Soybeans:

May soybeans advanced 27.50 cents on fairly heavy volume of 238,934 contracts. Volume was the highest since March 12 when 249,686 contracts were traded and May soybeans lost 26.00 cents while open interest declined 6,007 contracts. Additionally, volume was above the average daily volume for the month of March of 172,090 contracts and above average daily volume year to date of 203,231 contracts. In short, there was a significant amount participation on the rally. On March 31, open interest was positive as well having increased 6,841 contracts, which relative to volume is approximately 5% above average. The May contract gained 2,823 of open interest.

Yesterday’s report by the USDA was considered neutral to slightly bearish with stocks  as of March 1 of 992 million bushels, which was slightly above the consensus. Intended planted acreage came in at 81.5 million acres, which was up dramatically from 2013 when 76.533 million acres were planted.  this report is a classic example of how the report can differ dramatically than the market‘s reaction to it. Apparently, the tightening supply of old crop soybeans is the key driver for the rally. The specter of Chinese soybean cancellations remain over the market, and clients should keep in mind that last year, Chinese cancellations did not begin until April.

As this report is being compiled on April 1, May soybeans are trading 23.50 cents higher and have made a new high for the move at 14.91 1/2. Looking at the continuation chart, the next area of resistance is $15.00, which is slightly above the September 13th, 2013 high of 14.99 1/2 and after this, 15.20, the high made on July 22, 2013. As clients know, we recommended liquidating all positions in soybeans prior to the report, and obviously we got this one wrong. Generally speaking most major highs in soybeans occur in June or July and we are confident there will be another opportunity to catch the long side of the move. Perhaps the opportunity will arise when Chinese cancellations begin in earnest, which should send the market lower temporarily. At this juncture, we recommend a stand aside posture.

Soybean meal:

May soybean meal gained $10.90 on volume of 79,112 contracts. Volume was the highest since March 21 80,268 contracts were traded and May soybean meal advanced $4.50 while total open interest increased by 981 contracts. Additionally, volume on March 31 was above average daily volume for March  of 63,896, but only slightly above average daily volume year to date of 79,457 contracts. On March 31, total open interest increased by 4,215 contracts, which relative to volume is approximately 105% above average, meaning that new longs were heavily entering the market and driving prices higher for the move ($479.80). As this report is being compiled on April 1, May soybean meal is trading $4.50 higher and has made a new high for the move at 485.70. We have no recommendation.

Corn:

May corn advanced 10.00 cents on huge volume of 582,795 contracts. Volume was the highest since January 10 when 644,921 contracts were traded and May corn closed at $4.40 3/4, after making a low for the day of 4.14 1/2, which was the contract low. On March 31, perhaps the biggest surprise was the dismal performance of open interest. Total open interest increased by a mere 2,381 contracts, which is 85% below average. Most telling was that May corn lost 17,838 of open interest. This contract holds approximately 40% of the total open interest in corn. There were open interest increases in the July 2014 through July 2016 contracts , which offset the major decline in the May contract. As this report is being compiled on April 1, May corn is trading 7.25 cents higher and has made a new high for the move at $5.12 1/2. This is the highest price for corn on the continuation chart since August 2013 and the next area of resistance is $5.20. Prior to the report, we advised closing out all positions, and obviously this call was incorrect. We remain very concerned about the massive number of managed money longs in the market, and seasonally, corn is beginning to enter a period of weakness. We have no recommendation.

The USDA reported intended plantings of corn at 91.7 million acres, which was 1 million acre decline from the consensus. Acreage was the smallest since 2010 . Additionally, the USDA pegged corn stocks on March 1 at 7.006 billion bushels, which was 100 million bushels less than the consensus projected.

Chicago wheat:

May Chicago wheat advanced 1.75 cents on heavy volume of 125,334 contracts. Volume was the highest since March 20 when 177,414 contracts were traded and May wheat declined 12.00 cents while total open interest increased by 6,806 contracts. On March 31, total open interest increased by 4,196 contracts, which relative to volume is approximately 35% above average meaning there was a battle between longs and shorts and longs had a slight edge. However, May wheat made a new low for the move at $6.76 1/2, which is the lowest price since the March 18 print of 6.72 1/2. As this report is being compiled on April 1, May Chicago wheat is trading 9.50 cents lower and has made a low for the day at 6.83 1/2. Wheat was the only grain that we recommended going into the report because long puts were in place from significantly higher levels advised originally on March 19. In short, a large portion of profits should have been protected from the downside move of the past several days. Continue to hold these positions. Wheat is not close to generating a short or intermediate term sell signal.

Kansas City wheat:

May Kansas City wheat advanced 0.50 cents on volume of 27,453 contracts. Total open interest increased by 1,071 contracts, which relative to volume is approximately 45% above average. The May contract lost 744 of open interest. As this report is being compiled on April 1, May KC wheat is trading 6.75 cents lower, but has not taken out yesterday’s low of 7.48 1/4, which is the lowest price since March 18 of $7.43. Stay with bullish positions recommended on February 6 and the long put position recommended on March 19.

The USDA report was a disappointment with respect to wheat and stocks came in at 1.056 billion bushels, which was higher than the consensus of 1.042 billion bushels. However, stocks are significantly lower than the report as of March 1, 2013 of 1.235 billion bushels. All wheat acres intended for planning totaled 55.8 million acres, which was below the consensus of 56.3 million acres and below 2013 of 56.156 million acres. 

