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Soybean oil:

July soybean oil gained 5 points on heavier than normal volume of 100,824 contracts. Total open interest declined by a massive 6,115 contracts, which relative to volume is approximately 140% above average meaning liquidation was extremely heavy on the fractional gain. As this report is being compiled on May 22, July soybean oil is trading 39 points lower and has made a daily low 31.61.

Although, July soybean oil has been on a short and intermediate term buy signal, we have advised clients to stay away from it due to the very weak soybean market. July soybean oil will generate a short and intermediate term sell signal if the daily high is below OIA’s key pivot point for May 22 of 31.90.

From the May 20 report:

“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 9.00 on volume of 134,636 contracts. Total open interest increased just 206 contracts, however, the July contract lost 3,269 of open interest, which makes the minor increase of open interest slightly more impressive (bullish). As this report is being compiled, July Chicago wheat is trading 7.25 lower after making a daily high of 5.29, which takes out yesterday’s high of 5.28 and is the highest print since 5.30 1/4 made on May 18, which is the high for the move.

The market has been chopping, however we have seen to back to back increases of open interest on price advances on May 20 and 21.This indicates that short-sellers are not liquidating. The COT report will be released this afternoon and we will have a better idea of how much liquidation has occurred. July Chicago wheat remains on a short-term buy signal, but an intermediate term sell signal and we recommend a stand aside posture.

Live cattle:

June live cattle advanced 1.025 cents on volume of 51,848 contracts. Total open interest increased by a strong 3,685 contracts, which relative to volume is approximately 185% above average meaning aggressive new buyers were entering the market in large numbers and driving prices higher (1.53000), which is below the May 20 high of 1.53050. As this report is being compiled, the June contract is trading 30 points lower and has not taken out yesterday’s high.

We we continue to be skeptical of cattle’s ability to move substantially higher, and though open interest increases have been terrific, they are not powering the market to new highs. For example, the June contract made a recent high for the move of 1.54975 (May 14-close 1.53800) and since then (May 15-May 21) total open interest has increased by 7,303, but the June contract has declined by  1.425 cents.  In summary, open interest increases are driving prices lower, not higher. This is clearly bearish. June and August live cattle remain on a short and intermediate term buy signal. Stand aside.

WTI crude oil:

July WTI crude oil advanced $1.74 on modest volume of 650,324 contracts. Volume increased from May 19 when WTI lost 2.25 on volume of 590,322 contracts and total open interest declined by 783. On May 21, Total open interest increased by 8423, which relative to volume is approximately 40% below average. The June contract lost 220 of open interest.

Yesterday, the July contract rallied to a high of 60.94, and the high thus far on May 22 has been 60.80. In short, there was no follow through on yesterday’s rally. As this report is being compiled on May 22, the July contract is trading 1.11 lower and has made a daily low of 59.35. On May 20, July WTI generated a short term sell signal, but remains on an intermediate term buy signal. We were hoping for one more rally day before recommending a bearish trade.

From the May 20 report:

“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.”

Natural gas:

June natural gas advanced 3.4 cents on volume of 439,016 contracts. Total open interest declined by 3,142, which relative to volume is approximately 60% below average. The June contract accounted for loss of 19,057 of open interest, and there were sufficient open interest increases in the forward months to reduce total open interest substantially below average. As this report is being compiled on May 22, July natural gas is trading 5.4 cents lower.

We see the market trading down to its 20 day moving average of 2.878 before resuming its uptrend.The crude oil market is most definitely impacting the performance of natural gas. In order for July natural gas to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for May 22 of 2 818.

Gold:

August gold lost $4.70 on volume of 190,111 contracts. Total open interest declined by a massive 9,382 contracts, which relative to volume is approximately 100% above average. The June contract accounted for loss of 23,818 of open interest. As this report is being compiled on May 22, August gold is trading 1.30 lower on low pre-holiday volume. Gold has held up remarkably well considering the strong move in the dollar index during the past four trading sessions. We will take a fresh look at gold next week and possibly have a recommendation. August gold remains on a short and intermediate term buy signal.

Silver:

July silver advanced 1.9 cents on light volume of 23,528 contracts. Total open interest increased by 259 contracts, which relative to volume is approximately 50% below average. The reason for the total open interest increase was that the December 2016 contract gained 297.

As this report is being compiled on May 22, July silver is trading 8.7 cents lower and has made a daily low of 16.940, which is below yesterday’s low of 17.000, but fractionally above the May 20 low of 16.935. July silver remains on a short and intermediate term buy signal.

Dollar index: The June dollar index will generate a short term buy signal if the low of the day is above OIA’s key pivot point for May 22 of 95.758.

The June dollar index lost 18 ticks on volume of 40,709 contracts. Volume was the weakest since May 18 when the June contract advanced 1.089 on volume of 38,060 contracts and total open interest increased by 497.On May 21, total open interest declined by 1,042 contracts, which relative to volume is average. The June contract account for loss of 1,263 of open interest.

In yesterday’s report, we commented on the Johnny-come-lately’s entering the June dollar index because open interest had increased by an out sized number (1,402) and the June contract close just fractionally higher. Obviously, we were wrong about this and it looks like the Johnny-come-lately’s may have been the smartest guys in the room. As this report is being compiled on May 22, the June dollar index is trading 93.6 points higher on the day and has made a daily high of 96.355.

Euro: The June euro will generate a short term sell signal is the daily high is below OIA’s key pivot point for May 22 of 1.1087. It is likely the euro will generate a  short-term sell signal early next week.

The June euro advanced 14 pips on volume of 243,545 contracts. Total open interest declined by 1,908 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on May 22, the euro is trading sharply lower, down 98 pips and is made a daily low of 1.1005, which takes out yesterday’s low of 1.1062.

May 21 was the fourth day in a row in which the euro declined along with open interest. For this reason we thought the euro might see a good-sized bounce, but it appears the perennial disaster that is Greece is reasserting itself and pressuring the market lower.

British Pound:

The June British pound advanced 1.27 cents on volume of 106,276 contracts. Total open interest increased by 200 contracts, which indicates a complete lack of enthusiasm for the upside in the pound by market participants. As this report is being compiled on May 22, the June pound is trading sharply lower, down 1.94 cents on the day. Next week, we will be examining the possibility of a long GBP/EUR trade.