For Bloomberg access:{OIAR<GO>}

Soybean oil:

July soybean oil gained 10 points on volume of 74,048 contracts. Total open interest declined by 725 contracts, which relative to volume is approximately 50% below average. The May contract lost 186 of open interest. As this report is being compiled on May 15, July soybean oil is trading 28 points lower after making a new high for the move of 33.72, which takes out the previous high of 33.48 made on May 6. Although, July soybean oil remains on the short and intermediate term buy signal, the fact remains soybeans are weak and in our view will soon test the contract low of 9.35 1/4 made on October 1, 2014.

Chicago wheat:

July Chicago wheat advanced 32.75 cents on very heavy volume of 204,181 contracts. Volume was the strongest since April 14 when 205,588 contracts were traded and the July contract closed at 4.96 1/2.On May 14, total open interest declined by 7,859 contracts, which relative to volume is approximately 50% above average meaning that large numbers of short sellers were powering the market higher and liquidating as the July contract moved to the highest level since April 13 (5.18).

As this report is being compiled on May 15, the July contract is trading 3.00 cents lower and has made a daily high of 5.19 3/4, which takes out yesterday’s high of 5.14 1/2. We see the current rally as a garden-variety short covering affair which happens from time to time in wheat. The July contract will generate a short-term buy signal on May 15 is the daily low remains above OIA’s key pivot point for May 15 of 4.95.

Conceivably, wheat may rally up to its late March-early April highs of 5.40-5.43. However, there are large numbers of speculative short-sellers in Chicago wheat, which could drive prices higher above the early spring highs, but the fundamentals are abysmal.We have no recommendation at this juncture.

Live cattle: On May 14, June and August live cattle generated short-term buy signals, which reversed the April 13 short-term sell signals. Both contracts remain on intermediate term buy signals.

June live cattle advanced 1.825  cents on heavy volume of 70,745 contracts. Total open interest increased by a huge 5,993 contracts, which relative to volume is approximately 230% above average meaning aggressive new buyers were entering the market in very large numbers and driving prices to a new high for the move (1.54975), which is the highest print since 1.54675 made on April 6. The June contract lost 3,641 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on May 15, June live cattle is trading 1.70 cents lower and has made a daily low 1.51575, which is the lowest print since 1.50825 made on May 13. After the generation of buy signals, the market has a tendency to pull back from 1-3 days and this is the opportunity to initiate bullish positions if you are so inclined.

Lean hogs:

June lean hogs lost 82.5 points on volume 38,052 contracts. Total open interest increased by a massive 3,627 contracts, which relative to volume is approximately 275% above average meaning that huge numbers of new short-sellers were entering the market and driving prices lower (83.600). The May and June contracts lost a total of 616 of open interest, which makes the total open interest increase more impressive (bearish).We are concerned about the back to back massive open interest increases and on May 13, total open interest increased by 3,382 and the June contract lost 27.5 points.

As this report is being compiled, the June contract is trading 65 points lower and has made a daily low of 82.275. Although it is premature to call the end of the current lean hog rally, we advise a sideline stance for those not involved in the market and to take partial profits on bullish positions.

WTI crude oil:

June WTI crude oil lost 62 cents on volume of 736,287 contracts. Total open interest declined by a massive 50,041 contracts, which relative to volume is approximately 160% above average meaning liquidation was extremely heavy on the rather modest decline. The June contract lost 70,303 of open interest.

As this report is being compiled long May 15, the June contract is trading 55  cents lower and has made a daily low of 58.42, which takes that yesterday’s low of 59.36 and is the lowest print since 58.14 made on May 8. The market looks tired at current levels, and as we pointed out yesterday’s report  there are two key pivots based upon a spike in volume that occurred after the release of the EIA reports: 61.85 and 62.58. If we get a rally near these levels, we may be looking to initiate a short call strategy, but this will depend upon the performance of open interest as prices move up to these key inflection points.

From the May 13 report:

“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.” 

