The USDA will release its supply and demand report (WASDE) on April 9 at 11:00 a.m. CDT.

This is a potential make or break report for soybeans and corn. Much buying by speculators has been based upon the USDA raising its exports for soybeans and corn. Regardless of whether exports are raised, the key point is: what USDA numbers are baked into current prices.

Soybeans:

May soybeans lost 9.50 cents on volume of 166,436 contracts. Total open interest increased by 3,519 contracts, which relative to volume is approximately 20% below average. The May contract lost 15,087 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on April 8, May soybeans are trading 7.50 higher and has made a daily high of 14.83 1/2, which has taken out yesterday’s high of 14.79 1/2. We recommend a stand aside posture until after the release of the USDA report. May soybeans remain on a short and intermediate term buy signal.

Soybean meal:

May soybean meal lost $4.80 on volume of 73,487 contracts. Total open interest declined by 1,148 contracts, which relative to volume is approximately 40% less than average. The May contract lost 11,380 of open interest. As this report is being compiled on April 8, May soybean meal is trading $4.20 higher and has made a daily high of 480.80, which is shy of yesterday’s high of 481.40. We recommend a stand aside posture until after the release of USDA report. May soybean meal remains on a short and intermediate term buy signal.

Corn:

May corn lost 2.50 cents on heavy volume of 361,116 contracts. Volume was higher than April 2 when 353,803 contracts were traded and May corn lost 11.75 cents while total open interest increased by 8,537 contracts. On April 7, total open interest declined by 2,832 contracts, which relative to volume is approximately 55% below average. The May contract lost 29,255 of open interest. As this report is being compiled on April 8, May corn is trading 5.00 cents higher and is currently trading below the high of the day of 5.07 1/2. We continue to recommend a stand aside posture until after the release of USDA report. We have written extensively about the massive long position of managed money, which makes corn vulnerable to significant downside if the report disappoints.

Sugar #11:

July sugar lost 28 points on heavy volume of 193,645 contracts. Volume was the highest since February 27 when 195,464 contracts were traded. On April 7, total open interest increased by 3,845 contracts, which relative to volume is approximately 20% below average. However, the May contract lost 23,281 of open interest, which makes the total open interest increased much more impressive (bearish). In yesterday’s report, we recommended the initiation of bearish positions in July sugar and advised using the April 4 high of 17.82 as an exit point for bearish positions. As this report is being compiled on April 8, July sugar is trading 26 points higher and has made a daily high of 17.78.

Cocoa:

July Cocoa lost $10.00 on heavy volume of 48,101 contracts. Volume was the highest since February 7 when 60,328 contracts were traded. On April 7, total open interest declined by 1,815 contracts, which relative to volume is approximately 50% above average meaning that liquidation was heavy on a modest decline. The May contract accounted for loss of 12,403 of open interest. As this report is being compiled on April 8, July cocoa has made a high of $3008.00 on heavy volume, which is above the recommended exit point of 2998.00. For cocoa to generate a short-term buy signal, which would reverse the short-term sell signal generated on April 2, July cocoa must make a low for the day above 2996.00. Although the advance of April 8 represents the 3rd day of the countertrend rally after generating the short-term sell signal on April 2, clients should exit bearish positions. We’ll take another look at the market tomorrow and see if it makes sense to reinstitute bearish positions, or whether cocoa reverses the sell signal.

Cotton:

May cotton lost 1.78 cents on fairly heavy volume of 34,761 contracts. Volume was the highest since March 26 when 56,095 contracts were traded and cotton made its high for the move at 97.35, but closed lower on the day by 2.45 cents while open interest increased 852 contracts. On April 7, total open interest declined by 1,523 contracts, which relative to volume is approximately 65% above average meaning that liquidation was heavy on the decline. The May contract lost 6,670 of open interest. As this report is being compiled on April 8, May cotton is trading 1.25 cents higher and has made a daily high of 92.44, which is below yesterday’s high of 92.86 and the high of April 4 of 93.23. For the past 3 days beginning on April 4, cotton has been a chop affair with strong moves in both directions. Open interest action has been positive, however for cotton to resume its advance, the low for the day must be above 92.67. Stand aside.

Live cattle: On April 7, June live cattle generated a short-term sell signal, but remains on an intermediate term buy signal. We have no recommendation at this time.

WTI crude oil:

May WTI crude oil lost 70 cents on relatively heavy volume of 585,779 contracts. Volume was the highest since March 19 when 666,208 contracts were traded and May WTI advanced 29 cents while total open interest declined by 827 contracts. On April 7, total open interest declined by 10,641 contracts, which relative to volume is approximately 25% below average. The May contract accounted for loss of 36,384 of open interest.

