Soybeans:

July soybeans lost 4.50 cents on very light volume of 129,206 contracts. Volume was the smallest since March 28 when 125,720 contracts were traded and July soybeans closed at $14.07. On April 30, total open interest declined by 5,219 contracts, which relative to volume is approximately 55% above average, meaning that there was a significant amount of liquidation on the minor decline. The May contract lost 4,470 of open interest, and July lost 3,585. As this report is being compiled on May 1, July soybeans are trading 43.25 cents lower and have made a new low for the move at 14.60.We have been cautioning clients about the long side of the bean complex, and that a correction is not only overdue, but highly desirable. As we have said in previous reports, we think there will be a terrific opportunity on the long side after soybeans have washed out speculative longs. July soybeans remain on a short and intermediate term buy signal. Stand aside.

In yesterday’s report (see below), we pointed out some of our concerns regarding open interest and the disappointing volume on the price advance.

From the April 29 report:

“July soybeans made a new contract high at $15.20 1/2, but the fact remains that low volume and a decline in total open interest indicate there was light participation and not much conviction on the part of new longs.In the previous paragraph we listed days in which soybeans advanced along with their corresponding volumes for comparison purposes. Certainly on a day when soybeans made a new contract high on the strong percentage advance, volume should have picked up and total open interest should have increased.”

“We think soybeans remain vulnerable to the downside and the unimpressive stats in yesterday’s trading confirm our cautious approach. July soybeans remain on a short and intermediate term buy signal.”

Soybean meal:

July soybean meal advanced $2.50 on light volume of 54,438 contracts. Total open interest declined by 692 contracts, which relative to volume is approximately 45% less than average. The May contract lost 2,623 of open interest and July -983. Like soybeans, we have been dubious about the long side, though we are bullish on soybean meal once there has been a wash out of speculative longs. As this report is being compiled on May 1, July soybean meal is trading $15.90 lower on the day and is currently trading on the lows. July soybean meal remains on a short and intermediate term buy signal. Stand aside.

Soybean oil:

July soybean oil lost 84 points on volume of 94,850 contracts. Total open interest increased by 1,377 contracts, which relative to volume is approximately 40% less than average, but the May contract lost 3,743 of open interest and the July 2014 through June January 2016 contracts all gained open interest. The action on April 30 is decidedly bearish. It now appears that soybean oil will generate a short-term sell signal on May 1. We have been warning clients away from the long side of soybean oil. However, there may be an opportunity on the long side further down the road if palm oil begins to rally. Once a sell signal is generated, we expect the market to have a rally from 1-3 days and this will be the opportunity to initiate bearish positions.

Corn:

July corn lost 2.50 cents on light volume of 204,634 contracts. Volume was the lowest since March 26 when 149,394 contracts were traded. On April 30, total open interest declined by 6,738 contracts, which relative to volume is approximately 30% above average. The May contract lost 9,756, and what is more telling, the July contract lost 900 of open interest on a minor decline. In short, market participants were running for the exit on a minor decline. July corn made a high of 5.21 1/2, which was one half cent shy of the high made on April 29, which was the high for the move. As this report is being compiled on May 1, July corn is trading 9.25 cents lower and has made a daily low of $5.06 1/4. As we have pointed out in previous reports, there is no compelling reason to be long corn. July corn remains on a short and intermediate term buy signal.

Chicago wheat:

July Chicago wheat advanced 5.00 cents on volume of 96,430 contracts. Volume increased somewhat from April 29 when 90,979 contracts are traded and July wheat advanced 8.00 cents while total open interest declined by 4,126 contracts. On April 30, total open interest increased on the price advance by 2,295 contracts, which relative to volume is approximately 5% below average, but this is the first open interest increase on a price advance for Chicago wheat since April 24 when Chicago wheat advanced 13.75 cents and total open interest increased by 3,862 contracts on volume of 136,636 contracts. On April 30, July Chicago wheat made a high of $7.24 3/4, which is just shy of the high made on March 20 of 7.25 1/4. July Chicago wheat remains overbought relative to its 20 day moving average of 6.91 5/8 and the 50 day moving average of 6.76 1/2. Our preference has been for the long side of Kansas City wheat. As this report is being compiled on May 1, July Chicago wheat is trading 11.25 cents lower on the day and has made a daily low of 7.01 1/4. July Chicago wheat remains on a short and intermediate term buy signal, however we recommend a stand aside posture.

