OIA will provide this week’s export sales in tomorrow’s report.

Soybeans:

July soybeans advanced 3.00 cents on volume of 147,182 contracts. Volume was the heaviest since May 9 when July soybeans advanced 17.50 cents on volume of 172,535 contracts and total open interest increased by 773 contracts. On May 14, total open interest increased by a hefty 5,012 contracts, which relative to volume is approximately 40% above average meaning that new longs were aggressively entering the market and driving prices higher. July soybeans made a low of $14.67 in the early going and recovered nicely to close fractionally higher.

As this report is being compiled on May 15, July soybeans are trading 18.25 cents lower and have made a daily low of 14.62 1/2, which is below OIA’s new key pivot point of $14.83 1/2. In order for July soybeans to resume its uptrend, the low of the day must be above the pivot point.The 20 day moving average for the July contract is $14.81. As stated in the excerpt from the May 11 report, soybeans have been unable to make a daily low above OIA’s key pivot point and as a consequence have been trading in a sideways pattern. As a result, July soybeans remain on a short-term sell signal and an intermediate term buy signal.We have no recommendation.

From the May 11 Weekend Wrap:

“July soybeans are at a crucial juncture and could rally one more day and still not generate a short-term buy signal unless the low for the day is above $14.82. Conceivably, soybeans could have a follow-through rally on Monday and then have a disappointing close.”

Soybean meal:

July soybean meal gained $1.80 on volume of 59,257 contracts. Total open interest increased only 286 contracts, which relative to volume is approximately 75% below average. However, the May contract lost 55 of open interest and July -1,337, which makes the total open interest increased more impressive (bullish). As this report is being compiled on May 15, July soybean meal is trading $5.50 lower, and as of this writing remains below OIA’s key pivot point of $479.80. In order for soybean meal to resume its uptrend, it must make a daily low above this pivot point. We like soybean meal and prefer it to soybeans and expect that new contract highs will be made. However, on May 15, the equity market is sharply lower along with the grain complex.The 20 day moving average for the July contract is $480.40 and the 50 day is 464.20. We have no recommendation.July soybean meal remains on a short and intermediate term buy signal.

Corn:

July corn lost 7.25 cents on volume of 195,259 contracts. Considering the move into new low territory (4.95 1/4), volume was on the low side as the July contract traded at its lowest price since April 22 (4.92 3/4). On May 14, total open interest increased by a massive 8,940 contracts, which relative to volume is approximately 75% above average, meaning that new short sellers were aggressively entering the market in large numbers and driving prices to new lows for the move.The May and July contracts lost 898 of open interest, which makes the total open interest increased more impressive (bearish). As this report is being compiled on May 15, July corn has made another new low at $4.84 1/2 and is trading 10.50 cents lower. The massive increase of open interest on yesterday’s decline is very bearish, and is consistent with our views on the market. On May 12, new crop December corn generated a short-term sell signal and old crop July will generate a short-term sell signal on May 15. 

Chicago wheat: On May 14, July Chicago wheat generated a short-term sell signal, but remains on an intermediate term buy signal.

July Chicago wheat lost 19.00 cents on volume of 109,424 contracts. Volume was the highest since May 9 when July Chicago wheat lost 12.75 cents on volume of 119,014 contracts, and total open interest increased by 4,842 contracts. On May 14, total open interest increased by 1,352 contracts, which relative to volume is approximately 45% below average, but an open interest increase on a price decline is bearish. The May contract lost 96 of open interest and July 2014 – 3996, which makes the total open interest increased more impressive (bearish).For the past 5 sessions beginning on May 8, total open interest has increased by 11,555 contracts while July Chicago wheat has declined 47.50 cents. Now that July Chicago wheat has generated a short-term sell signal, clients should wait for a rally of 1-3 days duration before considering bearish positions.As this report is being compiled on May 15, July Chicago wheat is trading 11.75 cents lower and has made a new low for the move at $6.77, which is the lowest print since 6.73 1/2 made on April 23.

Kansas City wheat: 

July Kansas City wheat lost 18.50 cents on relatively light volume of 18,465 contracts. Total open interest increased by a massive 2,316 contracts, which relative to volume is approximately 425% above average meaning that aggressive new short new short sellers were entering the market and driving prices to new lows for the move (8.03). As this report is being compiled on May 15, July KC wheat is trading sharply lower, down 23.25 cents and has made a new low for the move at 7.80 1/2, which takes out the low made on April 29 of 7.82 1/4. Kansas City wheat will not generate a short or intermediate term sell signal on May 15.

