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Due to the Memorial Day holiday, the petroleum stocks report issued by the EIA will be released tomorrow.

On May 27, both July gasoline and heating oil are close to generating short-term sell signals.

Now that July copper, June/September euro and June/September Canadian dollar have generated short-term sell signals, they should have counter trend rallies that last from 1-3 days before resuming their down trends. The dollar index should decline for 1-3 days before resuming its up trend.

Soybean oil:

July soybean oil advanced 50 points on healthy volume of 115,832 contracts. Total open interest increased by 2,448 contracts, which relative to volume is approximately 15% below average, however the July and August contracts lost 6211 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on May 27, July soybean oil has reversed course and is trading down 35 points on the day. Remarkably, soybean oil has held up much better than we thought and has been unable to generate a short, or intermediate term sell signal. However, the weight of soybeans and the dismal fundamentals associated with beans will likely take its toll on soybean oil. We see no reason to be involved in this market.

Chicago wheat:

July Chicago wheat lost 21.75 cents on heavy volume of 154,096 contracts. Volume was the strongest 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. On May 26, total open interest increased by 3,059 contracts, which relative to volume is approximately 20% below average.The July contract accounted for loss of 4,717 of open interest, which makes the total open interest increase by more impressive (bearish). As this report is being compiled on May 27, the July contract is trading 4.00 cents lower and has made a daily low of 4.82. For the July contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for May 27 of 4.82 3/4. Stand aside.

Live cattle:

August live cattle lost 7 points on light volume 37,460 contracts. However, total open interest increased by massive 3,373 contracts, which relative to volume is approximately 250% above average meaning a major battle ensued between buyers and sellers and sellers were able to edge the market fractionally lower.

It should be noted the massive increase of open interest did not move prices higher even though fundamentals for live cattle are favorable, especially at this time of year. In short, aggressive buying was met with the equal force of aggressive selling. The June contract accounted for loss of 2,503 of open interest as it approaches first notice day. The market continues to trade in a lackluster fashion and as we pointed out yesterday’s report, the current sideways action during the past month on borrowed time until the Fourth of July holiday after which we expect prices to decline. Stand aside.

WTI crude oil:

July WTI crude oil lost $1.69 on fairly light volume of 564,271 contracts. Volume increased from pre-holiday May 22 when 418,467 contracts were traded and the July contract lost $1.00 while total open interest declined by 12,066. However, volume was substantially below that of May 21 when the July contract advanced 1.74 on volume the 650,324 contracts and total open interest increased by 8423.

On May 26 total open interest declined by 9,950 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on May 27, the July contract is trading 27 cents lower and has made a daily high 58.95, which is below yesterday’s high of 59.94 and has made a new low for the move of 57.43, which is below yesterday’s print of 57.71.

As pointed out yesterday’s report, the fundamentals for US crude are bearish, but globally a more bullish picture emerges. We are concerned about a more hawkish stance by OPEC due to the increasing financial demands of Saudi Arabia. On May 20, the July contract generated a short-term sell signal and for an intermediate-term sell signal to be generated the high of the day must be below OIA’s key pivot point for May 27 of 54.67. Stand aside.

Brent crude oil:

July Brent crude oil lost $1.65 on light volume of 526,426 contracts. Total open interest increased by 827 contracts, which is minuscule and dramatically below average. However, the July contract lost 10,063 of open interest, which makes the minor increase of total open interest more impressive (bearish).

On May 27, as this report is being compiled, July Brent contract is trading down $1.41 while the July WTI contract is trading 42 cents lower. On May 20, July Brent generated a short-term sell signal and for an intermediate-term sell signal to be generated, the high of the day must be below OIA’s key pivot point for May 27 of 61.63. Stand aside.

Natural gas:

July natural gas lost 6.3 cents on volume of 284,609 contracts. Total open interest declined by a substantial amount for the second day in a row, this time by 13,782, which relative to volume is approximately 80% above average meaning liquidation was extremely heavy. On May 22, July natural gas lost 7.5 cents on volume of 264,334 contracts and total open interest declined by 16,994.

