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Coffee: On May 26, July New York coffee will generate an intermediate term sell signal after generating a short-term sell signal on May 24. We have no recommendation.

Corn:

July corn advanced 7.25 cents on volume of 327,739 contracts. Volume increased from May 24 when the July contract gained 0.25 cents on volume of 301,015 contracts and total open interest increased by 19,607. On May 25, total open interest increased by a massive 13,835 contracts, which relative to volume is approximately 70% above average meaning aggressive new buyers were entering the market and pushing prices to a new high for the move of 4.05. The July contract accounted for loss of 353 of open interest.

As this report is being compiled on May 26, The July contract is trading 3.75 cents above yesterday’s close and has made a new high for the move of 4.09 1/4, which takes out the April 21 print of 4.07 1/4. As we pointed out in yesterday’s report, according to the latest COT report managed money is net long, but not by a substantial amount, which means there are large numbers of short-sellers who are going to be forced to cover as prices continue to advance.

From May 20 through May 25 (four sessions), total open interest has increased by 46,778 contracts while July corn advanced 15.25 cents. This indicate that short sellers are not capitulating and buyers are driving the train. We see higher prices ahead. Do not short corn.

Soybeans:

July soybeans advanced by a very strong 30.75 cents on substantial volume of 304,278 contracts. Volume was the strongest since May 20 when the July contract gained 2.75 cents on volume of 426,977 contracts and total open interest declined by 2,466. On May 25, total open interest increased by 10,451 contracts, which relative to volume is approximately 20% above average meaning new buyers were entering the market in larger than usual numbers and driving prices higher (10.88).

As this report is being compiled on May 25 the July contract is trading 5.00 cents lower, but has made a new high for the move of 10.98, which takes out the May 10 print of 10.91 1/2. The COT report released last Friday showed that managed money was long soybeans by a stratospheric ratio of 11.58:1, up from the previous week of 9.22:1 and more than double the ratio two weeks ago of 5.53:1. This makes the market vulnerable to a strong setback when prices are eventually correct. The real driver for soybeans is soybean meal and in today’s trading meal has reached the highest level since July 2014. We see higher prices ahead. Do not short this market.

Soybean meal:

July soybean meal advanced by $18.30 on substantial volume of 162,010 contracts. However, total open interest action was a disappointment, up only 3,728 contracts, which relative to volume is approximately 10% below average. However, the July contract lost 3,406 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest.

It was negative that total open interest declined in July and this contract is over 30 days away from first notice day and there has been a pattern of unimpressive open interest action in meal. For example on May 20, July soybean meal advanced by $14.60 on heavy volume of 211,492 contracts, but total open interest declined by a massive 7,385 contracts. The July contract accounted for loss of 9,744 of open interest.

In summary, there is a skepticism regarding the move in soybean meal.The COT report released last Friday revealed that managed money was massively long soybean meal by a ratio of 11.35:1, which was close to double the previous week’s ratio of 6.21:1 and nearly 4 times the ratio of two weeks ago of 3.23:1. Do not short this market. Stand aside.

WTI crude oil:

July WTI crude oil advanced 94 cents on relatively light volume of 850,677 contracts. Interestingly, for the past two sessions (May 24 and 25), volume has been substantially below that of the past 30 days average volume. This is occurring as prices are advancing to their highest levels in several months and open interest action is positive.

On May 25, total open interest increased by 7,721 contracts, which relative to volume is approximately 55% below average, and the open interest increase on yesterday’s advance is positive, but the low number does indicate a degree of skepticism about the move.  The June contract lost 258. As this report is being compiled on May 26, the July contract is trading 14 cents above yesterday’s close and has made a new high for the move of 50.21, which takes out yesterday’s print of 49.75. We have no recommendation.

Gold: On May 25 June and August New York gold generated intermediate term sell signals after generating short term sell signals on May 23.

June gold lost $5.40 on heavy volume of 368,530 contracts. Though volume was heavy, it was substantially below that of May 24 when the June contract lost $22.30 on volume of 466,683 contracts, a record amount traded for 2016 while total open interest declined by 8,603 contracts.

On May 25, total open interest declined by a massive 17,864 contracts, which relative to volume is approximately 75% above average meaning liquidation was off the charts heavy. The June contract, which is near first notice day lost 43,769 of open interest.

Total open interest has declined every day since May 17 and during this time gold experience only one day when it closed positively (May 17). We expect the net long position of managed money in the upcoming COT report to have been trimmed considerably and based upon trading thus far in this week, we expect the report released a week from this Friday to show a further reduction of the net long position. This sets the market up for a strong advance in late summer. As this report is being compiled on May 26, the June contract is trading $2.90 lower and has made a daily low of 1218.40, which is above yesterday’s low for the move of 1217.70. Continue to stand aside.

Silver:

July silver gained 7 ticks on volume of 54,844 contracts. Volume increased from May 24 when the July contract lost 16.9 cents on volume of 46,831 contracts and total open interest increased by 101. On May 25 the total open interest declined by a hefty 1,793 contracts, which relative to volume is approximately 10% above average, which occurred in the face of a new low for the move of $16.185, which was below the May 24 print of 16.210. The July contract accounted for loss of 1,710 of open interest.

As we pointed out in yesterday’s research note, we have been impressed by silver’s ability to remain relatively firm in the face of declining gold prices. This is not to say that silver will not eventually succumb to more selling pressure, but does suggest the market may be probing for low. Continue to stand aside.

From the May 24 note on silver:

During the past couple of days, we have observed that though gold is making major new lows, silver is making only fractional new lows. For example, on May 19 silver made its low for the move of 16.350 and on May 23 made a low slightly below that of 16.325. Yesterday, July silver made a low 16.21 and the low thus far on May 25 has been 16.185.

Silver was the first to generate a short-term sell signal (May 19) and though gold has generated an intermediate term sell signal on May 25, the July contract is quite a distance from an intermediate term sell signal. For this to occur, the high of the day must be below OIA’s key pivot point for May 25 of $15.943.This number intersects the April 14 low of 15.965.

Euro: On May 25 the June and September euro generated intermediate term sell signals after generating short term sell signals on May 18. We have no recommendation.

S&P 500 E-mini: On May 25, the June and September S&P 500 E-mini generated short-term buy signals. This reverses the May 6 short-term sell signals. Both contracts remain on intermediate term buy signals.

The June S&P 500 E-mini advanced 12.25 points on volume of 1,453,610 contracts. Volume fell substantially from May 24 when the June contract gained 29.75 points on volume of 1,612,614 contracts and total open interest increased by 30,818. On May 25, total open interest increased just 4,127 contracts, a very disappointing number considering the magnitude of the advance and that the June contract made a new high for the move of 2092.50, which was above the previous days high of 2077.25.

As this report is being compiled on May 26, the June contract is trading 1.50 higher and has not taken out yesterday’s print. Aside from the E-mini being on short and intermediate term buy signals, we read recently of a substantial amount of put buying  in the indices, which have been at the upper end of the range of the past 10 years. In our view, this is another confirmation that the major indices are headed higher. The April 20 high of 2105.25 will be tested and in all likelihood taken out. At this juncture, we have no recommendation.