Cotton:

July cotton lost 23 points on volume of 14,743 contracts. Total open interest increased by a massive 1,715 contracts, which relative to volume is approximately 360% above average meaning that a battle occurred between longs and shorts, and shorts were able to move the market just fractionally lower. The May contract lost 120 of open interest. As this report is being compiled on May 15, July cotton is trading 45 points lower and has made a new low for the move at 90.12. On May 12, July cotton generated a short-term sell signal, and since then has fallen steadily lower without the usual 1-3 day countertrend rally. The massive increase of open interest on yesterday’s small decline is bad news for anyone long cotton and the minor decline of open interest from May 5 through May 13 combined with yesterday’s open interest increase clearly validates OIA’s premise that huge numbers of speculative longs remain in the cotton market. They will continue to fuel the downside move.Yesterday, we suggested that if clients were unwilling to wait for a countertrend rally to enter bearish positions, they should use the May 14 high of 92.13 as the exit point.

From the May 13 report:

“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 lost 2.75 cents on total volume of 16,010 contracts. Total open interest increased by only 43 contracts, and that May and July contracts lost a total of 913 of open interest. On May 12, July coffee generated a short-term sell signal, and until today had not had a countertrend rally. As this report is being compiled on May 15, July coffee is trading 11.50 cents higher and has made a daily high of 1.9775. In yesterday’s report we stated: “Unlike cotton, we recommend against initiating bearish positions at current levels. Wait for more of a rally.”

Before we recommend bearish positions, we want to watch coffee for one more day.

Sugar #11: On May 14, July sugar generated a short-term buy signal, and remains on an intermediate term buy signal.

July sugar gained 45 points on heavy volume of 132,932 contracts. Volume was the heaviest since April 23 when 143,184 contracts were traded. On May 14, total open interest increased by a massive 13,546 contracts, which relative to volume is approximately 300% above average meaning that new longs were aggressively entering the sugar market and driving prices to new highs for the move (18.28), which is the highest print since 18.27 made on March 31.

On May 13, July sugar advanced 51 points on volume of 127,402 contracts and again, total open interest increased by a massive 17,216 contracts, which relative to volume is approximately 475% above average.

As is usually the case after the generation of a buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to enter bullish positions. However, the market is massively overbought relative to its 20 day moving average of 17.16 the 50 day of 17.68. Year to date, the moving average is 17.12, and moving averages are in a bullish set up, meaning that shorter-term averages are above longer-term averages. A sign of caution: according to the most recent COT report, managed money is long sugar by ratio of 2.92:1, and has been at this level for a number of weeks. We advise against entering bullish positions at current levels.

Live cattle:

August live cattle advanced 55 points on volume of 60,293 contracts. Total open interest increased by 1,636 contracts, which relative to volume is average.As this report is being compiled on May 15, August cattle is trading 77.5 points lower and has made a new low for the move at 1.37200, which is the lowest print since 1.37000 made on May 7.We have been discussing the massive increase of open interest while prices barely moved and in yesterday’s report stated that a major is on the horizon. Stand aside

From the May 13 report:

“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: On May 14, June WTI crude oil generated a short-term buy signal, and remains on an intermediate term buy signal.

June WTI crude oil advanced 67 cents on volume of 578,514 contracts. Total open interest increased by 8,001 contracts, which relative to volume is approximately 40% below average. The June contract lost 15,241 of open interest. For the past 3 days, beginning on May 12, June WTI has advanced $2.38 while total open interest has declined 1,163 contracts.This is definitely bearish open interest action relative to the price advance. As this report is being compiled on May 15, June WTI is trading 78 cents lower and has made a daily low of 101.27. We are thoroughly unimpressed with the action in WTI, and though the June contract has generated a short-term buy signal, which reversed the short-term sell signal generated on April 30, we cannot see a lot of upside, even though prices may drift higher. At this juncture, we suggest the short call recommended on May 2 be liquidated and that clients  move to the sidelines.

Natural gas:

June natural gas advanced 9 ticks on volume of 201,581 contracts. Total open interest declined by 2,754 contracts, which relative to volume is approximately 45% below average. The June contract lost 3,104 of open interest. As this report is being compiled on May 15, June natural gas is trading 10.7 cents higher and has made a daily high of $4.509. On May 13, June natural gas generated an intermediate term sell signal, after generating a short-term sell signal on May 12. Today, is the first day of the countertrend rally, and we would prefer to see another 2 days of advances before considering bearish positions.

