Soybeans:

May soybeans advanced 12.75 cents on heavy volume of 273,738 contracts. Volume was the highest since February 27 when 427,926 contracts were traded and May soybeans closed at $13.90. On April 9, total open interest increased by 8,601 contracts, which relative to volume is approximately 30% above average. The May contract lost 9,985 of open interest. After the release of the USDA report, May beans made a spike high to $15.12 on volume of 17,128 contracts on the 15 minute chart. Subsequently the market did not test the high, which we consider to be a major negative. We have been warning clients to be on the sidelines, and as this report is being compiled on April 10, May soybeans are trading 16.00 cents lower. We think the market has topped for now although a rally in the June-July period is likely. Soybeans remain on a short and intermediate term buy signal, but we advise against being long.

The USDA reported that ending stocks declined 10 million bushels to 135 million bushels and they increased exports by 50 million bushels. As we said at the top of our reports beginning with the April 6 Weekend Wrap, the central question was how much of the USDA’s report was baked into prices. Based upon the market’s reaction yesterday and the subsequent action today, we think quite a lot.

Today, the USDA reported that 79.14 thousand metric tons were sold, which brings total commitments to 1.652 billion bushels versus the USDA’s new projections for the season of 1.750 billion bushels.

Soybean meal:

May soybean meal advanced $4.00 on heavy volume of 111,659 contracts. Interestingly, total open interest declined by 850 contracts, which relative to volume is approximately 55% below average. The May contract accounted for loss of 8,395 of open interest. May soybean meal made a high of 490.90, then like soybeans promptly sold off. As this report is being compiled on April 10, May soybean meal is trading $3.10 lower on the day. Like soybeans, we advise against long positions despite soybean meal being on a short and intermediate term buy signal.

The USDA reported that soybean meal sales totaled 179.6 thousand metric tons, which brings total commitments to 8690.8 thousand metric tons versus the new USDA projections for the season of 9979 thousand metric tons.

Corn:

May corn lost 4.75 cents on huge volume of 639,980 contracts. Volume was the highest since January 10 when 644,921 contracts were traded and May corn closed at $4.40 3/4. On April 9, total open interest increased by 7,739 contracts, which relative to volume is approximately 45% less than average. However, the May contract accounted for loss of 34,311 of open interest, which makes the total open interest increased more impressive (bearish). Between 11:00 a.m.-11:15 a.m. CDT, May corn traded in a range of 5.00-5.19 on volume of 46,174 contracts. Subsequently, the market sold off and closed lower on the day. We consider this  to be negative along with the increase of open interest on the decline. As this report is being compiled on April 10, May corn is trading 1.75 cents lower on the day. Despite corn being on a short and intermediate term buy signal, we would avoid the long side of this market.

In yesterday’s supply and demand report, corn exports were increased by 125 million bushels and ending stocks were reduced to 1.331 billion bushels. Obviously, the market was disappointed and had discounted the USDA number. Today, the USDA reported that 658.7 thousand metric tons of corn was sold, which brings total commitments to date of 1.652 billion bushels versus the new USDA projection for the season of 1.750 billion bushels. This week’s reported sales were the lowest since January 2014.

Chicago wheat:

May Chicago wheat lost 12.00 cents on extremely heavy volume of 203,301 contracts. Volume was the highest since March 3 when 213,769 contracts were traded and May Chicago wheat closed at $6.31 1/2. On April 9, total open interest increased by 4,207 contracts, which relative to volume is approximately 20% below average, however the May contract lost 12,606 of open interest, which makes the total open interest increase much more impressive (bearish). As this report is being compiled on April 10, May Chicago wheat is trading 7.75 cents lower and has made a new low for the move at $6.56 1/4. May Chicago wheat is going to generate a short-term sell signal, probably tomorrow. For the past 3 days beginning on April 7, open interest action has been negative regardless of whether prices advanced or declined. Under no circumstances should clients be long wheat.

