Soybeans:

May soybeans advanced 13.00 cents on volume of 162,371 contracts. Volume declined substantially from April 2  when 233,338 contracts were traded and May soybeans declined 22.25 cents while total open interest declined 720 contracts. On April 3, total open interest increased by 3,703 contracts, which relative to volume is approximately 10% below average. The May contract lost 4,744 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on April 4, May soybeans are trading 11.50 cents lower after making a high of 14.87. As we have been saying for the past couple of reports, we think soybeans are in the process of topping and advise against initiating or holding long positions. The threat of Chinese cancellations hang over the market, and the fact that USDA has not increased their projected sales for the season gives credence they believe there will be cancellations. Soybeans remain on a short and intermediate term buy signal. Stand aside.

The USDA announced that 66.2 thousand metric tons had been sold, which brings total commitments for the season of 1.635.5 billion bushels. The USDA is projecting only 1.530 billion bushels for the season. In other words, there is a 105 million bushel difference between total commitments and what the USDA projects for the season. This is a good reason not to be bullish.

Soybean meal:

May soybean meal advanced $3.60 on volume of 60,621 contracts. Total open interest increased by 2,309 contracts, which relative to volume is approximately the 50% above average meaning that new longs were very aggressive about entering new long positions and driving prices higher. The May contract lost 58 of open interest. As this report is being compiled on April 4, May soybean meal is trading $6.40 lower after making a daily high of 482.00. Our thinking about soybeans is applicable to soybean meal, and we recommend against holding long positions even though May soybean meal remains on a short and intermediate term buy signal.

The USDA announced that 307.8 thousand metric tons had been sold, which brings total commitments to date of 8,511 thousand metric tons versus the USDA projection for the season of 9,888 thousand metric tons. This week’s sale is the highest in 8 weeks.

Corn:

May corn advanced 4.50 cents on volume of 260,797 contracts. Volume was the lowest since March 28 when 252,497 contracts were traded and May corn closed unchanged while total open interest increased by 3,859 contracts. On April 3, total open interest increased again, this time by a massive 15,405 contracts, which relative to volume is approximately 140% above average meaning that large numbers of new longs were heavily entering the market and pushing prices higher. As this report is being compiled on April 4, May corn is trading 2.75 cents lower on the day. Corn remains on a short and intermediate term buy signal, but we see no reason to be involved in the market. The massive increase of open interest is not moving prices significantly higher.

The USDA announced the sale of 960.6 thousand metric tons of corn, which brings total commitments to 1.626 billion bushels versus USDA projections for the season of 1.625 billion bushels.

Sugar:

May sugar gained 21 points on volume of 92,301 contracts. Open interest increased by 1,409 contracts, which relative to volume is approximately 40% less than average. As this report is being compiled on April 4, May sugar is trading 10 points higher and has made a daily high of 17.34. The fact that open interest increased on yesterday’s advance indicates that new buyers are willing to enter the market at the first sign of a rally. OIA protocols indicate that the rally could extend as high as 17.61, and more likely to 17.42. Although this is the second day of the countertrend rally, we  prefer to wait one more day before recommending bearish positions. May sugar generated a short-term sell signal on April 2.

From the April 1 report:

“The sizable increase of open interest on a decline of the magnitude seen on April 1 is an indication that market participants are digging in and refusing to liquidate . According to the COT report , which was tabulated on March 25, managed money is long sugar by ratio of 2.82:1. Beginning on March 26 (which is the start of the new reporting period) through April 1, open interest increased by 3,994 contracts while May sugar gained only 21 points. In short, there is plenty of fuel provided by managed money sellers to drive prices further to the downside. Wait for a countertrend rally before considering bearish positions.”

Cocoa:

May cocoa closed unchanged on volume of 34,311 contracts. Total open interest declined by a massive 3,943 contracts, which relative to volume is approximately 360% above average meaning there was massive liquidation even though cocoa traded in a narrow $24.00 range. As this report is being compiled on April 4, May cocoa has closed at $2,966, which is an advance of $49.00 from April 3.

On April 2, May cocoa generated a short-term sell signal and we recommended that clients wait for a countertrend rally before initiating bearish positions. April 4 the first day of the countertrend rally, and it shouldn’t extend much beyond today’s high of 2,983. We would expect some follow-through,  on Monday, but the market should weaken on Monday. If cocoa closes significantly higher on Monday, it is likely the sell signal generated on April 2 was false. At this juncture stand aside, but market action on April 7 will be key.

Cotton:

May cotton lost 53 points on volume of 23,035 contracts. Total open interest declined by 162 contracts, which is minuscule and dramatically below average. As this report is being compiled on April 4, May cotton is trading 1.45 cents higher and has made a daily high of 93.23, which is the highest print since April 1 when May cotton a daily high is exactly 93.23. Like cocoa, market action on April 7 will be key to determining whether cotton will resume its upward trend, or reverse to generate a short-term sell signal. Cotton remains on a short and intermediate term buy signal.

Live cattle: Liquidate bullish positions in April cattle on April 4.

