Soybeans:

July soybeans lost 21.75 cents on remarkably low volume of 123,132 contracts. Volume was dramatically below that of May 9 when July soybeans advanced 17.50 cents on total volume of 172,535 contracts and total open interest increased by 773 contracts. On May 12, total open interest declined by a minuscule 714 contracts, which relative to volume is approximately 70% below average.The May contract lost 433 of open interest and the new crop November contract gained 2,442 of open interest. As this report is being compiled on May 13, July soybeans are trading 16.25 cents higher and have made a high of 14.85. In order for July soybeans to reverse the short-term sell signal generated on May 7, the low of the day must be above OIA’s key pivot point of $14.82 1/2. We have no recommendation.

Soybean meal:

July soybean meal lost $9.10 on volume of 52,557 contracts. Total open interest declined by 168 contracts, which relative to volume is approximately 80% below average. The May contract lost 280 of open interest. As this report is being compiled on May 13, July soybean meal is trading $5.90 higher on the day. In order for July soybean meal to resume its uptrend, the low the day must be above OIA’s key pivot point of $479.10. We have no recommendation.

Corn: On May 12, new crop December corn generated a short-term sell signal, but remains on an intermediate term buy signal.

July corn lost 8.00 cents while the new crop December lost 6.75 cents on total volume of 175,552 contracts. Volume shrank dramatically from May 9 when July corn lost 9.00 cents on total volume of 416,471 contracts while total open interest increased by 735 contracts.On May 12, total open interest declined by a hefty 6533 contracts, which relative to volume is approximately 50% above average. The May contract lost 1550 of open interest and the new crop December added 2399 of open interest. As this report is being compiled on May 13, July corn is trading 1.75 cents higher while the new crop December is trading 2.25 higher on the day. Usually after the generation of a sell signal, the market has a tendency to rally from 1-3 days and this is the opportunity to initiate bearish positions in December corn. July corn remains on a short and intermediate term buy signal.We have no recommendation for July corn.

Chicago wheat:

July Chicago wheat lost 7.50 cents on volume of 85,762 contracts. Total open interest increased by a substantial 4,861 contracts, which relative to volume is approximately 120% above average meaning that new short sellers continued to enter the market in heavy numbers and drive prices lower ($7.00). For the past 3 days beginning on May 8, open interest has increased each day as prices have declined on each of those days. For example, from May 8 through May 12, July Chicago wheat lost 22..75 cents while total open interest increased by 11,482 contracts. This is clearly bearish open interest action relative to the price decline. As this report is being compiled on May 13, July Chicago wheat is trading 8.50 cents lower but has not taken out yesterday’s low of 7.00. Stand aside.

Kansas City wheat:

July Kansas City wheat lost 4.25 cents on light volume of 17,974 contracts. Total open interest declined by 140 contracts, which relative to volume is approximately 55% below average.The May contract lost 42 of open interest. Remarkably, volume was light even though July KC wheat made its lowest print since May 2 ($8.05 1/2). Additionally, at one point, July Kansas City wheat was down 19.25 cents and recovered nicely to close only fractionally lower. While the performance of Kansas City wheat is outstanding, we continue to be concerned about the very negative performance and open interest action associated with Chicago wheat. As this report is being compiled on May 13, July KC wheat is trading 2.00 cents lower.We want to see more declines of open interest, and our initial target is 7.93 5/8, the 20 day moving average.

Cotton: On May 12, July cotton generated a short-term sell signal, but remains on an intermediate term buy signal.

July cotton lost 1.06 cents on volume of 18,394 contracts. Total open interest declined by a massive 3455 contracts, which relative to volume is approximately 525% above average meaning that liquidation was off the charts heavy. However, from May 5 through May 12, July cotton has fallen 3.45 cents while total open interest has declined only 2197 contracts. As this report is being compiled on May 13, July cotton is trading 52 points lower, but has not broken below yesterday’s low of 90.50. With managed money holding long positions by ratio of 7.35:1, there is plenty of fuel to fund a continued downside move. As is usually the case after the generation of a sell signal, the market has a tendency to rally from 1-3 days, and this is the opportunity to initiate bearish positions.

Coffee: On May 12, July coffee generated a short-term sell signal, but remains on an intermediate term buy signal

July coffee advanced 5.35 cents on volume of 14,640 contracts. Total open interest declined by 535 contracts, which relative to volume is approximately 45% above average meaning that liquidation was substantial on the rally. This is consistent with bear market behavior. Per the May 9 report, we stated that rallies would be muted because there are large numbers of speculators looking to recover losses or lost profits. As is usually the case after the generation of a sell signal, the market has a tendency to rally from 1-3 days and this is the opportunity to initiate bearish positions.

From the May 9 report:

“As we pointed out in the weekend report, from the time that coffee topped out on April 23, through May 8, total open interest increased, and with the action on Friday, total open interest has increased by 9,127 contracts while July coffee has declined 29.50 cents.This is very bearish open interest action relative to the price decline. Speculators are refusing to liquidate, which means the carnage is far from over. At this juncture, we think rallies will be muted because there are masses of speculators who are looking to recover losses or lost profits.”

Live cattle:

August live cattle lost 12.5 points on heavy volume of 79,223 contracts. Volume was highest since March 13, 2014 when 82,941 contracts are traded and August cattle closed at 1.34775.On May 12, total open interest increased by 1,483 contracts, which relative to volume is approximately 20% less than average. The June contract accounted for loss of 11,738 of open interest, which makes the total open interest increase neutral. As this report is being compiled on May 13, August cattle is trading 17.5 points lower and has made a daily low of 1.37600. We like the long side of cattle, but we think the market will continue to trade in a consolidation pattern until supplies tighten. The June contract continues to perform poorly, and is now selling at a substantial discount to August 2014, which dampens our enthusiasm for the long side at this juncture.