Kansas City wheat:

May Kansas City wheat lost 8.25 cents on huge volume of 42,715 contracts. Total open interest declined by only 214 contracts, which relative to volume is approximately 75% below average. The May contract accounted for a loss of 5,207 contracts. There was sufficient open interest increases in the forward months to bring the total open interest number significantly below average. As this report is being compiled on April 10, May KC wheat is trading 9.25 cents lower and has made a new daily low of 7.19 3/4. May KC wheat will generate a short-term sell signal on April 10.

In the supply-demand report, the USDA reported that ending stocks totaled 583 million bushels, which was an increase of 25 million bushels. Additionally, the USDA reported today that sales in all wheat categories totaled  41.8 thousand metric tons, which is the lowest as of the season that started on June 1, 2013.

Sugar #11:

July sugar lost 15 points on heavy volume of 189,356 contracts. Total open interest increased by 12,024 contracts, which relative to volume is approximately 145% above average, meaning that new shorts were entering the market and driving prices lower. In the early going, May sugar made a high of 17.93 and then promptly sold off. As this report is being compiled on April 10, July sugar is trading 2 points higher on the day. Although clients were stopped out on the 17.93 high, we recommended for those who were so inclined to reinstitute bearish positions and use the 17.93 high as an exit point. We think sugar is headed lower.

Cocoa:

July cocoa advanced $26.00 on heavy volume of 58,947 contracts., However, volume declined dramatically from the 79,168 contracts traded on April 8 when July cocoa advanced $27.00 and total open interest declined by 897 contracts. On April 9, total open interest increased by a massive 4,706 contracts, which relative to volume is approximately 210% above average meaning that new longs were aggressively entering the market and driving prices to new highs for the move ($3036.00) which is the highest print since 3040 on March 19. Though it appeared cocoa would generate a short-term buy signal, which would reverse the short-term sell signal, this has not occurred. At this juncture, we are unable to determine whether cocoa is headed for new highs, or whether this is a topping formation. July cocoa made the high for the move on March 17 at 3047.

Cotton:

May cotton lost 1.35 cents on heavy volume of 46,463 contracts. Volume was the highest since March 26 when cotton topped out at 97.35 on volume of 56,095 contracts and May cotton closed 2.45 cents lower while open interest increased by 852 contracts. On April 9, total open interest declined by 555 contracts, which relative to volume is approximately 45% less than average. In yesterday’s report, we stated that it was inevitable cotton would generate a short-term sell signal and that cotton had been making a series of lower highs and lower lows. As this report is being compiled on April 10, cotton is trading 1.15 cents lower and has made a new low for the move at 89.05, which is the lowest print since 88.45 made on March 6. Additionally, it is below the 50 day moving average of 89.54. Wait for a rally before initiating bearish positions.

WTI crude oil:

May WTI crude oil advanced $1.04 on heavy volume of 789,212 contracts. Volume was heavier than April 8 when 741,628 contracts were traded and May WTI advanced $2.12 while total open interest increased by 3,749 contracts. On April 9, total open interest increased by 16,174 contracts, which relative to volume is approximately 20% below average. The May contract lost 22,779 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on April 10, May WTI is trading 32 cents higher and has made a high just 4 cents above yesterday’s high of 103.77. May crude oil remains on a short and intermediate term buy signal. We have no recommendation.

Natural gas:

May natural gas advanced 5.2 cents on healthy volume of 323,092 contracts. Volume increased slightly from April 8 when 316,722 contracts were traded and May natural gas advanced 5.8 cents while total open interest declined by 3,819 contracts. On April 9, total open interest increased by 3,497 contracts, which relative to volume is approximately 50% below average. However, the May contract lost 22,041 of open interest, which makes the total open interest more impressive (bullish). Natural gas will generate a short-term buy signal on April 10. Wait for a pullback before initiating bullish positions.

