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Soybean oil:

July soybean oil gained 2 points on volume of 69,881 contracts. Total open interest increased by 3,215 contracts, which relative to volume is approximately 75% above average meaning a battle ensued between buyers and sellers and the market closed essentially unchanged. The August through October 2015 contracts lost a collective 532 of open interest. As this report is being compiled on May 21, the July contract is trading 4 points lower. Soybeans continue to drift lower, are near contract lows, and this is going to negatively impact soybean oil prices. Unless there is a change in the direction of soybeans, we think a short-term sell signal in soybean oil is inevitable. Stand aside.

Chicago wheat:

July Chicago wheat advanced 2.75 cents on volume of 140,273 contracts. Volume was the highest since May 14 when the July contract advanced 32.75 cents on volume of 204,181 contracts and total open interest declined by 7,859 contracts. On May 20, total open interest increased by 1,628 contracts, which relative to volume is approximately 45% below average, but an open interest increase on a price advance is bullish. The July contract lost 331 of open interest, which makes the total open interest increase slightly more impressive (bullish).

As this report is being compiled on May 21, the July contract is trading 12.00 cents higher and has made a daily high of 5.28, which is the highest print since 5.30 1/4 made on May 18.On May 15, July Chicago wheat generated a short term buy signal, but remains on an intermediate term sell signal. Despite taking out short-sellers on May 14 through May 19 (total open interest declined during this time frame), there remains large numbers of speculative shorts who will be forced to cover as prices continue to move higher. Although, fundamentals for wheat are bearish, this is a technical rally and wheat is known for such moves.We recommend a stand aside posture for now.

Live cattle:

June live cattle lost 62.5 points on volume of 43,020 contracts.Total open interest declined by 46 contracts. The June contract lost 3,458 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in June. We consider this to be bearish open interest action relative to the price decline. As this report is being compiled on May 21, the June contract is trading 1.30 cents above yesterday’s close and has made a daily high 1.53000, which is below yesterday’s high of 1.53050. We are leery of this move, and do not feel there is enough upside to warrant bullish positions. However, June and August live cattle remain on a short and intermediate term buy signal.

From the May 20 report:

“It appears the market really does not have the internal strengths to move substantially higher from here. We are concerned that the June contract has made a double top: 1.54675 (April 6) 1.54975 (May 14).  June live cattle remains on a short and intermediate term buy signal, but we think it is vulnerable to reverse the short-term buy signal generated on May 14.”

WTI crude oil: On May 20, July WTI crude oil generated a short-term sell signal, but remains on an intermediate term buy signal.

July WTI crude oil advanced 99 cents on light volume of 492,575 contracts. Volume with the weakest since May 4 when 395,171 contracts were traded and the July contract closed at 60.16. On May 20, total open interest increased by 6,792, which relative to volume is approximately 40% below average, but an open interest increase on a price advanced is positive. The June contract lost 946 of open interest.

As this report is being compiled on May 21, the July contract is trading 1.90 higher and has made a daily high is 60.94. Although, it is uncommon for a short term sell signal to reverse immediately, for this to occur, July WTI must make a daily low above OIA’s key pivot point for May 21 of 60.88.

As we pointed out in yesterday’s report, we expected a counter trend rally and this is the first day of corrective action since yesterday’s short-term sell signal. Based upon today’s action, it appears the rally may continue for another day before it runs out of steam. Stand aside.

From the May 20 report:

“We think a short-term sell signal is inevitable. Once this occurs, we will wait for a counter trend rally and then examine various strategies for bearish positions.”

Brent crude oil: On May 20, July Brent crude oil generated a short term sell signal, but remains on an intermediate term buy signal.

July Brent crude oil advanced $1.01 on light volume of 497,467 contracts. Total open interest increased by 2,919 contracts, which relative to volume is approximately 70% below average. The July contract lost 12,289 of open interest, which makes the minor increase of open interest slightly more impressive (bullish).As this report is being compiled on May 21, the July contract is trading 1.49 higher on the day. Similar to WTI, Brent is following the pattern of having a counter trend rally after the generation of a short-term sell signal. For the past three weeks, Brent has been the under performer versus WTI. Stand aside.

