On May 9, the USDA will release its world agriculture supply and demand report (WASDE).

Soybeans:

July soybeans gained 9.75 cents on light volume of 132,146 contracts. Volume was the lowest since April 30 when 129,206 contracts were traded and July soybeans lost 4.50 cents while total open interest declined by 5,219 contracts. On May 2, total open interest declined by a massive 7,491 contracts, which relative to volume is approximately 120% above average meaning that liquidation was very heavy on the price advance. This is bearish open interest action relative to the price advance. The May contract lost 1,937 of open interest and July -5733. As this report is being compiled on May 5, July soybeans are trading 3.50 lower and have made a daily low of 14.61 which is 2.75 cents above the low made on May 2 of 14.57 1/4. For July soybeans to generate a short-term sell signal, the high for the day must be below 14.58 1/2. We think the path of least resistance is down, at least at this juncture, and advise against being long at current prices. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

July soybean meal gained $3.70 on volume of 52,435 contracts. Total open interest declined by 930 contracts, which relative to volume is approximately 25% below average. The May contract lost 888 of open interest and July -658. As this report is being compiled on May 5, July soybean meal is trading 30 cents lower on the day. Soybean meal remains on a short and intermediate term buy signal. Stand aside.

Soybean oil:

July soybean oil advanced 35 points on volume of 60,951 contracts. Total open interest increased by 3,139 contracts, which relative to volume is approximately 100% above average meaning that new longs were aggressively entering the market and driving prices higher. The May contract lost 2,873 of open interest, which makes the total open interest increase more impressive (potentially bullish), however July soybean oil is on a short-term sell signal, which was generated on May 1. The rally on May 2 was the first day of the countertrend rally after the generation of a sell signal. As this report is being compiled on May 5, July soybean oil is trading 24 points lower after having made a daily high of 41.88 in the evening session on Sunday. Also, July soybean oil has made a new low for the move at 41.07, which takes out the May 1 low of 41.10. The fact that open interest increased on the advance indicates that some market participants think soybean oil is headed higher. We most definitely disagree. It now appears that the 2nd day of the countertrend rally occurred in the overnight session. We think soybean oil will struggle to move higher.

Corn:

July corn lost 7.50 cents on volume of 222,731 contracts. Total open interest declined by 5,073 contracts, which relative to volume is approximately 10% below average. The May contract lost 7,560 of open interest and July -3927.As this report is being compiled on May 5, July corn is trading 8.25 cents higher, which is most likely the result of the sharply higher move in wheat. As indicated in the May 4 Weekend Wrap, for July corn to generate a short-term sell signal, the daily high must  be below $5.01 1/2 and for new crop December the daily high must be below 4.97. Stand aside.

Chicago wheat:

July Chicago wheat advanced 8.75 cents on volume of 71,210 contracts. Surprisingly, volume was the lowest since January 24, 2014 when 69,025 contracts were traded and July Chicago wheat closed at $5.77. On May 2, total open interest declined by 1,227 contracts, which relative to volume is approximately 25% less than average. The May contract lost 722 of open interest. The price, volume and open interest action on May 2, left a lot to be desired, but this has not stopped the ascent of Chicago wheat on May 5 when the July contract currently is trading 18.00 cents higher and has made a major breakout and new high for the move at $7.40 1/2.. Today’s high, takes out the March 20 high of 7.25 1/4. The market is massively overbought and the Ukrainian situation is obviously getting much worse although wheat export business is still being conducted in the black sea region. Chicago wheat remains massively overbought, and we advise against new bullish positions at this juncture. We think it is much safer to wait for a setback rather than get caught long at what could be a an interim top.

Kansas City wheat:

July Kansas City wheat advanced 17.75 cents on heavier than normal volume of 29,896 contracts. Volume was the heaviest since April 15 when 34,087 contracts were traded and July Kansas City wheat advanced 23.50 cents while total open interest increased by 756 contracts. On May 2, total open interest increased again, this time by 1,573 contracts, which relative to volume is approximately 110% above average meaning that new longs were heavily entering the market and driving prices to new highs for the move ($8.28). The May contract lost 317 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on May 5, July KC wheat is trading 14.50 cents higher on the day and has made a new high for the move at $8.43, which is the highest print on the continuation chart since January 16, 2013 when KC wheat made a high of 8.47.

The market is massively overbought due to the disastrous weather conditions in hard red wheat growing states and the worsening situation in Ukraine. Although KC wheat can continue to rally, we advise against entering new bullish positions at current levels.If KC wheat corrects to its 20 day moving average, the July contract could pullback to $7.69 1/4. The overbought condition of the market simply makes it too risky to consider bullish positions at this juncture.

Sugar #11:

July sugar lost 35 points on volume of 76,573 contracts. Total open interest increased by a massive 7,065 contracts, which relative to volume is approximately 250% above average meaning that aggressive new short sellers were heavily entering the market and driving prices lower. As this report is being compiled on May 5, July sugar is trading 2 points lower after making a new low for the move at 17.27, which is the lowest print since 17.18 made on April 18. July sugar remains on a short-term sell signal, and for the market to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point of 17.19.

