Soybeans:

July soybeans lost 5.25 cents on very light volume of 101,386 contracts. Total open interest declined by 4,228 contracts, which relative to volume is approximately 55% above average meaning that liquidation was fairly substantial on the modest decline. The July contract accounted for loss of 5,857 of open interest. As this report is being compiled on May 19, July soybeans are rallying 19.75 cents after making a new low for the move at $14.56 1/4. Remember, in order for soybeans to resume its advance to new highs, the market must make a low above OIA’s key pivot point of 14.83 1/2. Soybeans remain on a short term sell signal, but an intermediate term buy signal. Stand aside.

Soybean meal:

July soybean meal lost $1.20 on light volume of 40,215 contracts. Total open interest declined by 653 contracts, which relative to volume is approximately 35% less than average. The July contract accounted for loss of 2,299 of open interest. As this report is being compiled on May 19, July soybean meal is trading sharply higher, $10.60 and has made a new high for the move at $492.50. In order for soybeans to resume its rally to new contract highs, the low for the day must be above OIA’s key pivot point of $480.20, and the low on May 19 has been $477.40. Stand aside.

Corn:

July corn lost 0.75 cents on volume of 175,803 contracts. Volume was the lowest since May 12 when 175,552 contracts were traded and July corn lost 6.75 cents while total open interest declined by 6,533 contracts. On May 16, total open interest declined by a massive 12,848 contracts, which relative to volume is approximately 185% above average meaning that liquidation was very heavy on the modest decline. However, July corn made a new low for the move at $4.80 1/4 and as this report is being compiled on May 19, the July contract has made another new low at $4.77 1/4. On May 15, July corn generated a short-term sell signal and for it to generate an intermediate term sell signal the high of the day must be below OIA’s key pivot point of 4.75 3/4. Wait for a rally before initiating bearish positions.

Chicago wheat:

July Chicago wheat lost 4.00 cents on volume of 74,070 contracts. Total open interest increased by 1,889 contracts, which relative to volume is average. The July contract lost 792 of open interest, which makes the total open interest increase more impressive (bearish). On May 16, Chicago wheat made a new low for the move at $6.70 1/2, and as this report is being compiled on May 19, July Chicago wheat has made another new low at 6.62 3/4. On May 14, July Chicago wheat generated a short-term sell signal, but as of yet has not generated an intermediate term sell signal. Stand aside.

Kansas City wheat:

July Kansas City wheat lost 11.00 cents on volume of 21,507 contracts. Total open interest declined by a massive 1,247 contracts, which relative to volume is approximately 130% above average meaning that liquidation was extremely heavy on the decline. The July contract lost 2,113 of open interest. As this report is being compiled on Made 19, July KC wheat is trading 0.50 cents higher on the day. July Kansas City wheat will generate a short-term sell signal on May 19. Stand aside.

Cotton:

July cotton lost 54 points on volume of 12,234 contracts. Total open interest declined by a massive 2,046 contracts, which relative to volume is approximately 360% above average meaning that liquidation was off the charts heavy. From May 15 through May 16, liquidation has been extremely heavy on the modest declines. For example July cotton has declined 88 points during the two-day period, but open interest has declined by a massive 3466 contracts. As this report is being compiled on May 19, July cotton is making new lows for the move and is trading 61 points lower. In the May 13 report, we suggested for clients who did not want to wait for a rally to use the May 14 high of 92.13 as an exit point.While the trade has worked out well, we fully expect the market to have a countertrend rally. The only rally seen thus far has been on May 14.On May 12th, July cotton generated a short-term sell signal, but on May 19 remains on an intermediate term buy signal. If bearish positions were not initiated on May 14, stand aside.

Coffee:

July coffee lost 11.75 cents on volume of 21,032 contracts. Total open interest increased by 29 contracts, which is minuscule and dramatically below average. The July contract lost 460 of open interest, which makes the small increase of open interest more impressive (bearish).That open interest did not decline on Friday’s sharp loss, reinforces our view that speculative longs continue to hang on, and this group will be forced to liquidate as coffee prices continue to slide. On May 12, July coffee generated a short-term sell signal, but remains on an intermediate term buy signal. We have no recommendation at this juncture.

