Soybeans:

July soybeans advanced 18.50 cents on very light volume of 98,761 contracts. Total open interest increased by 3,968 contracts, which relative to volume is approximately 55% above average meaning that new longs were aggressively entering the market and driving prices higher. The May contract lost 384 of open interest. As this report is being compiled after the close of trading on May 14, July soybeans have recovered nicely from the early lows and look to close fractionally higher on the day. As we said in yesterday’s report, for July soybeans to generate a short-term buy signal, which would reverse the short-term sell signal generated on May 7 , the low for the day must be above 14.82 1/2. Based upon the way soybeans are trading, we look for the market to continue to move higher.However, July soybeans remain on a short term sell signal as of the May 14 close.

Soybean meal:

July soybean meal advanced $6.50 on light volume of 47,288 contracts. Total open interest increased by 2,302 contracts, which relative to volume is approximately 100% above average indicating that market participants were extremely aggressive about entering new long positions and driving prices higher. As this report is being compiled after the close of trading on May 14, soybean meal has recovered nicely from the low it made in the early going at $ July meal must make a daily low above OIA’s key pivot point of $479.50. Like soybeans, soybean meal wants to go higher and it looks like it is headed for new contract highs.

Corn:

July corn advanced 3.25 cents on very light volume of 180,690 contracts. Total open interest increased by 3,667 contracts, which relative to volume is approximately 20% below average. The May contract lost 1,581 of open interest and the price and open interest action on May 13 was bullish. However, we have been recommending a stand aside posture because of the heavy position of managed money and that corn has been a major laggard compared to the rest of the grain complex. As this report is being compiled after the close on May 14, July corn has made a new low for the move at 4.95 1/4, which is the lowest print since April 22 (4.92 3/4). We think it is highly likely that July corn will follow December corn by generating a short-term sell signal on May 15. The December contract generated a short-term sell signal on May 12.

Chicago wheat:

July Chicago wheat lost 5.75 cents on light volume of 68,494 contracts. Total open interest declined by 1,279 contracts, which relative to volume is approximately 25% less than average. The May contract lost 219 of open interest. It appears inevitable that July Chicago wheat is going to generate a short-term sell signal, and therefore we continue to advise a stand aside posture.

Kansas City wheat:

July Kansas City wheat gained 0.25 cents on light volume of 14,044 contracts. Total open interest increased by a massive 1,500 contracts, which relative to volume is approximately 320% above average meaning that a battle occurred between longs and shorts and neither was able to move the market much. As this report is being compiled on May 14 after the close, July Kansas City wheat made a new low at $8.03, which took out the May 12 low of 8.09 1/2. However, July KC wheat has a considerable distance to go before it generates a short-term sell signal and would have to make a daily high below $7.78 3/8. Stand aside.

Cotton:

July cotton lost 37 points on volume of 12,746 contracts. Total open interest declined by 290 contracts, which relative to volume is approximately 10% below average. On May 12, July cotton generated a short-term sell signal and remains on an intermediate term buy signal. Since then, July cotton has not had the 1-3 day countertrend rally, which is the opportunity to initiate bearish positions. As this report is being compiled on May 14, July cotton is trading 14 points lower after trading as high as 92.13. The market looks weak, and we expect considerable more downside, especially since managed money is massively long cotton by ratio of 7.35:1.From May 5 through May 13, July cotton has fallen 3.82 cents while total open interest has declined only 2,487 contracts.

For clients who are looking to initiate bearish positions but are not willing to wait for more of a rally, today’s high of 92.13 is a reasonable exit point for bearish positions. There is support between 89.71 (March 24 low) -90.02 (April 11 low), which if broken, will bring on the classical bar charting guys who will begin piling in on the short side. July cotton is trading below its 50 day moving average of 92.02 and the 20 day moving average of 92.91.

Coffee:

July coffee advanced 2.30 cents on volume of 22,103 contracts. Total open interest declined by 307 contracts, which relative to volume is approximately 40% below average. On May 12, July coffee generated a short-term sell signal and currently remains on an intermediate term buy signal. As is usually the case after the generation of a sell signal, the market has a tendency to rally from 1 to 3 days and this is the opportunity to enter bearish positions. However, coffee has had only one day (yesterday) when it had a weak rally. As this report is being compiled on May 14, July coffee is trading 2.90  cents lower and has made a daily low of 1.8295, which has not taken out the low of 1.8275 made on May 12. Unlike cotton, we recommend against initiating bearish positions at current levels. Wait for more of a rally.

Sugar #11: July sugar will generate a short term buy signal on May 14, which reverses the April 2 short-term sell signal. July sugar has been on an intermediate term buy signal.