Live cattle:

August live cattle lost 1.225 cents on volume of 61,554 contracts. Total open interest declined by 1,881 contracts, which relative to volume is approximately 20% above average. The June contract lost 5,850 of open interest. On May 2, August cattle made a new contract high at 1.39575, then reversed to close sharply lower on the day. As this report is being compiled on May 5, August cattle is trading 20 points higher on low volume. August cattle remain on a short and intermediate term buy signal. We want to watch the market some more before recommending bullish positions.

WTI crude oil:

June WTI crude oil advanced 34 cents on light volume of 426,339 contracts. Volume was the lowest since April 25 when 420,970 contracts were traded and June WTI lost $1.34 while total open interest declined by 4,104 contracts. On May 2, total open interest increased by 3,071 contracts, which relative to volume is approximately 60% below average. The June contract accounted for loss of 6,837 of open interest, which makes the total open interest increase potentially bullish. However, June WTI generated a short-term sell signal on April 30. May 2 was the first rally day after the generation of the sell signal, and we were looking for a 2nd day rally, which would be the ideal time to initiate bearish positions.

Unfortunately, the rally occurred in the very early morning from 2:40 5 AM-3:00 a.m. CDT, and WTI has had a downward trajectory ever since. As this report is being compiled on May 5, June WTI is trading 60 cents lower after making its high of $100.44 in the early morning hours. Because we did not get a two-day rally, we think the best course of action is to write out of the money calls at strike prices and option months of your choice. According to the latest COT report, managed money is long by ratio of 10.38:1, which means there is plenty of fuel to fund the continued downside move.

It is a certainty that heating oil will generate a short-term sell signal as we discussed in the May 4 Weekend Wrap, and Brent crude will likely generate a short-term sell signal in the next day or two.

Natural gas:

June natural gas lost 4.5 cents on light volume of 155,438 contracts. Total open interest declined by 5,670 contracts, which relative to volume is approximately 45% above average meaning that liquidation was fairly substantial on a very modest decline. The June contract accounted for loss of 5,788 of open interest. As this report is being compiled on May 5, June natural gas is trading 2.1 cents higher and has made a daily high of 4.775, which is the highest print since 4.823 made on May 1. Today’s daily low of 4.651, which is the lowest print since 4.648 made on April 28. We like the way natural gas is trading and recommend that the partial bullish position coupled with the short call continue to be held. However, if natural gas penetrates the April 25 low of 4.644, we would liquidate the remainder of the bullish position, and continue to hold the short call position.

Australian dollar:

The Australian dollar lost 4 pips on heavy volume of 92,977 contracts.Volume was the highest since March 26 when 90,378 contracts were traded and the June Australian dollar closed at 91.76. As this report is being compiled on May 5, the June Australian dollar is trading 6 pips higher on low volume.Until the June Aussie dollar makes a daily low above OIA’s key pivot point of 92.64, it will trade sideways to lower.

Copper:

July copper advanced 4.85 cents on light volume of 41,942 contracts. However volume exceeded the 34,431 contracts traded on May 1 when July copper lost 60 points and total open interest declined 956 contracts. As this report is being compiled on May 5, July copper is trading 30 points lower and has made a low for the day at $3.0500, which is above OIA’s key pivot point of $3.0436. This means it is likely copper will resume its uptrend if it can make a daily low above OIA’s next key pivot point of $3.0870. The Chinese PMI numbers came out and were disappointing, but copper has held up well despite this.We recommend against shorting copper even though the Chinese economy continues to worsen. As we have pointed out before, copper is volatile and the options market is illiquid.

Gold: For June gold to generate a short-term buy signal, the low the day must be above $1305.90 and then 1315.00.

June gold advanced $19 50 on robust volume of 179,796 contracts.Volume was the highest since April 24 when June gold advanced $6.00 on volume of 198,137 contracts and total open interest increased by 2,862 contracts. On May 2, open interest increased by 4,893 contracts, which relative to volume is average.As this report is being compiled on May 5, June gold is trading $5.30 higher and has made a new high for the move at 1315.80, which is the highest print since 1328.40 made on April 15. June gold is at a critical juncture, and it is quite possible the rally may run out of steam. However, the volume and open interest accompanying the price advance on Friday bodes well for a possible breakout.

Platinum: It appears that July platinum will generate a short and intermediate term buy signal on May 5.

Silver:

July silver gained 50.3 cents on volume of 55,796 contracts. Total open interest declined by a hefty 2,415 contracts, which relative to volume is approximately 60% above average meaning that liquidation was substantial on a very large advance. This is bearish open interest action relative to the price advance. Silver has been the under performer for quite some time, and this may continue to be a drag on platinum and gold. In order to get a robust upward movement in gold and platinum, silver must join the party by performing much better. For July silver to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of $20.14.

S&P 500 E mini:

The June S&P 500 E mini lost 3.25 points on volume of 1,721,094 contracts. Total open interest increased by 891 contracts. As this report is being compiled on May 5, the E mini is trading 2.25 points higher. Continue to maintain long put protection if holding long equity positions.