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Chicago and Kansas City wheat are rallying sharply on May 14, and we will provide an analysis of the advance in tomorrow’s report. Short and intermediate term buy signals will not be generated today.

Soybean oil:

July soybean oil advanced 27 points on volume of 85,348 contracts. Total open interest increased by a sizable 4,867 contracts, which relative to volume is approximately 130% above average meaning aggressive new buyers were entering the market in large numbers and driving prices higher (33.36). As this report is being compiled on May 14, July soybean oil is trading 13 points lower and has made a daily high of 33.45, which is below the print made on May 12 of 33.47 and the high for the move of 33.48 made on May 6. The market is struggling to break out of the top of its range, but the negative fundamentals of soybeans will keep a lid on rallies. July soybean oil remains on a short and intermediate term buy signal. We have no recommendation.

Live cattle: Unless June and August live cattle reverses today’s advance, both contracts will generate short-term buy signals on May 14.

June live cattle advanced 50 points on heavy volume of 68,110 contracts. Volume increased from May 12 when the June contract advanced 1.225 cents on total volume of 65,655 contracts and total open interest increased by 1,569. On May 13, total open interest increased by a whopping 6,227 contracts, which relative to volume is approximately 250% above average meaning that huge numbers of new buyers were entering the market in large numbers and driving prices higher (1.52500), which is the highest print since 1.52925 made on May 11.The June contract accounted for loss of 4,249 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 14, June live cattle is trading 1.80 cents above yesterday’s close and has made a new high for the move of 1.53900, which is the highest print since 1.54675 made on April 7. 

Lean hogs:

June lean hogs lost 27.5 points on volume of 49,179 contracts. Total open interest increased by massive 3,382 contracts, which relative to volume is approximately 170% above average meaning a battle ensued between buyers and sellers and sellers were able to move prices fractionally lower. The May contract lost 45 open interest, June -2416. As this report is being compiled on May 14, June lean hogs are trading 75 points lower. June lean hogs remain on a short and intermediate term buy signal, and we think prices are headed higher.

WTI crude oil:

June WTI crude oil lost 25 cents on heavy volume of 903,781 contracts. Volume increased substantially from May 12 when the June contract advanced $1.50 on volume of 809,392 and total open interest increased by 2,830.On May 13, total open interest declined just 2,335 contracts. The June contract lost 42,026 of open interest, which means there were sufficient open interest increases in the forward months to reduce total open interest to a negligible number.

We view this as bearish because prices rallied after the release of the EIA report and then sellers came in aggressively to push prices lower.During the 10 minute period after the release of the EIA report, prices spiked to a high of 61.85 on volume of 32,290 contracts and closed at 61.22 on the 10 minute chart. We saw the exact same kind of market action on May 6 after the release of the EIA report when prices spiked to a high of 62.58. See the extract from the May 6 report below.

In summary, we have two spike high pivots (61.85 and 62.58) made on heavy volume and both should be formidable resistance going forward. As this report is being compiled on May 14, the June contract is trading 79 cents lower and has made a daily low of 59.46, which is the lowest print since 59.12 made on May 12.

From the May 6 report:

“As we pointed out in yesterday’s report, the volume traded in the 10 minute period after the release of the EIA report in the June contract was 30,578 contracts and the range traded was 61.96-62.58, closing at 62.03 on the 10 minute chart. In short, volume traded in that 10 minute period in the June contract represented 3.3% of the total volume traded in all contracts.”

“From time to time we mention that massive volume spikes as prices approach a new high or low can be a sign of capitulation and a possible major high or low. The high of 62.58 should be on every speculators watch list.On April 7, OIA announced that June WTI generated a short-term buy signal and an intermediate term buy signal on April 14.”

Natural gas: On May 13, June natural gas generated an intermediate term buy signal after generating a short-term buy signal on May 1.

June natural gas advanced 3.8 cents on moderate volume of 391,276 contracts. However, total open interest exploded higher by 18,772 contracts, which relative to volume is approximately 75% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (2.972), which is the highest print since March 20 (2.971). The June contract lost 7,082 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 14, after the release of the EIA storage report, June natural gas is trading 6.4 cents higher and has made a new high for the move of 3.020, which is the highest print since 3.026 made on February 24, 2015. We know there are large numbers of managed money shorts in the market and as prices continue to rise, this class of speculator will be forced to cover positions, driving prices still higher. Total open interest has increased during the past two days (24,821) and this indicates shorts are digging in and refusing to liquidate.

