Soybeans: July soybeans will generate a short-term buy signal on May 22, and has been on an intermediate term buy signal.

July soybeans gained 35.50 cents on light total volume of 154,518 contracts.Volume was below that of May 20 when 160,501 contracts were traded and July soybeans lost 15.50 cents while total open interest increased by 3,403 contracts.Additionally, volume was the lightest since May 16 when 101,386 contracts were traded and July soybeans lost 5.25 cents.On May 21, total open interest increased by 4,905 contracts, which relative to volume is approximately 30% above average. The July contract lost 735 of open interest, which makes the total open interest increased more impressive (bullish). However, considering the magnitude of the move, volume was disappointing as was the open interest increase.  In our view, this conveys a certain amount of skepticism by market participants about soybeans continuing to move higher.

As this report is being compiled on May 22, July soybeans are trading 26.00 cents higher and have made a daily high of $15.36 3/4, which takes out the previous high of the July contract of 15.21 made on April 17. Additionally the July contract has taken out the April 30 high of 15.32 made by the May contract. As we have pointed out in previous reports, soybeans had to make a low above OIA’s key pivot point in order to generate a short-term buy signal, which would reverse the short-term sell signal generated on May 7. As is usually the case after the generation of a short-term buy signal, the market has a tendency to pullback from 1-3 days and this is the opportunity to initiate bullish positions. The next target on the upside is 15.72, the high made on October 24, 2012.

The USDA reported that sales of soybeans totaled 164.44 thousand metric tons bringing total commitments to date to 1.648.7 billion bushels versus USDA projections for the season of 1.600 billion bushels. Sales for the recent reporting week were nothing short of terrific and were the highest since mid March. There were no cancellations. This explains the very bullish action of May 21 and 22.

Soybean meal:

July soybean meal advanced $11.40 on light volume of 52,865 contracts. Volume was below that of May 20 when 59,330 contracts were traded and July soybean meal lost $3.80 while total open interest declined by 1,305 contracts. Additionally, volume was significantly below the 66,852 contracts traded on May 19 when July soybean meal advanced $10.30 and total open interest increased by 3,163 contracts. On May 21, total open interest increased by 2,603 contracts, which relative to volume is approximately 100% above average meaning that new longs were very aggressive about entering new positions.The July contract gained 1,409 of open interest. The increase of open interest indicates those who were participating had very strong opinions about the direction of the market. However, like soybeans, volume was muted, which means potential participants were leery about participating in the advance. In the report of May 20, we recommended bull spreading the July-August 2014 contracts as a more conservative approach in the absence of a pullback. In order to recommend out right bullish positions, we want to see the market correct its overbought condition, especially after making a low above OIA’s key pivot point in yesterday’s trading.

The USDA reported sales of 186.32 thousand metric tons bringing total commitments to date of 9400.5 thousand metric tons versus USDA projections for the entire season of 10,070 thousand metric tons. Like soybeans, sales were terrific and were the highest since the week of April 17.

Soybean oil:

The USDA reported weekly sales of 41.34 thousand metric tons bringing total commitments to date of 634.8 thousand metric tons versus USDA projections for the season of 748.4 thousand metric tons. Sales this week where the highest since early February.

Corn: On May 21, July corn generated an intermediate term sell signal after generating a short-term sell signal on May 15.

July corn advanced 1.00 cent on volume of 184,261 contracts. Volume was the lightest since May 16 when 175,803 contracts were traded and July corn lost 0.75 cents while total open interest declined 12,848 contracts. On May 21, total open interest declined only 420 contracts, which is minuscule and dramatically below average. The July contract accounted for loss of 4,655 of open interest. As this report is being compiled on May 22, July corn is trading 0.75 cents higher but has not broken below yesterday’s low of 4.72 1/2. July corn generated a short-term sell signal on May 15, and is now on an intermediate term sell signal as well. Since May 15, July corn has not had a countertrend rally, which would enable clients to initiate bearish positions. Although it appears corn prices are headed lower, we would not get overly bearish at current prices.

The USDA reported sales of 507.9 thousand metric tons bringing total commitments to date of 1.772.4 billion bushels versus USDA projections for the season of 1.900 billion bushels.

Chicago wheat:

July Chicago wheat lost 6.25 cents on heavy volume of 142,174 contracts.Volume was the highest since April 16 when 156,564 contracts were traded and July Chicago wheat closed at $6.95 1/4. On May 21, total open interest increased by 5,757 contracts, which relative to volume is approximately 55% above average. The July contract lost 3,138 of open interest, which makes the total open interest increased much more impressive (bearish). As this report is being compiled on May 22, July Chicago wheat is trading 5.50 cents lower and has made a new low for the move at $6.54, which is the lowest print since March 11 (6.42). Remarkably, July Chicago wheat has declined every day since May 7 and has had only one day (May 19) when the market closed higher. As a result, there has not been the opportunity to initiate bearish positions after July Chicago wheat generated a short-term sell signal on May 14.Basically, the market has collapsed and though July Chicago wheat has not generated an intermediate term sell signal, this appears to be inevitable.

The USDA reported sales in all wheat categories of 142.2 thousand metric tons bringing total commitments to 1.168 billion bushels versus USDA projections for the season, which ends May 31 of 1.185 billion bushels.

Kansas City wheat:

July Kansas City wheat lost 6.75 cents on volume of 16,669 contracts. Total open interest declined by 198 contracts, which relative to volume is approximately 45% less than average. The July contract accounted for loss of 801 of open interest. As this report is being compiled, July KC wheat is trading sharply lower, down 9.75 cents and has made a new low for the move at 7.47 3/4, which is the lowest print since 7.45 1/2 made on April 24. July Kansas City wheat generated a short-term sell signal on May 19, and has not yet generated an intermediate term sell signal. Stand aside.