The Energy Information Administration announced that working gas in storage was 1,160 Bcf as of Friday, May 9, 2014, according to EIA estimates. This represents a net increase of 105 Bcf from the previous week. Stocks were 790 Bcf less than last year at this time and 959 Bcf below the 5-year average of 2,119 Bcf. In the East Region, stocks were 463 Bcf below the 5-year average following net injections of 60 Bcf. Stocks in the Producing Region were 382 Bcf below the 5-year average of 866 Bcf after a net injection of 29 Bcf. Stocks in the West Region were 114 Bcf below the 5-year average after a net addition of 16 Bcf. At 1,160 Bcf, total working gas is below the 5-year historical range.

Euro: On May 14, the June euro generated an intermediate term sell signal after generating a short-term sell signal on May 12.

The June euro advanced 8 pips on volume of 148,086 contracts. Total open interest declined only 28 contracts. As this report is being compiled on May 15, the June euro is trading 10 pips higher after making a new low for the move at 1.3645 on heavy volume. 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 enter bearish positions.

British pound:

The British pound lost 52 pips on heavy volume of 116,254 contracts.Volume was the highest since March 19, 2014 when 118,686 contracts were traded and the June pound closed at 1.6521.On May 14, increased by 1,290 contracts, which relative to volume is approximately 50% below average, however the fact that open interest increased at all on the price decline is clearly bearish. According to the latest COT report managed money is long by ratio 4.85:1 which means there are plenty of funds to fuel the downside move. We think it is inevitable the pound generates a short-term sell signal, and clients should position themselves for this event.

Yen:

The June yen advanced 50 pips on volume of 102,554 contracts. Total open interest declined by 1,371 contracts, which relative to volume is approximately 45% less than average. This is not surprising since managed money is short the yen by a ratio of 2.89:1. As this report is being compiled on May 15, the June yen is trading 29 pips higher and has made a new high for the move at .9875. On May 6, the June yen generated a short and intermediate term buy signal, and since then has continued to rally.

From the May 11 Weekend Wrap:

“We continue to be amazed by the fact that leveraged funds are massively short the yen despite its very impressive performance thus far in the 2nd quarter and year to date. Additionally, the moving averages are in a bullish set up: 5 day MA .9830, 20 day MA .9796 50 day MA .9777, 100 day MA .9735. The 200 day moving average stands at .9928 and the year to date moving average is .9751. The June yen closed at .9826 on May 9.”

“Though the market has been in an uptrend, open interest action of late leaves much to be desired area. For example, from April 30 through May 8, the June yen advanced 104 pips, however total open interest declined by 5329 contracts.The June contract is within 30 days of expiration, and open interest will be declining in this contract, which will impact overall open interest. For the yen to continue its advance, it must overcome resistance at the of April 11 high of .9873, March 3 .9889,  and the February 3 high of .9930, which is at the 200 day moving average.”

Gold:

June gold advanced $11.10 on volume of 139,835 contracts. Total open interest increased by 2,800 contracts, which relative to volume is approximately 20% below average, but an open interest increase on the advance is positive. As this report is being compiled on May 15, June gold is trading $5.50 lower on the day. The rally in that 10 year treasury note is causing much trepidation about the state of the economy and there are numerous stats that show retail is slowing down.

Platinum:

July platinum advanced $29.70 on very heavy volume of 18,443 contracts. volume was the heaviest since March 28 when 20,020 contracts were traded and July platinum closed at 1407.20.On May 14, open interest increased massively again, this time by 2,294 contracts, which relative to volume is approximately 425% above average meaning that new longs continued to pile into the platinum at a very aggressive pace. July platinum reached its highest level since $1488.60 made on March 14, 2014.With the massive open interest increase over the past 2 days (5,435 contracts), the market is massively overbought and we discourage clients from entering bullish positions at this juncture.

10 year Treasury Notes: On May 14, the June 10 year treasury note generated an intermediate term buy signal and has been on a short-term buy signal.

S&P 500 E mini:

The June S&P 500 E mini lost 9.00 points on light volume of 1,193,947 contracts. Total open interest declined by 7,313 contracts, which relative to volume is approximately 65% below average. As this report is being compiled on May 15, the June E mini is trading 19.50 points lower and has made a daily low of 1859.00.Maintain long put protection if holding long equity positions.