Weekly Natural Gas Storage Report – EIA

The Energy Information Administration announced that working gas in storage was 1,897 Bcf as of Friday, May 8, 2015, according to EIA estimates. This represents a net increase of 111 Bcf from the previous week. Stocks were 752 Bcf higher than last year at this time and 38 Bcf below the 5-year average of 1,935 Bcf. In the East Region, stocks were 150 Bcf below the 5-year average following net injections of 59 Bcf. Stocks in the Producing Region were 45 Bcf above the 5-year average of 789 Bcf after a net injection of 44 Bcf. Stocks in the West Region were 68 Bcf above the 5-year average after a net addition of 8 Bcf. At 1,897 Bcf, total working gas is within the 5-year historical range.

Euro:

The June euro advanced 1.40 cents on surprisingly light volume of 264,024 contracts. Total open interest increased by 1,810, which relative to volume is approximately 60% below average, but an open interest increase is bullish, and indicates that short sellers are not liquidating. Yesterday, the June contract made a high of 1.1387, and this has been taken out on May 14 with another new high for the move of 1.1457. Again, we see prices continuing to advance until more short sellers have been blown out of the market. 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 71 pips on heavy volume of 161,716 contracts. Volume increased from May 12 when the June contract advanced 88 pips on volume of 123,857 contracts and total open interest increased by 2,203 contracts. Additionally, volume was the heaviest since 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 13, total open interest increased by 814 contracts, which relative to volume is approximately 75% below average. Additionally, it is the smallest open interest increase since May 7 when the June contract advanced 15 pips on volume of 92,464 contracts and total open interest increased by 639.As this report is being compiled on May 14, the June contract is trading 4 pips above yesterday’s close and has made a new high for the move of 1.5821, which takes out yesterday’s high of 1.5766 and is the highest print since the December 2014 pound made a high of 1.5824 during the week of November 24, 2014.On April 17, the June pound generated a short term buy signal and an intermediate term buy signal on April 28.

Australian dollar:

The June Australian dollar advanced 1.10 cents on volume of 99,676 contracts. Total open interest declined by 1,650 contracts, which relative to volume is approximately 35% less than average, but an open interest decline on the move of the magnitude seen on May 13 indicates that short sellers are being squeezed out of the market and that new buyers were not powering the market higher in yesterday’s trade.

As this report is being compiled on May 14, the Australian dollar is trading 13 pips lower after making a new high for the move of 81.51, which takes out yesterday’s high of 81.10 and is the highest print since 82.10 made the week of January 19, 2015. On April 17, the June Australian dollar generated a short-term buy signal and an intermediate term buy signal on April 28.

Canadian dollar:

The June Canadian dollar advanced 18 pips on volume of 63,889 contracts. Total open interest increased by 1,143 contracts, which relative to volume is approximately 25% less than average, however an open interest increase on a price advances bullish. As this report is being compiled on May 14, the June contract is trading 21 pips lower and has made a fractional new high of 83.86, which takes out yesterday’s high of 83.82. On April 16, the June Canadian dollar generated a short and intermediate term buy signal.

Gold: On May 14, August gold will generate a short-term buy signal, but will remain on an intermediate term sell signal. After the generation of the buy signal, the market should have a pullback lasting from 1-3 days and this is the opportunity to initiate bullish positions.

August gold advanced $25.80 on very heavy volume of 283,116 contracts. Volume was the strongest since March 27 when 329,519 contracts were traded and gold closed at 1200.70. On May 13, total open interest increased by a massive 12,104 contracts, which relative to volume is approximately 60% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move (1219.40). The June contract lost 2,535 open interest, which makes the total open interest increase more impressive (bullish).

The move yesterday followed positive price and open interest action on May 12 when gold advanced $9.40 on volume of 171,346 contracts and total open interest increased by 4,132. As this report is being compiled on May 14, gold has made another new high at 1228.40, which takes out the previous high of 1225.00 made on April 6.

Silver: On May 14, July silver will generate a short and intermediate term buy signal. After the generation of buy signals, the market should have a pullback lasting from 1-3 days and this is the opportunity to initiate bullish positions.

July silver had a very major advance of 69.5  cents on heavy volume of 82,414 contracts.Volume was the strongest since April 28 when 115,577 contracts were traded and July silver closed at 16.630. On May 13, total open interest increased by massive 5,464 contracts, which relative to volume is approximately 160% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move’s (17.235). As this report is being compiled on May 14, July silver has rocketed to a new high of 17.585, which is the highest print since 17.695 made February 4, 2015.