for the move of 17.235, which is the highest print since April 6. July silver will generate a short-term buy signal, at the earliest tomorrow if the daily low is above OIA’s key pivot point of 16.568.