Soybeans:

July soybeans lost 15.50 cents on volume of 160,501 contracts. Volume fell from the 171,747 contracts traded on May 19 when July soybeans advanced 20.25 cents and total open interest increased by 8,687 contracts. On May 20, total open interest increased by 3,403 contracts, which relative to volume is approximately 15% below average. The July contract gained 1,244 of open interest and the July 2014 through July 2015 contracts all gained open interest. While an open interest increase on a price decline is usually bearish, we think that market participants got a little ahead of themselves and made the mistake of selling into the low-end of the trading range. July soybeans made a high of 15.01 and proceeded to sell off to the rest of the session and close lower on the day. This may have been viewed as a key reversal day by some market participants, but as this report is being compiled on May 21, July soybeans are trading 23.00 cents higher, and have taken out yesterday’s high. July soybeans have yet to make a daily low above OIA’s key pivot point of $14.84 1/8, but this is imminent and until this occurs, July soybeans will remain on a short-term sell signal.We think it is likely July soybeans will make new contract highs in the coming 30-45 days.We have no recommendation.

Soybean meal:

July soybean meal lost $3.80 on volume of 59,330 contracts. Total open interest declined by 1,305 contracts, which relative to volume is approximately 10% below average. The July contract lost 2,156 of open interest. On May 20, July soybean meal made a new contract high at $499.10.Yesterday, July soybean meal made a daily low above OIA’s key pivot point of 480.80. This means a rally to new contract highs is in the offing and that setbacks should be bought. As this report is being compiled on May 21, July soybean meal is trading $7.80 higher, but has not taken out yesterday’s high.The all-time high for soybean meal occurred on August 30, 2012 when the high print was $550.50 and the secondary high occurred on July 12, 2013 when soybean meal made a high of 544.00. It appears reasonable that soybean meal could test those highs.

A more conservative way to trade soybean meal would be to buy the July contract and sell the August contract. This spread made a low on May 12, of $23.00 premium to July, which was the lowest price since late March 2014. It made a high of $31.50 on April 9 and a secondary high of 31.30 on April 21.The spread has 5 weeks to work before the July contract enters 1st notice day. If the spread dips below $23.00, we would exit the position.

Corn:

July corn lost 3.75 cents on heavier than normal volume of 212,577 contracts. Volume was the highest since May 15, when July corn lost 11.25 cents on volume of 251,947 contracts and total open interest declined by 8,811 contracts. On May 20, total open interest increased by 4,706 contracts, which relative to volume is approximately 10% below average. However, the July contract lost 3643 of open interest, which makes the total open interest increased much more impressive (bearish).This is the second increase of open interest on a price decline during the past week and the previous one occurred on May 14 when July corn lost 7.25 cents and total open interest increased by 8940 contracts.Since generating a short-term sell signal on May 15, July corn has not have a countertrend rally, which means we have been unable to recommend bearish positions. It is highly likely that July corn will generate an intermediate term sell signal on May 21.

Chicago wheat:

July Chicago wheat lost 4.00 cents on heavier than normal volume of 110,828 contracts. Total open interest increased by 355 contracts, which is minuscule and dramatically below average. However, the July contract lost 4,713 of open interest, which makes the total open interest increase more impressive (bearish). As as this report is being compiled on May 21, July Chicago wheat is trading 4.25 cents lower, but has not taken out the May 19 low of 6.62 3/4.On May 14, July Chicago wheat generated a short-term sell signal, but remarkably has not generated an intermediate term sell signal.Unfortunately, July Chicago wheat has not had a countertrend rally, which would have enabled clients to initiate bearish positions.

Kansas City wheat:

July Kansas City wheat lost 0.50 cents on volume of 16,204 contracts. Total open interest increased by 428 contracts, which relative to volume is average. The July contract lost 43 of open interest. As this report is being compiled on May 21, July KC wheat is trading 4.25 cents lower and has made a daily low of 7.59 1/2, which is slightly above the low made on May 19 of 7.59. On May 19, July KC wheat generated a short-term sell signal, but remains on an intermediate term buy signal. Despite this, we are reluctant to recommend the initiation of bearish positions if KC wheat has a countertrend rally. Supplies are going to be extremely tight and we would much prefer that clients initiate bearish positions in Chicago wheat once the countertrend rally has occurred.

Cotton:

July cotton lost 15 points on volume of 17,254 contracts. Total open interest declined by only 71 contracts, which is minuscule and dramatically below average. The July contract lost 391 of open interest. Yesterday, July cotton made a low of 88.71, which is the lowest print since March 12, 2014 (88.78). From May 9 through May 20, cotton has closed lower every day, and has not had its normal countertrend rally after generating a sell signal on May 12.If clients did not initiate bearish positions per the May 13 report, we advise a stand aside posture. The market is overdue for a rally. For July cotton to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point of 89.58.

