Soybeans:

July soybeans lost 16.50 cents on heavy volume of 232,025 contracts. Volume was the heaviest since April 15 when 241,654 contracts were traded and soybeans advanced 25.00 cents while total open interest increased by 4,445 contracts. The May contract accounted for loss of 16,841 of open interest. On April 22, total open interest declined by a healthy 6,950 contracts, which relative to volume is approximately 20% above average. The May contract lost 16,841 of open interest. As this report is being compiled on April 23, July soybeans are trading 0.50 cents lower and have made a daily low of $14.60 1/2, which is the lowest print since 14.60 1/4 made on April 15. Soybeans remain on a short and intermediate term buy signal. At this juncture, we recommend a stand aside posture. We want to see a further correction and a shakeout of speculative longs before contemplating bullish positions.

Soybean meal:

July soybean meal lost $5.80 on heavy volume of 96,759 contracts. Volume was the heaviest since April 16 when 98,032 contracts were traded and July soybean meal advanced $5.40 while total open interest increased by 2,277 contracts. On April 22, total open interest declined by a massive 7,297 contracts, which relative to volume is approximately 210% above average meaning that liquidation was extremely heavy on the decline. The May contract accounted for loss of 12,008 contracts. For the past 2 days, the open interest decline in soybean meal relative to volume has been massively higher than soybeans. According to the latest COT report managed money is long soybean meal by a ratio of 4.39:1 and they are long soybeans by a ratio of 7.42:1. With the relatively low net long position in soybean meal compared to soybeans and the massive decline of open interest, soybean meal may be in stronger hands than soybeans. As this report is being compiled on April 23, July soybean meal is trading 30 cents higher and has made a daily low of $467.00, which takes out the 468.00 low made on April 15. Soybean meal remains on a short and intermediate term buy signal, and like soybeans, we prefer to see a further correction before contemplating bullish positions

Soybean oil:

July soybean oil lost 28 points on volume of 96,313 contracts. Volume increased from the 78,336 contracts traded on April 21 when July soybean oil declined 40 points and total open interest declined by 2,803 contracts. On April 22, total open interest declined by a massive 5,670 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy. The May contract lost 12,495 of open interest. As this report is being compiled on April 23, July soybean oil is trading 17 points lower and has made a daily low of 42.59, which is the lowest print since 42.29 made on April 15. On April 15, soybean oil generated a short-term buy signal, and since then, the market has pulled back for a 4th day on April 23 . The bean complex is in a corrective mode, and we suggest standing aside for now. July soybean oil remains on a short and intermediate term buy signal.

Corn:

July corn gained 8.25 cents on very heavy volume of 433,504 contracts. Volume was the highest since 639,980 contracts were traded on April 9 when corn declined 4.75 cents and total open interest increased by 7,739 contracts. On April 22, total open interest declined by 8,297 contracts, which relative to volume is approximately 20% below average. However, total open interest declined on the biggest gain since March 31 (+10.00 cents-open interest + 2381 contracts) This is the most negative market action since April 9. As this report is being compiled on April 23, July corn is trading 7.50 cents higher and has made a daily high of $5.09 3/4. July corn remains on a short and intermediate term buy signal. We have no recommendation at this juncture.

Chicago wheat:

July Chicago wheat advanced 4.00 cents on heavy volume of 132,169 contracts. Volume was the heaviest since April 16 when 156,564 contracts were traded and July wheat declined by 14.50 cents while total open interest increased only 170 contracts. During the past 3 days beginning on April 17, total open interest has declined by 3,492 contracts while  Chicago wheat declined 15.75 cents. On April 22, total open interest increased by 135 contracts, which is essentially an unchanged number relative to volume. The May contract lost 10,098 of open interest. We consider the price and open interest action on April 22 to be positive, and though it appeared that Chicago wheat was going to generate a short-term sell signal, the market has shrugged this off and held firm. From April 15 through April 22, price and open interest has been performing in a bullish congruent manner. Before advising clients to get long  wheat, we want to see two items: First, we want to see July Kansas City wheat generate a short-term buy signal, which would reverse the short-term sell signal generated on April 10 Second, independent strength by Chicago and Kansas City wheat relative to corn. Chicago wheat remains on a short and intermediate term buy signal.

Kansas City wheat:

July Kansas City wheat advanced 5.00 cents on heavier than normal volume of 28,196 contracts. Volume was the heaviest since April 15 when 34,087 contracts were traded and July KC wheat advanced 23.50 cents while total open interest increased by 756 contracts. On April 22, total open interest declined by a massive 2,552 contracts, which relative to volume is approximately 250% above average meaning that liquidation was off the charts heavy. The May contract lost 3,488 of open interest. From April 17 through April 22, total open interest declined by 5,830 contracts while July KC wheat declined by 14.00 cents. This is constructive open interest action relative to the price decline, especially since managed money was long by a ratio of 8.68:1 according to the most recent COT report. We think there is a high likelihood that both Chicago and KC wheat will be heading higher in the period just ahead. However, as mentioned in the report on Chicago wheat, we want to see KC wheat generate a short-term buy signal before recommending bullish positions.