Kansas City wheat:

July Kansas City wheat advanced 10.00 cents on total volume of 26,683 contracts. Total open interest increased by 1,516 contracts, which relative to volume is approximately 125% above average meaning that new longs were aggressively entering the market and pushing prices to new highs for the move (8.15 1/4). As this report is being compiled on May 1, July Kansas City wheat is trading 3.50 cents lower after making a daily low of 7.98 1/2 and a new high for the move at 8.17. We like Kansas City wheat however, the market remains massively overbought and needs to correct further before it is wise to enter bullish positions. Keep an eye on the 20 day moving average of 7.60 5/8 and the 50 day moving average of 7.41 5/8 for support.

Live cattle:

August live cattle lost 5 points on total volume of 57,721 contracts.Volume was the highest since April 4 when 74,357 contracts were traded and August cattle closed at 1.33275. On April 30, total open interest declined 625 contracts, which relative to volume is approximately 50% below average. The April contract lost 950 of open interest. As this report is being compiled on May 1, August cattle is trading 1.275 cents higher on the day and has made a daily high of 1.37475, which is a new contract high for the August contract. In yesterday’s report, we advised clients to wait one more day before recommending bullish positions, and in hindsight, this was obviously an error. The market is far stronger at this juncture then we had anticipated, even though we have been expecting higher prices going forward.

At this juncture, our best suggestion is to wait for a dip before entering bullish positions. Additionally, because the market is trading at contract highs, we recommend small bullish positions on pullbacks. A conservative strategy would be to buy the June contract and sell August with the anticipation that June will gain strength based upon strong near-term demand. The spread topped out on March 28 at 3.275 cents premium to June and made a low on April 28 of 70 points, premium to June.

From the April 29 report:

“As is usually the case after the generation of a buy signal, the market has a tendency to pullback from 1-3 days. As this report is being compiled on April 30, August cattle is trading 42.5 points lower on the day and has made a low of 1.35375. We prefer to wait one more day before recommending bullish positions, but definitely think cattle prices are headed higher and expect to see cattle prices test the February contract high of 1.51000.”

Cotton: This will be our last report on cotton until such time as we see a trading opportunity. Although the market may rally up to its March 26 high, with prices at current levels, we cannot recommend bullish positions and will not recommend bearish positions because cotton remains on a short and intermediate term buy signal.

July cotton gained 23 points on volume of 17,154 contracts. Volume declined from the 26,186 contracts traded on April 29 when July cotton advanced 1.83  cents and total open interest increased by 7,996 contracts. On April 30, total open interest increased massively, this time by 4,767 contracts, which relative to volume is approximately 750% above average.At this juncture, we do not see the upside as warranting new bullish positions.

WTI crude oil: On April 30, June WTI crude oil generated a short-term sell signal, but remains on an intermediate term buy signal.

June WTI lost $1.54 on volume of 575,133 contracts. Volume was the highest since April 22 when 623,559 contracts were traded and June WTI closed at $101.75.On April 30, total open interest declined by only 4,321 contracts, which relative to volume is approximately 60% below average. The June contract lost 15,345 of open interest. On April 25 and April 30 June WTI declined by a total of $2.88, but open interest declined only 8,425 contracts. This tells us that there is significant liquidation ahead, especially since managed money is long WTI by a ratio of 10.99:1 according to the most recent COT report. After the generation of a sell signal, the market tends to rally from 1-3 days, And this is the opportunity to initiate bearish positions. As this report is being compiled on May 1, June WTI is trading 22 cents lower and has made a new low for the move at 98.74.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. At 399.4 million barrels, U.S. crude oil inventories are above the average range for this time of year. Total motor gasoline inventories increased by 1.6 million barrels last week, but are in the lower half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 1.9 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 7.9 million barrels last week.