Natural gas:

June natural gas lost 3.3 cents on volume of 332,166 contracts. Total open interest declined by 11,589, which relative to volume is approximately 50% above average meaning that liquidation was heavy on the modest decline.The June contract lost 17,845 open interest. As this report is being compiled after the release of the EIA storage report, June natural gas is trading 4.4 cents higher and has made a daily high 3.038, which takes out yesterday’s high of 3.021 and is the highest print since 3.105 made on May 19. June natural gas remains on a short and intermediate term buy signal and the trend remains up.

Weekly Natural Gas Storage Report – EIA

The Energy Information Administration announced that working gas in storage was 1,989 Bcf as of Friday, May 15, 2015, according to EIA estimates. This represents a net increase of 92 Bcf from the previous week. Stocks were 738 Bcf higher than last year at this time and 35 Bcf below the 5-year average of 2,024 Bcf. In the East Region, stocks were 146 Bcf below the 5-year average following net injections of 55 Bcf. Stocks in the Producing Region were 50 Bcf above the 5-year average of 815 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 61 Bcf above the 5-year average after a net addition of 6 Bcf. At 1,989 Bcf, total working gas is within the 5-year historical range.

Gold:

August gold advanced $3.10 on volume of 154,499 contracts. Total open interest declined by 1,394 contracts, which relative to volume is approximately 55% below average. The June contract accounted for loss of 12,806 of open interest and there were sufficient open interest increases in the forward months to reduce total open interest substantially below average. We consider the open interest action relative to the price advance action on May 20 be positive.

As this report is being compiled on May 21, the August contract is trading 4.60 lower and has made a daily low of 1202.00, which takes out yesterday’s low of 1204.20 and is the lowest print since May 13 (1191.50). Since the generation of the short-term buy signal on May 14 and the intermediate term buy signal on May 18, August gold has corrected on May 19 and today. However, we do not think the correction is quite over yet and prefer that clients remain on the sidelines, especially with the long Memorial Day holiday upon us.

Silver:

July silver advanced 4.2 cents on volume of 40,002 contracts. Total open interest declined just 3 contracts. The July contract accounted for loss of 900 of open interest and there were sufficient open interest increases in the forward months to reduce total open interest to a negligible number. We consider this to be slightly positive. As this report is being compiled on May 20, the July contract is trading 2.7 cents higher and has made a daily low of 17.000, which is above yesterday’s low of 16.935. Like gold, we recommend a sideline stance due to the upcoming long holiday weekend.

Dollar index:

The June dollar index advanced 14.6 points on relatively heavy volume of 54,999 contract. However, volume declined from May 19 when the June contract advanced 1.094 points on volume of 65,081 contracts and total open interest increased by 429. On May 20, total open interest increased by 1,402 contracts, which relative to volume is average.

The relatively large increase of open interest in yesterday’s trading is in sharp contrast to May 18 and 19 when the index advanced sharply and total open interest increases were substantially below average. In our view this indicates that some Johnny-come-lately’s were entering the market yesterday thinking that a new bull move has begun.

The June dollar index remains on a short and intermediate term sell signal and for a short-term buy signal to be generated, the low of the day must be above OIA’s key pivot point for May 21 of 96.639.

Euro:

The June euro lost 39 pips on relatively heavy volume of 300,587 contracts. Volume declined from May 19 when June contract lost 1.49 cents on volume of 334,222 contracts and total open interest declined by 499. On May 20, declined again, this time by 3.560 contracts, which relative to volume is approximately 30% below average, but this is the third open interest decline for three days in a row when prices also have declined. From May 18 through May 20, the June contract has lost 3.49 cents while total open interest has declined by 12,220.

In short, price declines have been the result of liquidation, not new short-sellers entering the market. Our interpretation of this is that market participants do not have confidence that prices are headed much lower at this juncture. In yesterday’s report, we commented on this, and the open interest action on May 20 seems to be confirming our thesis. The June euro remains on a short and intermediate term buy signal.

From the May 19 report:

“We are surprised that we have not seen open interest increases on such a precipitous decline.This leads us to believe the euro may rally further before the market resumes a downtrend. Also, the dollar index seems to be confirming this.”