The Energy Information Administration announced that working gas in storage was 826 Bcf as of Friday, April 4, 2014, according to EIA estimates. This represents a net increase of 4 Bcf from the previous week. Stocks were 849 Bcf less than last year at this time and 997 Bcf below the 5-year average of 1,823 Bcf. In the East Region, stocks were 448 Bcf below the 5-year average following net withdrawals of 5 Bcf. Stocks in the Producing Region were 411 Bcf below the 5-year average of 772 Bcf after a net injection of 9 Bcf. Stocks in the West Region were 137 Bcf below the 5-year average after no net change. At 826 Bcf, total working gas is below the 5-year historical range.

Euro:

The June euro advanced 57 pips on volume of 159,006 contracts. Total open interest increased by 1,955 contracts, which relative to volume is approximately 45% below average. Although the open interest action has increasing at a rate that is below average, the fact remains the June euro continues to rally, which violates our protocols. In short, it appears the euro may generate a short-term buy signal on April 10 or 11, which would reverse the short-term sell signal generated on April 3. Stand aside.

Dollar index: On April 9, the June dollar index generated a short-term sell signal and remains on an intermediate term sell signal.

British pound: On April 9, the June British pound generated a short-term buy signal, which reversed the short-term sell signal of March 19. The June pound remains on an intermediate term buy signal.

The June British pound advanced 46 pips on volume of 77,935 contracts. Total open interest increased by 2,539 contracts, which relative to volume is approximately 35% above average. As this report is being compiled on April 10, the June pound is trading 6 pips lower after making a new high for the move at 1.6812, which is the highest print since 1.6805 made on February 18. The market is massively overbought and due for correction. Stand aside.

Canadian dollar: On April 9, the June Canadian dollar generated an intermediate term after generating a short-term buy signal on April 1.

Yen: On April 9, the June yen generated a short and intermediate term buy signal.

The June Canadian dollar advanced 56 pips on volume of 51,683 contracts. Total open interest increased by 780 contracts, which relative to volume is approximately 40% below average. On April 9, the June Canadian dollar made a high of 91.95, which is the highest print since 92.18 made on January 9, 2014. As this report is being compiled on April 10, the June Canadian dollar is trading 51 pips lower, which is to be expected after the generation of the intermediate term buy signal. Additionally, the market is overbought relative to its 20 day moving average of 90.20. We have no recommendation at this juncture.

Gold: Bull alert

June gold lost $3.20 on light volume of 139,138 contracts. Total open interest declined by 1,217 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on April 10, June gold is trading $9.80 higher on the day. For gold to generate a short-term buy signal, the low for the day must be above 1318.20. Gold remains on an intermediate term buy signal.

Platinum: Bull alert

For platinum to generate a short-term buy signal, the low the day must be above 1446.60. Based upon the closing price of 1460.10 on April 10, it looks highly likely a short-term buy signal will be generated tomorrow.

S&P 500 E mini:

The S&P 500 E mini gained 19.75 points on volume of 1,417,666 contracts. Total open interest declined by 12,677 contracts, which relative to volume is approximately 60% below average. For the past 2 days (April 8 and 9, the E mini has advanced a total of 26.75 points while total open interest has declined by 32,262 contracts. This is bearish open interest action relative to the price advance. As this report is being compiled on April 10, the June E mini is trading 27.75 points lower and has made a daily low of 1833.25, which does not take out the April 8 low of 1830.75. Continue to maintain the out of the money call position coupled with long puts if holding long equity positions.

However, it appears the market may be in for a correction that is more severe than the street has anticipated. One area of concern is the collapse in the Nikkei, which is trading over 3.00% lower on April 10. The Nikkei has fallen by 5% since April 2, and it appears that the 50 day moving average is bound to cross below the 200 day moving average. Additionally, the FTSE 100 appears to have made a major double top in late January and February and is trading between the 50 and 200 day moving averages.