Cotton: On April 22, July cotton generated a short-term buy signal, which reversed the short-term sell signal generated on April 10. July cotton remains on an intermediate term buy signal.

July cotton advanced 1.04 cents on light volume of 20,859 contracts. Volume was disappointing and was the second lowest for the month of April thus far. On April 22, total open interest increased by a massive 2153 contracts, which relative to volume is approximately 310% above average meaning that massive numbers of new longs were entering the market and driving prices to their highest level since 93.48 made on April 4. The May contract lost 1,861 of open interest. July cotton closed at its highest level (93.25) since March 31 when it closed at 93.55.

As this report is being compiled, July cotton is trading 1.09 cents lower after making a daily low of 90.73. During the time that cotton made its low (9:30-9: 45 a.m. CDT), a total of 3422 contracts were traded, which signifies wholesale liquidation. In yesterday’s report, we suggested waiting one more day before considering bullish positions, and based upon the sharp setback of April 23, we think it is worthwhile waiting an additional day. Our concern is not that the market setback, because this is fairly standard after the generation of a buy signal, rather it is the severity of the decline that concerns us. We thought the April 20 low of 91.55 would stem any decline, and this clearly has not been the case. Additionally, cotton closed at 93.25 yesterday, but from the time cotton opened in the evening session yesterday through today, the high has been only 93.31, or 6 ticks above yesterday’s close. In other words, there was no follow through from yesterday’s rally, which is another concern. When and if contemplating bullish positions, we would suggest that positions be on the light side.  

From the April 21 report:

“Although the market is somewhat overbought, relative to the 20 day moving average of 92.13, it is not overly so. At this juncture, we do not think cotton will see much of a setback, unless it reverses the short-term buy signal of today. However, we think it would be wise to wait one more day before considering bullish positions. We think the April 21 low of 91.55, which was the lowest print since April 15 (90.51) would be a reasonable exit point for bullish positions.”

WTI crude oil:

 June WTI crude oil declined by $1.90 on heavy volume of 670,048 contracts. Volume was the heaviest since April 16 when 748,831 contracts were traded and WTI prices advanced by 1 cent while total open interest declined by 15,604 contracts. On April 22, total open interest declined by a massive 31,510 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy. The May contract lost 33,723 of open interest. We see further liquidation ahead and continue to advise a sideline stance. June WTI crude oil remains on a short and intermediate term buy signal.

From the April 21 report:

“We have been warning about the massive long position of managed money and have advised clients to stay on the sidelines. Many trend followers will be bailing out on this move and with the long to short ratio of managed money standing at 11.23:1, there is plenty of fuel for the downside.” 

The Energy Information Administration announced U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.5 million barrels from the previous week. At 397.7 million barrels, U.S. crude oil inventories are well above the average range for this time of year.Total motor gasoline inventories decreased by 0.3 million barrels last week, and are in the lower half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.6 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 1.2 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 12.0 million barrels last week.

Natural gas:

May natural gas advanced 4.2 cents on light volume of 199,664 contracts. Volume declined from April 21 when 206,878 contracts were traded and May natural gas lost 4.4 cents while total open interest declined by 4,880 contracts. On April 22, total open interest declined by a massive 9,940 contracts, which relative to volume is approximately 100% above average, meaning that liquidation was massive on the advance. This is clearly bearish open interest action relative to the price advance. The May contract lost 21,780 of open interest. In the report of April 14, we recommended that clients initiate bullish positions in natural gas. However, we are becoming concerned about the declines of open interest as prices have advanced. For example, on April 17 May natural gas advanced 21.1 cents on heavy volume of 406,021 contracts, but open interest declined 1,114 contracts. In short as natural gas prices advanced 25.3  cents in 2 days, total open interest declined by 11,054 contracts.

Tomorrow is the natural gas storage report, and this is going to have a major impact on prices. At this juncture, we suggest the partial liquidation of bullish positions, and for the remaining position write out of the money calls to shield against further declines. Sell stops should be based upon sound money management and risk appetite.

Euro: We are suspending coverage on the euro until we see something of interest, or a new trading opportunity.

S&P 500 E mini:

The June S&P 500 E mini gained 9.50 points on light volume of 1,107,964 contracts. Total open interest increased by 12,662 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on April 23, the June E mini is trading 4.50 points lower and has made a daily low of 1867.50. If the June E mini can maintain a daily low above the April 23 pivot point of 1865.00, a short-term buy signal will be generated, which will reverse the short-term sell signal generated on April 11. We continue to be troubled by the very poor volume stats and as this report is being compiled on April 23, volume in the June contract is approximately 763,000 contracts with 90 minutes left to trade in the cash market. Maintain previously purchased puts, however do not add to the put position at this juncture. This is for clients who hold long equity positions.