Coffee:

July coffee advanced 2.20 cents on heavy volume of 37,066 contracts. Volume was the highest since May 9, when 42,466 contracts were traded and July coffee lost 11.60 cents while total open interest increased by 1487 contracts.On May 20, total open interest increased by a massive 2257 contracts, which relative to volume is approximately 140% above average meaning that large numbers of new longs were entering the market and pushing prices higher. The July 2014 through July 2015 contracts all gained open interest. The massive increase of open interest on a rather minor advance is indicative of market participants who think coffee prices are going higher immediately. OIA disagrees with this and July coffee has been on a short-term sell signal since May 12th. As this report is being compiled on May 21, July coffee is trading 3.30 cents lower but has not taken out yesterday’s low of 1.8005. We recommend a stand aside posture.

Sugar #11:

July sugar lost 19 points on volume of 99,267 contracts. Total open interest increased by 1200 contracts, which relative to volume is approximately 45% less than average. However, the July contract lost 5257 of open interest, which makes the total open interest increase more impressive (bearish). Sugar is on the precipice of generating a short-term sell signal, which would reverse the short-term buy signal generated on May 14.

From May 12th through May 14, July sugar advanced 105 points and total open interest increased by 30,989 contracts. However, after topping out on May 14, the market has fallen 4 consecutive days (through May 21). The real bad news is that open interest from May 15 through May 20 has increased by 2,491 contracts while July sugar lost 67 points. In short, the new longs who were entering the market aggressively during the 3 day rally during May 12th through May 14, are now refusing to liquidate as prices move lower.

From the May 14 report:

“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 lost 45 points on volume of 45,757 contracts. Total open interest declined by 1,864 contracts, which relative to volume is approximately 55% above average meaning that liquidation was fairly significant on yesterday’s decline. The June contract lost 4,145 of open interest. As this report is being compiled on May 21, August cattle is trading 25 points lower on the day.We have no recommendation.

WTI crude oil:

July WTI crude oil gained 22 cents on volume of 534,889 contracts. Total open interest declined by 6,159 contracts, which relative to volume is approximately 50% below average. The June contract lost 34,607 of open interest. As this report is being compiled on May 21, July WTI crude oil is trading $1.63 higher and has made a new high for the move at 104.29. It appears the draw in inventories of 7.2  million barrels is the catalyst for sending prices significantly higher on the day. However, as the EIA report points out: “US crude oil inventories are near the upper limit of the average range for this time of year.”On May 14, June WTI crude oil generated a short-term buy signal and has been on an intermediate term buy signal. Our reluctance to recommend bullish positions has been based upon skepticism regarding the actual supply of crude oil inventory and that prices are advancing solely upon the logistics of moving WTI crude in and out of Cushing Oklahoma to refineries on the Gulf coast. Also, adding to our skepticism is that product prices are relatively weak (especially gasoline) and that Brent crude’s performance has been underwhelming.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.2 million barrels from the previous week. At 391.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.0 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 3.4 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are in the middle of the average range. Total commercial petroleum inventories increased by 2.1 million barrels last week.

Natural gas:

July natural gas advanced 8 cents on relatively heavy volume of 282,457 contracts.Volume was the highest since May 15 when 283,641 contracts were traded and June natural gas advanced 10.2 cents while total open interest declined by 11,597 contracts. On May 20, total open interest declined by 11,014 contracts, which relative to volume is approximately 50% above average meaning that liquidation was fairly heavy on the advance. The June contract accounted for loss of 16,649 of open interest. Natural gas remains on a short and intermediate term sell signal. We have no recommendation except clients should contemplate initiating bull spreads in natural gas once it is apparent that prices have bottomed.

Australian dollar: On May 20, the June Australian dollar generated a short-term sell signal, but remains on an intermediate term buy signal.

The June Australian dollar lost 72 pips on volume of 86,706 contracts. Total open interest declined by 1,118 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on May 21, the June Australian dollar is trading 40 pips lower and has made a new low for the move at 91.92, which is the lowest print since 91.75 made on May 2. After the generation of a sell signal, the market has a tendency to have a countertrend rally lasting from 1-3 days, and this is the opportunity to initiate bearish positions.

S&P 500 E mini:

The S&P 500 E mini lost 14.25 points on heavier than normal volume of 1,572,214 contracts. Total open interest increased by 17,661 contracts, which relative to volume is approximately 55% below average. As this report is being compiled after the release of the Federal Reserve minutes, the E mini is trading 14.50 points higher and has made a daily high of 1885.00, which takes out yesterday’s high of 1884.50. Maintain long put protection if you are holding long equity positions.