Live cattle:

August live cattle lost 22.5 points on huge volume of 87,675 contracts. Volume was the highest since March 5 when 97,286 contracts were traded and August cattle closed at 1.33400. On May 13, total open interest increased by 2107 contracts, which relative to volume is average. For the past 3 days beginning on May 9, cattle has experienced high-volume accompanied by increases of open interest. For example, from May 9 through May 13, August cattle has advanced only 25 points on heavy volume, however, total open interest has increased by 6,377 contracts. In short, prices are essentially unchanged as open interest builds dramatically on high-volume. In our view, this means that a major move is in the offing, and at this juncture we cannot ascertain which is the likely direction, especially since the June contract is displaying extraordinary weakness.

WTI crude oil:

June WTI crude oil advanced $$1.11 on heavier than normal volume of 565,924 contracts. Total open interest increased by a very disappointing 1596 contracts, which relative to volume is dramatically below average. The June contract lost 26,986 of open interest. As we mentioned in yesterday’s report, for June WTI to reverse the short-term sell signal generated on April 30, the low for the day must be above $101.72 .As this report is being compiled on May 14, the low for June WTI is 101.83, therefore June WTI will generate a short term buy signal. Despite this, we are not enthusiastic bulls. However if June gasoline makes a daily low above $2.9681 and June heating oil a daily low above 2.9574, short-term buy signals would be generated which would reverse their short-term sell signals. This would give legs for the rally in WTI. As the stats indicate below, inventories are above their average range for this time of year.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.9 million barrels from the previous week. At 398.5 million barrels, U.S. crude oil inventories are above the average range for this time of year. Total motor gasoline inventories decreased by 0.8 million barrels last week, and are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories declined by 1.1 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.5 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 3.4 million barrels last week.

Natural gas: On May 13, June natural gas generated an intermediate term sell signal after generating a short-term sell signal on May 12.

June natural gas lost 7.6 cents on heavier than normal volume of 319,136 contracts. Total open interest declined by 9,760 contracts, which relative to volume is approximately 30% above average meaning that liquidation was fairly substantial on a decline to new lows of 4.347.As this report is being compiled on May 14, June natural gas is trading 1.5 cents higher on the day and has made a new low for the move at 4.339. We have no recommendation.

Euro:

The June euro lost 57 pips on relatively heavy volume of 216,300 contracts. Total open interest increased by 8101 contracts, which relative to volume is approximately 50% above average meaning that new aggressive short sellers were entering the market and driving prices to new lows for the move (1.3687). This is the first sign that market participants are getting bearish. On May 12, the June euro generated a short-term sell signal, and we are advising a stand aside posture until June euro has a rally, which can last from 1 to 3 days and is the opportunity to initiate bearish positions.

British pound:

The June British pound lost 43 pips on volume of 65,503 contracts. Total open interest declined by 3,866 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy on the decline. As this report is being compiled on May 14, the June pound is trading 54 pips lower, and it looks increasingly likely that a short-term sell signal could be generated, possibly as early as tomorrow.

Dollar index: On May 13, the June dollar index generated a short-term buy signal, but remains on an intermediate term sell signal.

The June dollar index advanced 24.8 points on volume of 27,714 contracts. Total open interest declined by a massive 2,573 contracts, which relative to volume is approximately 275% above average meaning that massive numbers of market participants were liquidating as the June dollar index traded to its highest level since April 8 when the June contract made a high of 80.350.We think there is an interesting trade in the currency cross of long USDGBP. As we said before, there is a high probability of the June British pound generating a short-term sell signal.

Platinum:

July platinum gained $14.10 on heavy volume of 13, 944 contracts. Total open interest increased by a huge 3141 contracts, which relative to volume is 640% above average meaning that huge numbers of new longs were aggressively bidding prices higher to a new high for the move at $1461.90. As this report is being compiled on May 14, July platinum has again made a new high at 1487.60, which is slightly below the March 14 high of $1488.60. On May 5, July platinum generated a short and intermediate term buy signal, and we have advise caution due to the under performance of gold and silver. However, on May 14, it appears that gold and silver have revived, and it wouldn’t take much for them to generate short-term buy signals.

S&P 500 E mini:

The June S&P 500 E mini gained 1.50 points on very light volume of 1,079,237 contracts. Total open interest increased by 24,812 contracts, which relative to volume is approximately 10% below average, but a healthy increase nonetheless. On May 13, the E mini made a new all-time high at 1898.50, and as this report is being compiled on May 14, the E mini is trading 10.50 lower and has not taken out yesterday’s high. We continue to advise long put protection for those clients holding long equity positions.