The USDA supply-demand report has been released and today’s observations on the grain markets take into account market action after the report’s release. We will provide an update on the USDA supply and demand stats in tomorrow’s report.

Soybeans:

May soybeans advanced 18.25 cents on heavy volume of 202,515 contracts. Volume was the highest since April 2 when 233,338 contracts were traded and May soybeans made its high for the move at that time of $14.96. On April 8, total open interest increased by 3,273 contracts, which relative to volume is approximately 35% less than average. The May contract accounted for loss of 13,478 contracts. As this report is being compiled on April 9, shortly after the release of the USDA report, May soybeans are trading 17.50 cents higher and have made a new high for the move at 15.12. Soybeans remain on a short and intermediate term buy signal. We have no recommendation.

Soybean meal:

May soybean meal advanced $3.80 on very heavy volume of 101,098 contracts. Volume was the highest since February 27 when 133,509 contracts were traded and May soybean meal closed at 451.60. On April 8, total open interest increased by a substantial 4,593 contracts, which relative to volume is approximately 75% above average meaning that new longs were aggressively entering the market and driving prices higher. The May contract lost 5,276 of open interest. As this report is being compiled on April 9 after the release of the USDA report, May soybean meal is trading $7.40 higher and has made a new high for the move at 490.90. May soybean meal remains on a short and intermediate term buy signal. We have no recommendation.

Corn:

May corn advanced 7.75 cents on healthy volume of 298,577 contracts. However, volume declined from the 361,116 contracts traded on April 7 when May corn lost 2.50 cents and total open interest declined by 2,832 contracts. On April 8, total open interest increased by 8,020 contracts, which relative to volume is average. The May contract lost 22,925 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on April 9, May corn is trading unchanged on the day after making a new high for the move at $5.19, which is the highest price for May corn since August 27, 2013 when the high print was $5.23. May corn remains on a short and intermediate term buy signal. We have no recommendation.

Chicago wheat:

May Chicago wheat advanced 4.75 cents on heavy volume of 142,514 contracts. Volume was the highest since March 20 when 177,414 contracts were traded and May Chicago wheat closed at 7.03 3/4. On April 8, total open interest declined by 2,033 contracts, which relative to volume is approximately 20% below average. The May contract lost 10,913 of open interest. As this report is being compiled on April 9 after the release of the USDA report, May Chicago wheat is trading 7.25 cents lower and has made a low of $6.63, which does not take out the low made on April 4 of 6.58 3/4. May Chicago wheat remains on a short and intermediate term buy signal. We have no recommendation.

Kansas City wheat:

May Kansas City wheat advanced 2.00 cents on volume of 29,178 contracts. Total open interest declined by 804 contracts, which relative to volume is average. The May contract lost 3,282 of open interest. As this report is being compiled on April 9 after the release of USDA report, KC wheat is trading 4.75 cents lower and has made a daily low of 7.30, which is above the low for the move of 7.24 1/4 made on April 4. May KC wheat remains on a short and intermediate term buy signal. We have no recommendation.

Sugar #11:

July sugar advanced 27 points on heavy volume of 185,552 contracts. Volume declined from the 193,645 contracts traded on April 7 when July sugar lost 20 points and open interest increased by 3,845 contracts. On April 8, total open interest increased by 1,342 contracts, which relative to volume is approximately 65% less than average. However, the May contract lost 24,277 of open interest, which makes the total open interest increase much more impressive (bullish). In the April 4 report, we recommended the initiation of bearish positions in July sugar and to use the April 4 high of 17.82 as the exit point. On April 9, the daily high of 17.93 has exceeded the exit point, therefore clients should be on the sidelines unless willing to make a second try on the bearish side.

May sugar generated a short-term sell signal on April 2, and yesterday’s advance was the 3rd day of the countertrend rally, which is within the bounds of OIA’s protocols. We think the high of 17.93 made on April 9 will most likely be the high for the move. For clients who are so inclined, we think it would be worthwhile to take another try initiating bearish positions in sugar. We would use the high of 17.93 to exit positions. The only caveat, is that open interest stats indicate that market participants are willing to enter new long positions on rallies.

Cocoa:

July cocoa advanced $27.00 on huge volume of 79,168 contracts. Volume was the heaviest since June 6, 2013 when 78,252 contracts were traded and July cocoa closed at 2379.00. On April 8, total open interest declined by 897 contracts, which is approximately 45% below average, but considering that the May contract lost 12,784 of open interest, the total decline is impressive, meaning bullish. In the April 4 report, we recommended the initiation of bearish positions in cocoa with an exit point of 2998. This occurred yesterday, and we advised clients to move to the sidelines. As this report, is being compiled on April 9, July cocoa is trading $27.00 higher, and cocoa will generate a short-term buy signal, which will reverse the short-term sell signal generated on April 2. As it turned out, the short-term sell signal was false, and any loss should have been minimal.

