Soybeans: On May 22, July soybeans generated a short-term buy signal, which reversed the short-term sell signal generated on May 7. July soybeans remain on an intermediate term buy signal.

July soybeans advanced 13.50 on heavy volume of 229,996 contracts. Surprisingly, volume was significantly higher than on May 21 when July soybeans advanced 35.50 cents on volume of 154,518 contracts and total open interest increased by 4,905 contracts. Additionally, total volume was the highest since April 25 when 247,971 contracts were traded and July soybeans closed at $14.94 1/4. On May 22, open interest increased by 6,113 contracts, which relative to volume is average. The July contract accounted for loss of 371 of open interest.

The heavy volume accompanied by open interest on May 22 that was above May 21 is indicative of the Johnny-come-lately’s piling in at the top of the market. Although, we think soybean prices are headed higher, the correction from the highs may shake out some of the new longs, therefore soybeans may experience a short-term pullback, which is consistent with OIA protocols after the generation of a buy signal. As this report is being compiled on May 23, July soybeans are trading 5.75 cents lower on the day and approximately 24 cents down from the contract high of 15.36 3/4 made on May 22. We suggest that clients wait until Tuesday May 27 before considering the initiation of bullish positions. Preferably, soybeans will continue its correction for at least one more day with a 3 day correction being the ideal.

Soybean meal:

July soybean meal advanced $3.40 on volume of 68,722 contracts. Volume increased substantially from May 21 when 52,865 contracts were traded and July soybean meal gained $11.40 while total open interest increased by 2,603 contracts. Additionally, volume was higher than May 19 when July soybean meal advanced 10.30 on volume of 66,852 contracts and open interest increased by 3,163 contracts. On May 22, total open interest increased only 467 contracts, which relative to volume is approximately 65% less than average.However, the July contract lost 2523 of open interest, which makes the total open interest increase more impressive (bullish). On May 22, July soybean meal made a new contract high at 508.00.July soybean meal remains on a short and intermediate term buy signal. Continue to hold the long July short August 2014 spread and exit the position if the spread dips below $23.00.We are waiting for more of a correction before recommending out right bullish positions.

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. We think soybean meal could test those highs.

Corn:

July corn advanced 2.25 cents on volume of 210,185 contracts. Total open interest increased by 5,076 contracts, which relative to volume is approximately 5% below average. The July contract accounted for loss of 5,399 of open interest, which makes the total open interest increase more impressive (bullish). Although prices advanced and open interest increased, we see corn prices drifting lower, punctuated by occasional rallies. July corn generated a short-term sell signal on May 15 and an intermediate term sell signal on May 21. We have no recommendation at this juncture.

Chicago wheat:

July Chicago wheat lost 5.00 cents on heavy volume of 129,407 contracts. Volume declined from the 142,174 contracts traded on May 21 when July Chicago wheat lost 6.25 cents and total open interest increased by 5757 contracts. On May 22, total open interest increased again, this time by 5071 contracts, which relative to volume is approximately 55% above average. There was open interest increases in the July 2014 through July 2015 contracts. As this report is being compiled on May 23, July Chicago wheat is trading 7.25 cents lower and has made a new low for the move at 6.51 1/2, which is the lowest print since March 11 (6.42).

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. The market has collapsed from the high of 7.44 made on May 6 and July Chicago wheat will generate an intermediate term sell signal if the high of the day is below OIA’s key pivot point of 6.57 1/8.We have no recommendation at this juncture.

Kansas City wheat:

July Kansas City wheat lost 9.75 cents on higher than normal volume of 23,987 contracts. Total open interest declined by a massive 1,899 contracts, which relative to volume is approximately 210% above average meaning that liquidation was extremely heavy on the decline. The July contract accounted for loss of 3,449 of open interest. As this report is being compiled on May 23, July KC wheat is trading 9.75 cents lower on the day and has made a new low for the move at 7.40 3/4, which is the lowest print since April 23 of 7.38 3/4. On May 19, July KC wheat generated a short-term sell signal, but will not generate an intermediate term sell signal until the high of the day is below OIA’s key pivot point of 7.28 1/4.We have no recommendation.

Cotton:

July cotton lost 1.51 cents on heavy volume of 31,463 contracts. Volume was the heaviest since April 23 when 32,777 contracts were traded and cotton closed 61 points lower while total open interest declined by 5,392 contracts. On May 22, total open interest declined by only 297 contracts, which relative to volume is approximately 50% below average. The July contract accounted for loss of 1,724 of open interest.

The tepid decline of open interest is a continuing bearish sign for cotton prices because as of the most recent COT report, managed money is long cotton by ratio 5.88:1. In short there is plenty of fuel to fund a continued downside move. As this report is being compiled on May 23, July cotton is trading 2.13 cents lower and has made a new low for the move at 85.26, which is the lowest print since February 3, 2014 of 85.00. Since cotton topped out at 95.10 on May 2, July cotton has closed higher on only 3 days. The market has been in free fall much like Chicago wheat.

On May 12, July cotton generated a short-term sell signal and will generate an intermediate term sell signal on May 23. For those who initiated bearish positions based upon OIA’s comments in the report of May 13, we would use the May 22, high of (90.66) to exit bearish positions.

Sugar #11: On May 22, July sugar generated a short-term sell signal, but remains on an intermediate term buy signal.