As this report is being compiled on April 8, May WTI is trading $1.73 higher and has made a daily high of 102.44, which takes out the previous high of $102.24 made on March 28. Though the fundamentals for WTI are a disappointment, the fact remains the market is well supported. The low on April 8 is 100.68, which is slightly below OIA’s key pivot point of 100.79, but the market wants to go higher. Also, it is likely that May gasoline is going to generate a short-term buy signal, which would reverse the March 17 short-term sell signal. May gasoline is already on an intermediate term buy signal. Both Brent crude oil and eating well remain on short and intermediate term sell signals. We have no recommendation at this juncture.

Natural gas:

May natural gas gained 3.7 cents on heavier than normal volume of 285,006 contracts. Volume was the highest since March 27 when 289,639 contracts were traded and May natural gas advanced 14.3 cents while total open interest declined by 1,213 contracts. On April 7, total open interest increased by 3,956 contracts, which relative to volume is approximately 45% less than average. The May contract lost 21,542 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on April 8, May natural gas is trading 6.7 cents higher and has made a high of 4.552, which is the highest print since 4.568 made on March 28. On March 12, natural gas generated a short-term sell signal, however, recently the market has been acting well. This is not to say the low of $4.221 made on April 2 cannot be tested, but as we have said before, the supply demand balance has changed to support prices rather than depress them. For natural gas to generate a short-term buy signal, the low the day must be above $4.520. We have no recommendation.

Euro:

The June euro advanced 37 pips on very light volume of 105,161 contracts. Total open interest declined by 918 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on April 8, the June euro is trading 57 pips higher and has made a high of 1.3810, which took out the April 3 print of 1.3808, but is below the April 2 high of 1.3818. On April 3, the June euro generated a short-term sell signal, and as is usually the case after the generation of a sell signal, the market has a tendency to rally from 1-3 days. April 8 is the 2nd day of the rally, and we would prefer to wait one more day before recommending bearish positions.

British pound:

The June British pound advanced 31 pips on light volume of 48,220 contracts. Total open interest declined by 1,367 contracts, which relative to volume is average. As this report is being compiled on April 8, the June British pound has advanced 1.37 cents and has made a new high for the move at 1.6747, which is the highest print since 1.6773 made on March 7. It is likely that the June pound will generate a short-term buy signal, which would reverse the short-term sell signal generated on March 19.

Canadian dollar:

The June Canadian dollar advanced 11 pips on light volume of 46,472 contracts. Total open interest declined by 331 contracts, which relative to volume is approximately 65% less than average. As this report is being compiled on April 8, the June Canadian dollar is trading 35 pips higher and has made a new high for the move at 91.51, which is the highest print since January 14 (91.76). On April 1, the June Canadian dollar generated a short-term buy signal, and it appears that is on the verge of generating an intermediate term buy signal. For this to occur, the low of the day must be above 91.16. We have advised clients not to chase the June Canadian dollar or the Canadian-sterling cross (CADGBP). We continue to advise a stand aside posture.

Australian dollar: The Australian dollar generated a short-term buy signal on February 7 and an intermediate term buy signal on March 7. At this juncture, the Australian dollar is massively overbought relative to the 5 day moving average of 92.33 and the 20 day moving average of 91.17.  Do not chase it. For now, we will suspend reporting on the Aussie until we see a trading opportunity.

Copper: Bull alert

May copper gained 1.70 cents on very heavy volume of 78,876 contracts. Volume was the highest since March 19 when 118,915 contracts are traded and copper made its capitulation and contract low at $2.8770. On April 7, total open interest declined by 1488 contracts, which relative to volume is approximately 25% less than average. The May contract lost 7,087 of open interest. It appears that copper may be on the verge of generating a short-term buy signal, and for this to occur, the low the day must be above $3.0368. Managed money has been heavily short copper and according to the recent report released last Friday, they are short by ratio of 1.68:1. Another positive factor is that the emerging markets are beginning to trade positively versus the developed markets during the past couple of weeks. For example, Brazil represented by ticker symbol EWZ is trading 5.23% higher in this quarter and +6.07% year to date versus the S&P 500, which is trading – 1.46% in the current quarter and – 0.18% year to date. If short, we recommend lightening up considerably on the position or liquidating it entirely.

S&P 500 E mini:

The June S&P 500 E mini lost 22.00 points on volume of 2,183,037 contracts. Total open interest declined by 9,574 contracts, which relative to volume is approximately 80% below average. As this report is being compiled on April 8, the June E mini is trading 4.75 points higher and has made a high of 1849.00, which is considerably below the high of April 7 of 1861.75. We tend to think the correction is not over, and more downside is likely. Previously, we have advised purchasing out of the money calls coupled with long puts for those clients who hold long equity positions. Continue to hold this combination.