Cotton:

July cotton gained 29 points on volume of 17,209 contracts. Total open interest increased by 1,374 contracts, which relative to volume is approximately 230% above average meaning a battle occurred between longs and shorts and neither side was able to move the market much by the close. July cotton made a high of 90.63 and promptly sold off, and as this report is being compiled on May 22, July cotton made a high 3 ticks (90.66) above yesterday’s high (90.63) and is selling down sharply and making new lows as this report is being compiled. On May 12, July cotton generated a short-term sell signal and has not yet generated an intermediate term sell signal, but this looks inevitable. For those who initiated bearish positions based upon OIA’s comments in the report of May 13, we would use today’s high as an exit point for bearish positions.

Coffee:

July coffee lost 4.30 cents on volume of 22,794 contracts. Total open interest declined by 550 contracts, which relative to volume is average. The July contract lost 2,386 of open interest. As this report is being compiled on May 22, July coffee is trading 1.50 cents lower after making a new low for the move at 1.7670. 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. The market has not had a countertrend rally that would warrant the initiation of bearish positions.

Cocoa: On May 21, July Cocoa generated a short and intermediate term buy signal. This reverses the short-term sell signal generated on May 1 and the intermediate term sell signal generated on May 8.

July cocoa gained $13.00 on volume of 22,265 contracts. Total open interest increased by a massive 2,623 contracts, which relative to volume is approximately 360% above average meaning that massive numbers of new longs were entering the market and driving prices to new highs ($2996). As this report is being compiled on May 22, July cocoa has made a new closing high of 3001, which is the highest close since April 23 (3008).From May 12th through May 22, the market has closed higher each day with the exception of May 14.

Live cattle:

August live cattle lost 50 points on volume of 34,318 contracts. Total open interest increased by 284 contracts, which relative to volume is approximately 65% less than average. The June contract lost 4,500 of open interest which makes the total open interest increase more impressive (bearish). As this report is being compiled on May 22, August cattle is trading 80 points lower and has made a daily low of 1.38275. Stand aside.

WTI crude oil:

July WTI crude oil advanced sharply by $1.74 on volume of 612,845 contracts. Volume was the highest since May 15 when 723,803 contracts were traded and WTI lost 87 cents while total open interest declined by 18,913 contracts. On May 21, total open interest increased by a substantial 20,859 contracts, which relative to volume is approximately 35% above average meaning that new longs were aggressively entering positions in heavy numbers. The open interest increase was broad-based and July 2014 through March 2016 contracts all gained open interest.. As this report is being compiled on May 22, July WTI is trading 50 cents lower on the day and surprisingly has not taken out yesterday’s high of 104.29. We have no recommendation.

Natural gas:

June natural gas lost 7.9 cents on total volume 237,351 contracts. Total open interest declined by 2,762 contracts, which relative to volume is approximately 45% below average. The June contract accounted for loss of 10,898 of open interest. As this report is being compiled on May 22, July natural gas is trading 10.9 cents lower on the day and has made a low of 4.350. Natural gas generated a short-term sell signal on May 12 and an intermediate term sell signal on May 13.We have no recommendation except clients should contemplate initiating bull spreads in natural gas once it is apparent that prices have bottomed.

The Energy Information Administration announced that working gas in storage was 1,266 Bcf as of Friday, May 16, 2014, according to EIA estimates. This represents a net increase of 106 Bcf from the previous week. Stocks were 774 Bcf less than last year at this time and 943 Bcf below the 5-year average of 2,209 Bcf. In the East Region, stocks were 449 Bcf below the 5-year average following net injections of 65 Bcf. Stocks in the Producing Region were 379 Bcf below the 5-year average of 892 Bcf after a net injection of 29 Bcf. Stocks in the West Region were 115 Bcf below the 5-year average after a net addition of 12 Bcf. At 1,266 Bcf, total working gas is below the 5-year historical range.

British pound:

The June British pound advanced 57 pips on heavy volume of 101,399 contracts. Total open interest increased by 3,230 contracts, which relative to volume is approximately 25% above average. As this report is being compiled on May 22, the June pound is trading 36 pips lower after making a high of 1.6915, which is slightly below yesterday’s high of 1.6919. We have no recommendation.The pound remains on a short and intermediate term buy signal.

Euro:

The June euro lost 18 pips on relatively heavy volume of 178,680 contracts. Total open interest increased by 1,243 contracts, which relative to volume is approximately 65% less than average. The euro made a new low for the move at 1.3632, which takes out the previous lowest print of 1.3644 made on February 27, 2014.Since May 7, the euro has closed lower except for 4 days when it closed moderately higher. Since generating a short-term sell signal on May 12th and an intermediate term sell signal on May 14, the market has not had any significant rally that would enable clients to initiate bearish positions. The euro is massively oversold, therefore we advise against initiating bearish positions at current levels.

S&P 500 E mini:

The June S&P 500 E mini gained 17.00 points on volume of 1,369,004 contracts. Total open interest increased by a massive 41,391 contracts, which relative to volume is approximately 20% above average, which is the best open interest increase relative to volume that we have seen in many months. This tells us new longs were willing to enter the market in significant numbers to drive prices higher. The only disappointing aspect of yesterday’s trading was the relatively low volume. As this report is being compiled on May 22, the E mini is trading 7.75 points higher to 1892.75, which is shy of the all-time high of 1898.50 made on May 13. We continue to recommend long puts for those clients who hold long equity positions.