July sugar lost 6 points on volume of 107,303 contracts. Total open interest increased by 1,038 contracts, which relative to volume is approximately 50% below average.As this report is being compiled on May 23, July sugar is trading 5 points lower on the day. As is usually the case after the generation of a sell signal, the market tends to rally from 1-3 days, and this is the opportunity to initiate bearish positions. As of the latest COT report, managed money is long sugar by ratio of 3.08:1, and it is likely the ratio will increase in this week’s COT report, which will only add fuel for a continued downside move. Wait for a rally before initiating bearish positions.

Live cattle:

August live cattle lost 95 points on volume of 44,573 contracts. Volume increased from May 21 when August cattle lost 50 points on volume of 34,318 contracts and total open interest increased by 284 contracts. On May 22, total open interest declined by a substantial 3,446 contracts, which relative to volume is approximately 210% above average meaning that liquidation was extremely heavy on the decline. The June contract accounted for loss of 5402 of open interest. As this report is being compiled on May 23, August cattle is trading 1.350 cents lower and is trading approximately 3.575 cents below the May 20 high of 1.40900, which is the contract high for August cattle. In short, speculators piled into the market at contract highs, and they are heading for the exits as the market corrects below the 20 day moving average of 1.37975. OIA continues to recommend a stand aside posture.

WTI crude oil:

July WTI crude oil lost 33 cents on very light pre-holiday volume of 361,794 contracts.Volume dropped dramatically from May 21 when 612,845 contracts were traded and July WTI advanced $1.74 while total open interest increased by a massive 20,859 contracts. On May 22, total open interest increased by a massive 14,412 contracts, which relative to volume is approximately 55% above average. As this report is being compiled on May 23, July WTI is trading 62 cents higher and has made a new high for the move at 104.50, which takes out the previous high of 104.29 made on May 21. July WTI is approaching the April 16 high on the continuation chart of $104.99 and the March 3, 2014 high of 105.22. On May 14, WTI crude oil generated a short-term buy signal and remains on an intermediate term buy signal. Although anyone who is long the market has made money, we question the ability of WTI to continue moving higher, especially as it approaches major multi-month resistance. Gasoline generated a short-term buy signal on May 19, which will support higher WTI values, but heating oil remains on a short and intermediate term sell signal.

Natural gas:

July natural gas lost 12.1 cents on very heavy volume of 378,764 contracts.Volume was the highest since April 17 when 406,021 contracts were traded and July natural gas closed at $4.780. On May 22, total open interest declined by 11,104 contracts, which relative to volume is approximately 20% above average meaning that liquidation was substantial on the major decline.For the past 4 days beginning on May 19, open interest has declined each day and totals 26,418 contracts while natural gas declined 6.3 cents. We like bull spreading the front month versus September or October.

Gold:

June gold advanced $6.90 on volume of 153,749 contracts. Total open interest increased by 3,289 contracts, which relative to volume is approximately 20% below average. However, we see a consistent pattern of open interest increases on price advances and  open interest decreases when price declines. This is bullish open interest action relative to price advances/declines. However, gold does not have the wherewithal to generate a short-term buy signal, even though it would not take much for it to do so. If June gold could make a low for the day above 1304.70, a short-term buy signal would be generated.

Platinum:

July platinum advanced $18.20 on heavy volume of 13,401 contracts. Total open interest increased by 329 contracts, which relative to volume is average. July platinum made a new high for the move at 1497.80, which is its highest print since September 2013. The contract high for the July contract is 1549.90. As this report is being compiled on May 23, July platinum is trading 15.50 lower, which is perfectly normal considering the sizable advance. July platinum generated a short and intermediate term buy signal on May 5.

Euro:

The June euro lost 28 pips on volume of 141,714 contracts. Total open interest increased by 1,592 contracts, which relative to volume is approximately 45% less than average, but open interest increases on declines have been typical for the euro of late. As this report is being compiled on May 23, the June euro is trading 20 pips lower and has made a new low for the move at 1.3614, which is the lowest print since February 13, 2014 of 1.3587.

Since generating a short-term sell signal on May 12th and an intermediate term sell signal on May 14, the euro has not had any significant rally, which would enable clients to initiate bearish positions. The euro has declined every day since it topped out on May 8 at 1.3993 with the exception of just 4 days when the euro closed moderately higher.We recommend against initiating bearish positions at current levels. The euro is massively oversold and can have a strong rally at any time.

British pound:

The June British pound lost 31 pips on volume of 64,586 contracts. Total open interest increased by 1,088 contracts, which relative to volume is approximately 30% less than average. As this report is being compiled on May 23, the June pound is trading 37 pips lower and has made a daily low of 1.6809. On May 21, the pound made a high of 1.6919 and on May 22, made a high of 1.6915, which may provide short-term resistance. The June pound topped out on May 6 at 1.6892. The June pound remains on a short and intermediate term buy signal. We have no recommendation.

S&P 500 E mini:

The June S&P 500 E mini advanced 5.25 points on low volume of 1,032,544 contracts. Total open interest increased by 12,948 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on May 23, the June E mini is trading 6.75 points higher and has made a high of 1897.75, which is just shy of the all-time high of 1898.50 made on May 13. We continue to recommend long put protection for those clients who hold on equity positions.