It should be noted that open interest declines accompanying price declines is bullish open interest action, especially since natural gas is on buy signals. As this report is being compiled on May 27, the July contract is essentially trading unchanged on the day. Despite the move down from 3.105 on May 19, July natural gas remains on short and intermediate term buy signals. For natural gas to generate short and intermediate term sell signals, the high of the day must be below OIA’s key pivot points for May 27 of 2.809 and 2.806 respectively.

Copper: On May 26, July copper generated a short term sell signal, but remains on intermediate-term buy signal.

July copper lost 3.30 cents on volume of 70,456 contracts. Total open interest declined by 3,218 contracts, which relative to volume is approximately 75% above average meaning that liquidation was very heavy on the decline. The July contract accounted for loss of 3,447 of open interest. As this report is being compiled on May 27, the July contract is trading 1.05 cents lower and has made a new low for the move of 2.7585, which takes out yesterday’s low of 2.7730. Stand aside.

Gold:

August gold lost $17.10 on huge volume of 346,326 contracts.Volume was the strongest since March 26 when 372,090 contracts were traded and August gold closed at 1206.50.On May 26, total open interest declined by 2,921 contracts, which relative to volume is approximately 55% below average. However, the June contract lost 32,688 of open interest and there were sufficient open interest increases in the forward months to reduce total open interest substantially below-average. We consider yesterday’s action to be bearish. Despite this, August gold remains on a short term buy signal, but appears likely that an intermediate term sell signal will be generated on May 27.

Silver:

July silver lost 30.5 cents on volume of 51,762 contracts. Total open interest increased by 298 contracts, which relative to volume is approximately 70% below average, however an open interest increase on a price decline is bearish. The July contract lost 870 of open interest, which makes the minor increase of open interest more impressive (bearish). As this report is being compiled on May 27, the July contract is trading 10.1 cents lower. July silver remains on a short and intermediate term buy signal.

Dollar index: On May 26, the June and September dollar index generated short and intermediate term buy signals.

The June dollar index advanced a very strong 1.297 points on heavy volume of 68,293 contracts. Total open interest increased by 2,069 contracts, which relative to volume is approximately 5% above average. As this report is being compiled on May 27, the June contract is trading 10 points higher on the day. We have no recommendation.

Euro: On May 26, the June and September euro generated short-term sell signals, and likely will generate intermediate term sell signals on May 27.

The June euro lost 1.69 cents on volume of 324,517 contracts. Volume increased from May 22 when the June contract lost 91 pips on volume of 296,951 contracts and total open interest increased by 2,619. On May 26, total open interest increased by substantial 6,196 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on May 27, the June contract is trading 20 pips higher. Stand aside.

British Pound:

The June British pound lost 1.03 cents on volume of 103,644 contracts. Total open interest declined by 3,472 contracts, which relative to volume is approximately 20% above average meaning liquidation was fairly heavy on the decline. As this report is being compiled on May 27, the June contract is trading 54 pips lower and has made a daily low of 1.5299, which is below yesterday’s print of 1.5352. For the June contract to generate a short-term sell signal the high of the day must be below OIA’s key pivot point for May 27 of 1.5315. Stand aside.

Australian dollar: On May 27, the June and September Australian dollar will generate short-term sell signals, but remain on intermediate-term buy signals.

The June Australian dollar lost 97 pips on volume of 92,539 contracts. Total open interest increased by 1,412 contracts, which relative to volume is approximately 40% below average, but an open interest increase on a price decline is bearish.This is the second day in a row in which prices have declined and open interest has increased. On May 22, the June contract lost 65 pips on volume of 73,625 contracts and total open interest increased by 593.As this report is being compiled on May 27, the June contract is trading 10 pips lower.

Canadian dollar: On May 26, the June and September Canadian dollar generated short-term sell signals, but remain on intermediate term buy signals.

The June Canadian dollar lost 85 pips on volume of 74,144 contracts. Total open interest increased by 2,258 contracts, which relative to volume is approximately 5% above average, but an open interest increase on yesterday’s decline is bearish. This is the second day in a row in which prices declined and open interest is increased. On May 22, the June contract lost 64 pips on volume of 52,582 contracts and total open interest increased by a sizable 3,460.As this report is being compiled on May 27, the June contract is trading 29 pips lower on the day.