April live cattle gained 55 points on volume of 41,276 contracts. Total open interest increased by 3,883 contracts, which relative to volume is approximately 250% above average meaning that new longs were aggressively entering the market and driving prices higher. The April contract lost 2,812 of open interest. As this report is being compiled on April 4, April cattle is trading 2.25 cents lower and it appears it’s going to break a key area of support at 1.42700. Cattle has not rallied as it approached 1st notice day and therefore we think the market is likely to move lower.

From the March 31 report:

“Although we are bullish cattle, the fact remains that the April contract has attempted to make new highs on 3 separate occasions during March and has failed to break out significantly. For example, the contract high on March 5 was 1.46825, March 20 contract high 1.46925, March 28 contract high 1.47000. Cattle may be on the verge of having a wash out before moving higher. The long to short ratio of managed money has been at a stratospheric level and yet prices are not breaking out significantly to new contract highs. Due to the high level of longs in the market, the market is vulnerable to significant selling pressure if support is broken at 1.42700. Maintain bullish positions recommended in late December, but have sell stops in place in anticipation of a short-term decline.”

WTI crude oil:

May WTI crude oil advanced 67 cents on light volume of 407,557 contracts. Volume declined from April 2 when 478,708 contracts were traded and May WTI lost 12 cents while total open interest increased by 5,427 contracts. On April 3, total open interest increased by 5,536 contracts, which relative to volume is approximately 45% less than average. The May contract lost 7,888 of open interest. As this report is being compiled on April 4, May WTI is trading $1.08 higher and has made a daily high of 101.63. Considering that the major indices are down for the day and the NASDAQ 100 and Russell 2000 are down well over 2%, WTI is holding up well. For May WTI to resume its advance, the low for the day must be above $100.74. May WTI remains on a short and intermediate term buy signal, but we see no reason to be involved in the market at this juncture.

Natural gas:

May natural gas advanced 10.6 cents on low volume of 199,943 contracts. Volume was the lowest since March 28 when 138,440 contracts were traded and May natural gas lost 5.3 cents while total open interest increased 6,472 contracts. On April 3, total open interest increased by 7,214 contracts, which relative to volume is approximately 45% above average meaning that new longs were aggressively entering the market and driving prices higher to $4.483, which is the highest print since March 31 (4.487). As we said in yesterday’s report, we did not see prices for May natural gas extending much beyond $4.519. May natural gas remains on a short-term sell signal, but an intermediate term buy signal. We have no recommendation.

Euro: On April 3, the June euro generated a short-term sell signal, but remains on an intermediate term buy signal.

The June euro lost 50 pips on heavy volume of 284,680 contracts. Volume was the highest since March 14 when 314,870 contracts were traded and the euro advanced 45 pips while total open interest declined 14,376 contracts. On April 3, open interest increased by a substantial 7,570 contracts, which relative to volume is average. The fact that open interest did not decline  indicates that longs are refusing to liquidate as prices moved to their lowest level since February 28 (1.3694). Wait for a countertrend rally lasting 1-3 days before considering bearish positions

Dollar index: On April 3, the June dollar index generated a short-term buy signal, but remains on an intermediate term sell signal.

British pound:

The June British pound lost 37 pips on volume of 95,104 contracts. Volume was the highest since March 19 when 118,686 contracts were traded and the pound lost 54 pips while total open interest declined by 70,720 contracts, which was due to the expiration of the March contract. On April 3, total open interest declined by 2,557 contracts, which relative to volume is average. The pound remains on a short-term sell signal, but an intermediate term buy signal.

Canadian dollar:

The June Canadian dollar lost 8 pips on volume of 36,692 contracts. Total open interest declined by a substantial 1,216 contracts, which relative to volume is approximately 35% above average. As this report is being compiled on April 4, the June Canadian dollar has broken out to a new high of 91.11, which is the highest price since the March 6 print of 91.26. Unfortunately, the June Canadian dollar has not had a countertrend pullback after generating a short-term buy signal on April 1. This would have allowed clients to initiate bullish positions. Additionally, the Canadian-sterling cross continues to rocket higher and is at the highest level since February 12. Do not chase the market, because CADGBP and the June Canadian dollar are significantly overbought.

Australian dollar:

The June Australian dollar lost 17 pips on volume of 61,344 contracts. Total open interest increased by only 132 contracts. As this report is being compiled on April 4, the Australian dollar has advanced 54 pips and made a high of 92.62 which is the highest print since the rally began on March 21. Like the Canadian dollar the Australian dollar is significantly overbought and we discourage clients from chasing the market.

S&P 500 E mini:

The June S&P 500 E mini closed unchanged on volume of 1,241,359 contracts. Total open interest increased by only 1,099 contracts. We have commented on the abysmal open interest increases during the past 5 sessions, and it appears  this may be indicative of a top, or temporary top. As this report is being compiled on April 4 after the release of the employment report, the E mini is trading 20.25 points lower on the day after making a new all-time high of 1892.50 just prior to the release of the report. The NASDAQ 100 and Russell 2000 have collapsed over 2 1/2% during Friday’s trading. Continue to hold out of the money calls coupled with long puts if holding long equity positions.