Live cattle:

August cattle advanced 55 points on light volume of 35,498 contracts. Total open interest increased by 719 contracts, which relative to volume is approximately 20% below average. The June contract accounted for loss of 3,771 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on May 19, August cattle is trading 1.975 cents higher and has made a new contract high of 1.40700, which takes out the previous high print of the August contract of 1.39550 made on May 2. However, this is a long way from the recent high of 1.48500 made on April 30 on the cattle continuation chart, which is a distance from the all-time high of 1.53000 made on February 28, 2014.We want to take a look at the open interest action for today’s trading and decide upon the best way to approach the market. We continue to be concerned the June contract is selling at a substantial discount to August. As the report of May 13 noted, the massive open interest increases on a high-volume was telling us that a major move was at hand. We are seeing the result of this on May 19.

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:

July WTI crude oil advanced 45 cents on volume of 442,749 contracts. Total open interest increased by 5,994 contracts, which relative to volume is approximately 45% less than average.The June contract lost 24,762 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on May 19, July WTI is trading 66 cents higher and has made a daily high of 102.49. On May 14, June WTI generated a short-term buy signal, which reversed the short-term sell signal generated on April 30. On May 19, July WTI is trading 70 cents higher while July Brent crude oil is trading 10 cents lower on the day.

It appears likely that July gasoline will generate a short-term buy signal on May 19, which reverses the short-term sell signal generated on May 6. July gasoline remains on an intermediate term sell signal. Strength in the gasoline market should support WTI prices. However, heating oil will not generate a short-term buy signal on May 19, nor an intermediate term buy signal.

From the May 14 report:

“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 lost 5.6 cents on light volume of 128,413 contracts. Total open interest increased by 333 contracts, which is minuscule and dramatically below average. However, the June contract lost 7,363 of open interest, which makes the total open interest increased more impressive (bearish). This is the first time in recent memory that open interest has increased on a price decline. Typically, open interest declines have been the order of the day. The open interest increase indicates that some market participants have decided to get bearish, but unfortunately for them, got to the party a bit too early as June natural gas is trading 8.1 cents higher and has made a high of 4.523.The June contract continues to gain on September, and we wrote about this over the weekend and suggest that clients read the report on natural gas. The widening spread is bullish for prices, and as we mentioned in the weekend report, bull spreading is a terrific way to play the natural gas market when the uptrend has not yet been firmly established. In short, the spread can make money whether the market advances or declines.

British pound:

The June British pound advanced 26 pips on volume of 62,187 contracts. Total open interest increased by 1145 contracts, which relative to volume is approximately 25% below average.As this report is being compiled on May 19, the June pound is trading unchanged on the day, and it appears that it is ready to resume its uptrend. However, the market may stall at OIA’s key pivot point of 1.6861.If the June pound is able to make a low above the pivot point, it is possible that new contract highs may be seen.

Platinum:

July platinum lost $3.80 on volume of 8847 contracts. Total open interest declined by a hefty 545 contracts, which relative to volume is approximately 140% above average. The market made a low of $1461.20, which was the lowest print since May 14 (1452.20). As this report is being compiled on May 19, July platinum is trading $2.50 higher after making a daily high of 1486.00, which is shy of the May 14 print of 1487.60. The market is massively overbought and despite its impressive performance, we discourage bullish positions at current levels. The long to short ratio of managed money is a stratospheric 12.48:1, which is almost double the ratio of the COT period 2 weeks prior. Managed money longs can push prices significantly lower even if platinum is just correcting

S&P 500 E mini:

The June S&P 500 E mini gained 7.50 points on volume of 1,527,425. Total open interest declined on the advance by 17,382 contracts, which relative to volume is approximately 45% less than average, but this is the first open interest decline on a price advance since April 30 when the E mini advanced 6.25 points on volume of 1,505,862 contracts and total open interest declined by 6218 contracts. We continue to advise long put protection for those clients who hold long equity positions.