Sugar #11:

May sugar lost 21 points on light volume of 93,898 contracts. Total open interest declined by 1,412 contracts, which relative to volume is approximately 40% below average. On March 27, May sugar generated a short-term buy signal, and usually after the generation of the signal, the market has a tendency to pullback from 1-3 days. As this report is being compiled on April 1, May sugar is trading 59 points lower and has made a daily low of 17.06. However, the sugar market looks like it may possibly reverse and generate a short-term sell signal. We discourage long positions at this juncture.

Live cattle:

April live cattle lost 65 points on volume of 43,175 contracts. Total open interest declined by 1,828 contracts, which relative to volume is approximately 55% above average meaning that liquidation was heavy on the decline. The April contract lost 1,920 of open interest. As this report is being compiled on April 1, April cattle is trading 1.250 lower on the day. 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 lost 9 cents on very light volume of 340,482 contracts. Total open interest increased by 6,349 contracts, which relative to volume is approximately 25% less than average. However, March 31 was the 5th day in a row that open interest increased. The May contract lost 5,407 of open interest. From March 25 through March 31, WTI crude oil advanced $1.98 while total open interest increased by 39,367 contracts. As this report is being compiled on April 1, May WTI is trading $1.92 lower and has made a new low for the move at $99.60, which is the lowest print since March 26 of 99.10. On March 27, May WTI generated a short-term buy signal, which reversed the short-term sell signal of March 12. At the time, we expressed our skepticism of the move higher, and advised a stand aside posture. Although the market is declining today, which is consistent with the protocol after the generation of the buy signal, we are seeing something more than a garden variety correction on April 1. WTI may again reverse and generate a new short-term sell signal possibly on April 2.

From the March 27 report:

“As this report is being compiled on March 28, May WTI is trading 52 cents higher and has made a new high for the move the $102.24, which is the highest price since the March 10 print of $102.25. Usually, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days, which is the opportunity to initiate bullish positions. The fundamentals for WTI are abysmal and our concern continues to be that Brent crude oil remains on a short and intermediate term sell signal as does heating oil. Gasoline is on a short-term sell signal, but an intermediate term buy signal. We have no recommendation.”

Natural gas:

May natural gas declined 11.4 cents on volume of 228,446 contracts. Total open interest declined by 6,525 contracts, which relative to volume is approximately average. The May contract lost 7,154 of open interest. As this report is being compiled on April 1, May natural gas is trading 8.9 cents lower and has made a daily low of $4.272, which is only approximately 2 cents above the low for the move of 4.256 made on March 24. Stand aside.

Euro:

The June euro advanced 24 pips on fairly heavy volume of 210,212 contracts. Total open interest increased by 456 contracts, which is minuscule and dramatically below average. As this report is being compiled on April 1, the June euro is trading 19 pips higher and has made a high of 1.3814, which is the highest print since 1.3826 made on March 26. For the euro to resume its rally to new highs, the June euro must make a daily low above 1.3796 and then 1.3825. If it is unable to do this, the euro will not move appreciably higher.

British pound:

The June British pound gained 27 pips on volume of 86,953 contracts. Total open interest increased by 1,926 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on April 1, the June pound is trading 37 pips lower and has made a daily low of 1.6610, which is above the March 31 low of 1.6603. For the British pound to reverse the short-term sell signal generated on March 19, the low of the day must be above 1.6641 and 1.6663. The pound is beginning to look like a candidate for bearish positions. Although open interest action has been terrific on the advance, the fact remains that managed money is long by a ratio of 5.00:1, which is the highest reading we have seen in at least a couple of months. Additionally, the beginning of the new COT tabulation period starts on March 26 and from March 26 through March 31, total open interest has increased by 9,454 contracts while the pound has advanced 1.41 cents. Chances are managed money is even more net long than they were in the last COT report.

Australian dollar:

The June Australian dollar advanced 21 pips on volume of 71,088 contracts. Total open interest declined by 1,532 contracts, which relative to volume is approximately 15% below average. However, this is the first open interest decline seen in the Australian dollar since March 21 when the Australian dollar advanced 49 pips on volume of 72,325 contracts and total open interest declined by 2,541 contracts. The market is massively overbought. Stand aside.

Gold:

June gold declined $10.50 on light volume of 142,930 contracts. Total open interest increased by 2,230 contracts, which relative to volume is approximately 40% below average, but this is the first open interest increase seen on a decline after topping out on March 17. This is bearish. As this report is being compiled on April 1, June gold is trading $2.10 lower and has made a new low for the move at $1277.40, which is the lowest print since 1277.20 made on February 11. On March 26, April gold generated a short-term sell signal. However, OIA advised clients to liquidate bullish positions on March 21, that had been recommended on February 6. Remarkably, June gold has not generated an intermediate term sell signal.

S&P 500 E mini:

The June S&P 500 E mini gained 14.00 points on volume of 1,576,689 contracts. Total open interest increased by a very minuscule 3,130 contracts, which is dramatically below average. This is the second day in a row that the S&P 500 E mini  advanced on abysmal oprn interest. On March 28, the E mini rose 10.00 points and open interest increased only 2,680 contracts. This indicates a reluctance on the part of longs and shorts to enter new positions. As this report is being compiled on April 1, the June E mini is trading 9.50 points higher on very low volume.

As we stated in the March 30 Weekend Wrap, if the S&P 500 cash index made a daily low above 1871.87 and the Dow made a daily low above 16383.60, we would recommend the initiation of additional call positions to balance out long put positions. These are in place to protect clients who hold long equity positions. On April 1, the low for the day in the S&P 500 cash index is 1873.96 and the Dow 16457.60. Additionally, the S&P 500 cash index has broken out to new all-time highs on April 1. Initiate new long out of the money call positions on April 1 in the E mini.