Natural gas:

June natural gas lost 1.6 cents on light volume of 197,265 contracts. Total open interest increased by 5,992 contracts, which relative to volume is approximately 20% above average. The May and June contracts both lost 536 of open interest. The relatively large open interest increase is a bit of the puzzle considering that the June contract made a new high for the move at 4.852, and closed only fractionally lower. As this report is being compiled on May 1, June natural gas is trading 7.9 cents lower on the day and has made a low of $4.707. In yesterday’s report, we recommended adding small bullish positions and to exit the position point at yesterday’s low of 4.751.

At this juncture, the only positions remaining should be the partial long position and the short call position recommended on April 22. It is very important that sell stops are in place for the partial bullish position and the next area of support for June natural gas is the April 25 low of 4.644. Managed money is holding long positions at the low and of recent COT reports, therefore selling pressure should be light. However, unless temperatures start rising across the country, we may not see the boost in natural gas demand required to ratchet prices significantly higher.

The Energy Information Administration announced that working gas in storage was 981 Bcf as of Friday, April 25, 2014, according to EIA estimates. This represents a net increase of 82 Bcf from the previous week. Stocks were 790 Bcf less than last year at this time and 984 Bcf below the 5-year average of 1,965 Bcf. In the East Region, stocks were 466 Bcf below the 5-year average following net injections of 34 Bcf. Stocks in the Producing Region were 396 Bcf below the 5-year average of 824 Bcf after a net injection of 35 Bcf. Stocks in the West Region were 122 Bcf below the 5-year average after a net addition of 13 Bcf. At 981 Bcf, total working gas is below the 5-year historical range.

Euro:

The June euro advanced 61 points on volume of 228,285 contracts. Total open interest increased by 4,213 contracts, which relative to volume is approximately 25% less than average. On April 30, the euro rallied to its highest level (1.3877) since April 11 (1.3903).Today, is the first day that the June euro is above OIA’s key pivot point of 1.3852, which means that the bias of the market is higher. Despite this, we are unable to get enthusiastic about the June euro at current prices. The June euro remains on a short and intermediate term buy signal.

Australian dollar:

The June Australian dollar advanced 23 pips on volume of 69,914 contracts. Total open interest declined by 997 contracts, which relative to volume is approximately 40% less than average.As this report is being compiled on May 1, the June Aussie is trading 20 pips lower. The Aussie dollar will continue to move sideways to lower until and unless the low for the day is above OIA’s key pivot point of 92.65.

Canadian dollar: This will be our last report in the Canadian dollar until such time as we see a trading opportunity.

The June Canadian dollar gained 9 pips on light volume of 46,523 contracts. Total open interest declined by a massive 4,451 contracts, which relative to volume is approximately 300% above average meaning that liquidation was extremely heavy on the modest advance. The June Canadian made a low of 90.97 on April 30, and as this report is being compiled on May 1, the Canadian is trading 16 pips lower and has made another daily low of 90.84. In yesterday’s report, we discussed the possibility of initiating new bullish positions, but wanted to wait another day before making a decision. At this juncture, we think it is better to be spectators. Stand aside.

From the April 29 report:

“We think the Canadian dollar may be a candidate for bullish positions and ready for a test of the April 9 high of 91.95. Today’s low is 90.97 and currently the market is trading 4 pips higher on the day. We prefer to wait one more day to see if the June Canadian dollar can maintain its strength. Based upon the 5 day moving average of 90.80 in the 20 day moving average of 90.89, the market is not overbought to any great extent.”

Copper:

July copper lost 4.55 cents on volume of 63,212 contracts. Total open interest increased by 2,059 contracts, which relative to volume is approximately 25% above average, meaning that new short sellers were entering the market and driving prices lower. As this report is being compiled on May 1, July copper is trading 50 points higher, but has made a new low for the move at $3.0030. It now appears the short-term buy signal generated on April 24 was false. In order for copper to resume the rally, the low the day must be above $3.0412. Stand aside.

S&P 500 E mini:

The June S&P 500 E mini advanced 6.25 points on volume of 1,505,862 contracts. Total open interest declined by 6,218 contracts, which minor and significantly below average, but an open interest decline as prices moved to their highest level since April 24 (1882.50 is not exactly a vote of confidence by market participants. As this report is being compiled on May 1, the E mini has slightly taken out the April 24 high, and is currently trading 1.50 points lower. Maintain long puts if holding long equity positions.