Due to the Memorial Day holiday, the USDA export sales report will be released tomorrow.

Soybeans:

July soybeans gained 9.00 cents on light volume of 114,317 contracts. Volume was the smallest since May 16 when July soybeans lost 5.25 cents on volume of 101,386 contracts while open interest declined by 4,228 contracts. On May 28, total open interest increased by 1,220 contracts, which relative to volume is approximately 50% below average. The July contract lost 4,086 of open interest, which makes the total open interest increase more impressive (bullish). Based upon the lackluster volume and increase of open interest, it is apparent that soybeans have yet to catch fire. As this report is being compiled on May 29, July soybeans are trading 2.50 cents higher and have made a daily high of 15.08 3/4.

The pullback in soybeans yesterday in the early was the 3rd day of the countertrend move after July soybeans generated a short-term buy signal on May 22. As a result, clients should be looking to position themselves for a move higher. As confirmation, July soybeans should make a daily low above 14.97 1/8 in order to move higher, and on May 29 the daily low is below OIA’s key pivot point. Though we think soybeans are headed higher, our preference is to be long soybean meal.

Soybean meal:

July soybean meal gained $4.30 on volume of 53,669 contracts. Total open interest increased by a massive 3,051 contracts, which relative to volume is approximately 120% above average meaning that aggressive new longs were entering the market and pushing prices higher. The July contract lost 773 of open interest, which makes the total open interest increase more impressive (bullish).Note the difference between the open interest increase in soybean meal versus soybeans. As this report is being compiled on May 29, July soybean meal is trading 50 cents higher after making a high for the day of 502.40. As mentioned in yesterday’s report, we suggest that bullish positions be initiated in soybean meal, which could take the form of writing puts in the July contract, buying August calls or long July futures. Also, we like the long July 2014 short August 2014 spread. Use the May 28 low of 492.70 as the exit point for bullish positions and the May 12 low of $23.00 premium July as the exit point for the spread.

Corn:

July corn gained 2.75 cents on volume of 203,305 contracts. Volume was the highest since May 22 when July corn advanced 2.25 cents on total volume of 210,185 contracts and total open interest increased by 5,076 contracts.On May 28, total open interest increased by 4,544 contracts, which relative to volume is approximately 15% below average. The July contract lost 8,055 of open interest, which makes the total open interest increase potentially bullish. However, July corn remains on a short and intermediate term sell signal.We have noticed a pattern in corn that clients should be aware of. On a small rally: May 28, May 23, and May 22, open interest has increased. We view this action by market participants as belief that corn is headed higher. Rather than initiate new long positions, it would be expected to see liquidation on rallies. As this report is being compiled on May 29, July corn is trading 4.25 cents lower, but has not taken out yesterday’s low of $4.66 1/2. Stand aside.

Chicago wheat:

July Chicago wheat lost 2.25 cents on volume of 76,169 contracts. Total open interest declined by 255 contracts, which relative to volume is approximately 85% below average . The July contract lost 793 of open interest. As this report is being compiled on May 29 , July Chicago wheat is trading 8.25 cents lower and has made a new low  for the move of $6.30, which is the lowest print since March 4, 2014 (6.25 1/4). As we pointed out in yesterday’s report, total open interest has been declining since May 23, after increasing between May 16 and May 22. At long last, managed money may be liquidating long positions that were initiated at higher levels. On May 14 July Chicago wheat generated a short-term sell signal and on May 27 generated an intermediate term sell signal. Stand aside.

Kansas City wheat:

July Kansas City wheat lost 2.25 cents on volume of 13,771 contracts. Total open interest declined by a heavy 1,006 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy on the modest decline. The July contract lost a massive 2,234 of open interest. As this report is being compiled on May 29, July KC wheat is trading 8.25 cents lower and has made a new low for the move at 7.26 1/2, which is the lowest print since April 11 (7.23 1/4).For July Kansas City wheat to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point of 7.28 1/2. Stand aside.

Cotton:

July cotton lost 10 points on volume of 27,352 contracts. Volume was above that of May 27 when July cotton lost 1.34 cents on volume of 25,084 contracts and total open interest declined only 153 contracts. On May 28, total open interest declined only 242 contracts, which relative to volume is approximately 55% below average. The July contract accounted for loss of 1,298 of open interest. For the past 2 days, cotton has traded from a high of 86.10 to a low of 83.86 and yet total open interest has declined only 395 contracts. This may signify that many longs have already been washed out of cotton and as a result, the market is in stronger hands.As this report is being compiled on May 29, July cotton is trading 96 points higher and has made a daily high of 86.94.