Dollar index:

The June dollar index lost 13.8 points on volume of 55,342 contracts. Total open interest declined by 646 contracts, which relative to volume is approximately 45% below average. As this report is being compiled, the June contract is trading 11.5  points lower and has made a daily low of 93.225, which is above yesterday’s low of 93.155, the low of the move thus far.

Remarkably, there has been almost no open interest increases on price declines throughout the entire slide in the dollar index. For example, on May 13 when the June contract lost 96.5  points on relatively light volume of 42,296 contracts, total open interest declined by 790 contracts.

One sign the dollar index may be near a bottom is if we see open interest increases near the lower end of the trading range. This sets up a possible trade in the index, such as writing out of the money puts. The June dollar index generated a short-term sell signal on April 27 and an intermediate term sell signal on May 6.

Euro:

The June euro gained 35 pips on heavier than normal volume of 295,726 contracts. Volume was the highest since May 8 when the June contract lost 64 pips on volume of 333,035 contracts and total open interest increased by 1,511.On May 14, total open interest declined by 4,401 contracts, which relative to volume is approximately 40% below average, but an open interest decline on a price advance is bearish and confirms that shorts are liquidating as prices move higher.

Yesterday, the June contract made a high for the move of 1.1457 and as this report is being compiled on May 15 has made another new high of 1.1464. It appears the euro is headed is headed for the February 3 high of 1.1546. It will be interesting to see in today’s COT report, which will be released in a couple of hours, whether the rally has blown out large numbers of short-sellers. The June euro generated a short-term buy signal on April 29 and an intermediate term buy signal on May 1.

British Pound:

The June British pound advanced 18 pips on volume of 109,961 contracts. Volume was the lightest since May 7 when the June contract advanced 15 pips on volume of 92,464 contracts and total open interest increased by 639.On May 14, total open interest increased by 3,269 contracts, which relative to volume is approximately 5% above average, however May 14 was the sixth day in a row in which prices advanced along with open interest on each day. Yesterday, the June contract made a new high for the move of 1.5821 and as this report is being compiled on May 15, yesterday’s high has not been taken out.

The long British pound trade is becoming very crowded and we think the COT report will show a massive increase in long positions by managed money. On April 17, OIA announced that the June pound generated a short-term buy signal and an intermediate term buy signal on April 28.

Australian dollar:

The June Australian dollar lost 29 pips on volume of 97,839 contracts. Total open interest declined by 372 contracts, which relative to volume is approximately 80% below average. Yesterday, the June contract made a new high for the move 81.51 and as this report is being compiled on May 15, the Australian dollar is trading 29 pips lower and has not taken out yesterday’s high.

Canadian dollar:

The June Canadian dollar lost 16 pips on volume of 57,820 contracts. Total open interest declined by a massive 2,661 contracts, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on the modest decline. Yesterday, the June contract made a new high for the move of 83.86, which is fractionally higher than the May 13 print of 83.82. As this report is being compiled, the June Canadian dollar is trading at 28 pips lower.

Gold: On May 14, August gold generated a short-term buy signal, but remains on an intermediate term sell signal.

August gold advanced $7.00 on volume of 196,145 contracts. Volume declined from May 13 when the August contract advanced $25.80 on volume of 283,116 contracts and total open interest increased by a massive 12,104. On May 14, total open interest increased by a healthy 5,475 contracts, which relative to volume is average.

During the past three sessions beginning on May 12, gold has advanced $42.20 and open interest has increased each day and totals +21,711 contracts in this time frame. This is very healthy price and open interest action and indicates that higher prices are ahead. We are waiting for the 1-3 day pullback, which usually occurs after the generation of a buy signal before recommending bullish positions.

Silver: On May 14, July silver generated a short and intermediate term buy signal.

July silver advanced 24.4 cents on healthy volume of 67,870 contracts. Total open interest declined just 73 contracts. The July contract counted for loss of 862 of open interest. In short, there was very little in the way of commitments made in yesterday’s trading, and this may reflect the major advance of silver over the past three days of $1.151. As this report is being compiled, July silver has closed at 17.563, up 9.8 cents. Now that July silver is on buy signals, clients should wait for a pullback that last can from 1-3 days before considering the initiation of bullish positions.