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The World Agriculture Supply Demand report (WASDE) will be released at noon Eastern Daylight Time on May 12.

We recommend a stand aside posture with respect to new positions in the grains and protective stops should be in place for positions with profits. Losing positions should be liquidated prior to the report.

Soybeans:

July soybeans advanced 1.25 cents on volume of 121,796 contracts. Total open interest declined by 1,317 contracts, which relative to volume is approximately 50% below average. The May contract lost 683 of open interest. As this report is being compiled on May 11, July soybeans are trading unchanged on very light volume. For July soybeans to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for May 11 of 9.81 7/8.The market has struggled at the pivot point and has been unable to make a low above it thus far.

Soybean oil:

July soybean oil advanced 47 points on light volume of 73,064 contracts. However, open interest exploded higher by 5,216 contracts, which relative to volume is approximately 185% above average meaning that aggressive new buyers were entering the market in large numbers and driving prices higher (32.99). The May contract lost 437 of open interest.

As this report is being compiled on May 11, July soybean oil is trading 28 points above Friday’s close and has made a daily high of 33.29, which is below the May 6 high of 33.48, the high of the move thus far. On April 16, July soybean oil generated a short-term buy signal and an intermediate term buy signal on May 5.

Corn:

July corn advanced 1.50 cents on volume of 245,962 contracts. Total open interest declined just 295 contracts. The May contract lost 821 of open interest.As this report is being compiled on May 11, July corn is trading 2.00 cents lower, and is approximately 6.00 cents above the low for move of 3.55 3/4 made on May 5. Additionally, July corn is trading above the contract low of 3.47 made on October 1, 2014. July corn remains on a short and intermediate term sell signal.

Live cattle: If today’s low in June live cattle of 1.51200 holds, the short-term sell signal of April 13 will be reversed and June live cattle will be on a short term buy signal. Also, August cattle will generate a short-term buy signal. Both contracts remain on intermediate term buy signals. 

June live cattle advanced 2.125 cents on heavy volume of 66,743 contracts. Volume was somewhat above the previous high-volume day of April 10 when live cattle lost 2.775 cents on volume of 65,323 contracts and total open interest increased by 132. On May 8, total open interest increased by a strong 3,858 contracts, which relative to volume is approximately 125% above average meaning aggressive new buyers were entering the market in large numbers and driving prices higher (1.51625). The June contract lost 4,403 of open interest, which makes the total open interest increase more impressive (bullish).

In the weekend report, we commented that open interest action live cattle was terrific while price performance was disappointing. The action on Friday was outstanding in terms of price, volume and open interest. As this report is being compiled on May 11, June live cattle is trading 60 points higher and has made a daily high of 1.52925, which is the highest print since 1.52425 made on April 16. 

Lean hogs:

June lean hogs advanced 1.325 cents on volume of 51,935 contracts. Total open interest declined by 1,794 contracts, which relative to volume is approximately 40% above average meaning liquidation was heavy on the advance.The June contract lost 4619 of open interest. As we pointed out in previous reports and made the point again in the weekend report, price performance has been outstanding while open interest action is abysmal. Despite this, we see prices continuing to advance. On April 24, June and July lean hogs generated short term buy signals and intermediate term buy signals on April 29.

WTI crude oil:

June WTI crude oil advanced 45 cents on fairly heavy volume of 839,870 contracts. Volume declined from May 7 when June WTI lost $1.99 on volume of 873,494 contracts and total open interest declined by 19,513. On May 8, total open interest declined by 13,353 contracts, which relative to volume is approximately 35% below average, but an open interest decline on a price advance is negative. The June contract accounted for a loss of 39,870 contracts. As this report is being compiled on May 11, the June contract is trading 20 cents lower and has made a daily high at 59.85, which is below Friday’s high of 59.90. Please review the May 10 weekend report for our thoughts on WTI.

Natural gas:

June natural gas advanced 14.6 cents on very heavy volume of 515,797 contracts. Volume exceeded that of April 30 when June natural gas gained 14.5 cents on volume of 476,596 contracts and total open interest increased by just 3,724 contracts.Additionally, volume was the highest since February 12, 2015 when 557,046 were traded and June natural gas closed at 2.819.

On May 8, open interest increased by 12,253 contracts, which relative to volume is approximately 5% below average, but is a relatively strong performance considering that managed money remains heavily net short according to the latest COT report. As this report is being compiled on May 11, June natural gas is pulling back, down 4.4 cents after making a new high for the move of 2.935, which is the highest print since March 20 (2.971). On May 1, June natural gas generated a short-term buy signal, and is close to generating an intermediate term buy signal. We think prices are headed higher, and the very large short position of managed money will help to fuel the rise.

Euro: On April 29, the June euro generated a short-term buy signal and an intermediate term buy signal on May 1.

The June euro lost 64 pips on volume of 333,035 contracts. Total open interest increased by 1,511 contracts, which relative to volume is approximately 75% below average, however an open interest increase on a price decline is bearish. As this report is being compiled on May 11, the June euro is trading 54 pips lower and has made a daily low of 1.1136, which is the lowest print since 1.1072 made on May 5. We tend to think the rally in the euro is not over and that a test of the May 7 high of 1.1398 is in the offing.

British Pound: On April 17, OIA announced the June British pound generated a short-term buy signal and an intermediate term buy signal was generated on April 28.

The June British pound advanced 1.94 cents on very heavy volume of 187,619 contracts. Volume was the strongest since March 13 when 191,988 contracts were traded and the June pound closed at 1.4713. On May 8, total open interest increased by a strong 6,246 contracts, which relative to volume is approximately 15% above average meaning aggressive new buyers were entering the market in substantial numbers and driving prices to a new high for the move (1.5519).

As this report is being compiled on May 11, the June pound is rocketing higher again, this time by 1.48 cents and has made a new high for the move of 1.5610, which is the highest print since 1.5603 made on December 22, 2014. The COT report revealed that managed money had shifted to a net long position, but there remains a hefty number of short-sellers who are being forced out of the pound as prices explode higher.

Australian dollar: On April 17, the June Australian dollar generated a short-term buy signal and an intermediate term buy signal was generated on April 28.

The June Australian dollar advanced 15 pips on volume of 117,453 contracts. Total open interest increased by 2,889 contracts, which relative to volume is average. As this report is being compiled on May 11, the June contract is trading 5  pips lower. Managed money remains heavily net short the Australian dollar and we see higher prices ahead.

Canadian dollar: On April 16, OIA announced that the June Canadian dollar generated a short and intermediate term buy signal.

The June Canadian dollar advanced 28 pips on volume of 70,136 contracts. Total open interest declined by 1,476 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on May 11, the June Canadian dollar is trading 4 pips higher and has made a daily high of 82.84, which is below Friday’s  print of 82.98 and the high for the move of 83.70 made on May 6. A test of the May 6 high is in the offing.

S&P 500 E mini: OIA recommends long straddles or strangles in the September S&P 500 E mini.

The June S&P 500 E mini advanced 24.25 points on volume of 1,381,447 contracts. Total open interest increased by 10,216 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on May 11, the June E mini is trading 3.00 points lower.

The major indices are at a critical juncture, and we think the best way to play this market is to initiate long straddles or strangles in the September S&P 500 E mini. If the market continues to move higher, the call side will make money while the put side loses. However, if there is a major downside move, the trade will be lucrative as volatility explodes and put profits more than offset losses in the call.