WTI crude oil:

June WTI crude oil advanced 60 cents on volume of 445,512 contracts. Total open interest declined by 10,760 contracts, which relative to volume is average. However, open interest should not be declining on a price advance. On May 9, June WTI lost 27 cents and open interest increased by 4,321 contracts, which again is bearish action. On May 8, June WTI lost 51 cents and open interest increased by 2,238 contracts which is bearish. As this report is being compiled on May 13, June WTI is trading 72 cents higher on the day and has made a new high for the move at $101.91, which is the highest print since $102.20 made on April 29.As we said yesterday, heating oil is on a short and intermediate term sell signal and gasoline is on a short-term sell signal. Additionally it is highly unusual for gasoline to be weak at this point in the season. For example, June gasoline has advanced only 0.58% (1.7 cents) during the 2nd quarter through May 12th. Seasonally, gasoline prices are usually far more robust. On May 2, we recommended shorting out of the money calls in WTI, and though this trade is a loser at this juncture, we see muted enthusiasm by market participants. For June WTI to reverse the sell signal, the low of the day must be above $101.72.

Tomorrow is the weekly EIA report, which can propel WTI in either direction. The decision to stay with the short call should be based upon your risk tolerance and sound money management principles.

Natural gas: On May 12, June natural gas generated a short-term sell signal, and will likely generate an intermediate term sell signal on May 13.

June natural gas lost 9.7 cents on heavier than normal volume of 295,646 contracts. Total open interest declined by 6,864 contracts, which relative to volume is approximately 10% below average.The June contract lost 12,251 of open interest. May 12 was the 7th day in a row (beginning on May 2) that open interest has declined. As this report is being compiled on May 13, June natural gas is trading 7.2 cents lower and has made a new low for the move at $4.356, which is the lowest print since 4.348 made on April 3, 2014. On April 22, we recommended shorting out of the money calls, and clients should continue to hold this position.

Euro: On May 12, the June euro generated a short-term sell signal, but remains on an intermediate term buy signal.

The June euro advanced 9 pips on very light volume of 101,905 contracts. Total open interest declined by a massive 5,446 contracts, which relative to volume is approximately 110% above average meaning that liquidation was extremely heavy on the modest advance. As this report is being compiled on May 13, the June euro is trading 57 pips lower and has made a new low for the move at 1.3687, which is the lowest print since 1.3669 made on April 4.Usually after the generation of a sell signal, the market tends to have a countertrend rally lasting from 1-3 days, and this is the opportunity to initiate bearish positions.

Swiss franc: On May 12, the June Swiss franc generated a short and intermediate term sell signal.

The June Swiss franc lost 12 pips on volume of 27,715 contracts. Total open interest declined by a huge 6288 contracts, which relative to volume is approximately 640% above average meaning that liquidation was off the charts heavy. According to the most recent COT report, managed money is long the Swiss franc by a ratio of 1.26:1. As this report is being compiled on May 13, the June Swiss franc is trading 26 pips lower on the day.

Copper:

July copper advanced 6.65 cents on heavy volume of 68,736 contracts. Total open interest increased by 4,299 contracts, which relative to volume is approximately 140 percent above average meaning that new longs were aggressively entering the market and pushing copper prices to new highs for the move of $3.1555, which is the highest print since $3.2160 made on March 7, 2014.As this report is being compiled on May 13, July copper is trading 60 points lower and has not taken out yesterday’s high. On April 24, July copper generated a short-term buy signal, and as of May 13 remains on an intermediate term sell signal. For July copper to generate an intermediate term buy signal, the low the day must be above $3.1670.

Gold:

June gold gained $8.20 on volume of 158,099 contracts. Total open interest declined by 4,297 contracts, which relative to volume is average. As this report is being compiled on May 13, June gold is trading 1.90 lower on the day. June gold remains on a short-term sell signal, but an intermediate term buy signal. We have no recommendation.

Platinum:

July platinum gained $12.00 on volume of 9,252 contracts. Total open interest declined by 77 contracts, which is minuscule and significantly below average. As this report is being compiled on May 13, July platinum is trading $9.10 higher on the day after making a new high for the move at $1461.90, which takes out the previous high made on May 6 of 1459.60. On May 5, July platinum generated a short and intermediate term buy signal, and subsequently conformed to OIA’s 1-3 day correction protocol, and now has resume its rally. As we have pointed out in previous reports, our concern about being long platinum has little to do with the internal strength the white metal, rather it is about the lackluster performance of gold and silver. We want to see strength in gold and silver.

Silver:

July silver advanced 42.2 cents on volume of 45,854 contracts. Total open interest declined by 4077 contracts, which is disappointing and relative to volume is approximately 250% above average meaning liquidation was off the charts heavy as silver had one of its best upside moves in a couple of weeks. July silver remains on a short and intermediate term sell signal.

S&P 500 E mini:

The June S&P 500 E mini advanced 19.25 points on very low volume of 1,187,731 contracts. Total open interest increased by a hefty 43,649 contracts, which relative to volume is approximately 45% above average, which is a stellar performance. Rarely, do we see an open interest increase that is substantially above average. The E mini made a new high for the move at 1894.00, which takes out the previous high of 1892.50. As this report is being compiled on May 13, the E mini has made another new all-time high of 1898.50.It now appears that E mini wants to go higher. We continue to advise long put protection for those clients who hold long equity positions because equity gains are offsetting losses in the long puts. With the market in nosebleed territory, we think it is mandatory that clients protect their long equity positions with puts.