Cotton:

May cotton advanced 1.17 cents on volume of 29,934 contracts. Total open interest increased by 1,104 contracts, which relative to volume is approximately 40% above average meaning that new longs were entering the market and driving prices higher. As this report is being compiled on April 9 after the release of the USDA stats, May cotton is trading 1.34 cents lower and has made a new low for the move at 90.31, which is the lowest print since 89.90 made on March 25. From April 4 through April 9 cotton has experienced a series of lower highs and lower lows. OIA thinks cotton is headed for a short-term sell signal, and this could come tomorrow.

WTI crude oil:

May WTI crude oil advanced $2.12 on very heavy volume of 741,628 contracts. Volume was the highest since March 12 when 1,082,134 contracts were traded and May WTI closed at $97.68. On April 8, total open interest increased by 3,749 contracts, which relative to volume is approximately 75% below average. However, the May contract lost 24,867 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on April 9, May WTI is trading 93 cents higher and has made a new high for the move at $103.59, which is the highest print since 104.23 made on March 4. As the EIA stats show, there is plenty of crude, and from a fundamental point of view, there is no compelling reason to be long. However, as we said yesterday, the market wants to go higher. We have no recommendation at this juncture.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.0 million barrels from the previous week. At 384.1 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 5.2 million barrels last week, and are well below the lower limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.2 million barrels last week but are near the lower limit of the average range for this time of year. Propane/propylene inventories rose 1.0 million barrels last week but are near the lower limit of the average range. Total commercial petroleum inventories increased by 5.5 million barrels last week.

Gasoline: On April 8, May gasoline generated a short-term buy signal, and remains on an intermediate term buy signal.

Natural gas:

May natural gas advanced 5.8 cents on heavier than normal volume of 316,722 contracts. Volume exceeded the 285,006 contracts traded on April 7 when May natural gas advanced 3.7 cents and total open interest increased by 3,956 contracts. On April 8, total open interest declined by 3,819 contracts, which relative to volume is approximately 45% below average. The May contract lost 24,315 of open interest. From April 4 through April 9 May natural gas has experienced a series of higher lows and higher highs. It appears inevitable that May natural gas will generate a short-term buy signal, which will reverse the short-term sell signal generated on March 12. At this juncture, we have no recommendation.

Euro:

The June euro advanced 56 pips on light volume of 160,442 contracts. Total open interest increased by 1,970 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on April 9, the June euro has taken out yesterday’s high and has made a new high for the move at 1.3846, which is the highest print since 1.3845 made on March 25. On April 3, the June euro generated a short-term sell signal, and since then through April 9 has had 3 days of a countertrend rally. The euro is overbought relative to the 50 day moving average of 1.3740 and the 5 day moving average of 1.3750, which is terrific when contemplating bearish positions. During April 7 and 8, the June euro advanced 93 pips (almost one cent) while total open interest increased 1,052 contracts. This is unimpressive.

Although we think the euro is trading at the top of its range, we would wait one more day to see if there is one final thrust higher before initiating bearish positions. For the June euro to generate a new short-term buy signal, the daily low must be above 1.3844.

British pound:

The June British pound advanced 1.38 cents on fairly heavy volume of 109,641 contracts. Volume was the highest since March 19 when 118,686 contracts were traded and the June euro closed at 1.6521. As this report is being compiled on April 9, the June pound is trading 17 pips higher and has made a new high for the move at 1.6779. The June pound will generate a short-term buy signal on April 9. We have no recommendation at this juncture.

Canadian dollar:

The June Canadian dollar advanced 37 pips on volume of 59,051 contracts. Total open interest increased by a massive 2,464 contracts, which relative to volume is approximately 55% above average. This is the largest increase in open interest since the June Canadian dollar generated a short-term buy signal on April 1. As this report is being compiled on April 9, the June Canadian dollar is trading 45 pips higher and has made a new high for the move at 91.89, which is the highest print since 91.88 made on January 13, 2014. Unfortunately, the Canadian dollar never had a pullback after generating the short-term buy signal on April 1, nor did the Canadian-sterling cross (CADGBP) with the exception of yesterday. However, this pullback came late in the rally, which makes it risky to enter the market on a one day setback.

S&P 500 E mini:

The S&P 500 E mini advanced 7.00 points on volume of 1,859,494 contracts. Total open interest declined by 19,585 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on April 9, the E mini is trading 18.50 points higher on light volume. Continue to hold out of the money calls coupled with long puts for clients who hold on equity positions.