From the May 27 report:

“In the May 13 report, we advised clients to initiate bearish positions if they were unwilling to wait for a countertrend rally and use May 14 high of 92.13 as an exit point for bearish positions. In the report of May 21, OIA advised clients to lower their exit point to the May 22 high of 90.66.”

“On May 23, OIA recommended liquidating partial positions, or alternatively buy calls against bearish positions because a countertrend rally is coming and it could be significant.”

Coffee:

July coffee lost 3.20 cents on heavy volume of 32,950 contracts. Volume was the strongest since May 20 when 37,066 contracts were traded and July coffee advanced 2.20 cents while total open interest increased by 2,257 contracts. On May 28, total open interest increased by 1,888 contracts, which relative to volume is approximately 120% above average meaning that new short sellers were aggressively entering the market and driving prices to new lows for the move (1.7080). This is the lowest print since April 2, 2014 (1.7000). The July contract lost 1,996 of open interest, which makes the total open interest increase much more impressive (bearish).

Although July coffee closed 3.20 cents lower, at the low of the day, July coffee was trading off 8.55 cents. The massive increase of open interest of open interest on the decline is bad news for anyone long coffee. It indicates that the dominant action on May 28 was the initiation of new long and short positions, not the liquidation of short and long positions. This indicates to OIA that prices are headed lower after the market has had a countertrend rally. Remember, managed money was long by a ratio of 9.65:1 per the latest COT report. As this report is being compiled on May 29, July coffee is trading 5.90 cents higher on the day. In order for July coffee to generate an intermediate term sell signal, the low the day must be below OIA’s key pivot point of 1.7740. Stand aside.

Sugar #11: On May 28, July sugar generated an intermediate term sell signal after generating a short-term sell signal on May 22.

July sugar advanced 9 points on light volume of 78,281 contracts. Total open interest increased by a massive 8,121 contracts, which relative to volume is approximately 310% above average meaning there was a battle between longs and shorts, and longs were able to move sugar only fractionally higher on the day.As this report is being compiled on May 29, July sugar is trading 32 points higher and has made a daily high of 17.57, which takes out the May 22 print of 17.54.From May 15 through May 27, July sugar closed lower every day. A countertrend rally is to be expected, and we will take a look at the market tomorrow and make an evaluation whether or not bearish positions should be initiated.

Live cattle:

August live cattle gained 35 points on volume of 31,335 contracts.Total open interest declined by a massive 1,659 contracts, which relative to volume is approximately 110% above average meaning that liquidation was extremely heavy on the modest advance. The June contract accounted for loss of 3,593 of open interest. As this report is being compiled on May 29, August cattle is trading 1.90 cents higher and has made a daily high of 1.39550, which is the highest print since 1.40050 made on May 22. In order for cattle to resume its uptrend, the low the day must be above OIA’s key pivot point of 1.37600. Yesterday, we said that we wanted to see large numbers of speculative longs lose interest and/or get blown out of the market before recommending bullish positions. Since the May 20 tabulation date of the COT report(May 21-May 28), total open interest has declined by 9,985 contracts. We won’t know until tomorrow afternoon whether the large net long position of manage money has been reduced.In any event, the low on May 29 is 1.37350, which is below the pivot point. Stand aside for now.

WTI crude oil:

July WTI crude oil lost $1.39 on volume of 497,805 contracts. Volume was the highest since May 21 when July WTI advanced $1.74 on volume of 612,845 contracts and total open interest increased by 20,859 contracts. On May 28, total open interest declined only 2,927 contracts, which relative to volume is approximately 70% less than average, meaning that the open interest decline was very light considering the magnitude of the price decline. The July contract lost 18,478 of open interest, which makes the total open interest decline more impressive (bullish). As this report is being compiled on May 29, July WTI is trading 97 cents higher on the day. July WTI crude oil remains on a short and intermediate term buy signal. We have no recommendation.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. At 393.0 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 1.8 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 0.2 million barrels last week and 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 3.2 million barrels last week.

Natural gas:

July natural gas advanced 10.4 cents on volume of 252,807 contracts. Volume was slightly above that of May 27 when July natural gas advanced 10.6 cents on volume of 235,227 contracts and total open interest increased by 529 contracts. On May 28, open interest declined by a massive 8,398 contracts, which relative to volume is approximately 35% above average.The June contract lost 5,804 of open interest. During the past 3 days beginning on May 23, July natural gas prices have advanced 25.8 cents, but total open interest has declined by 11,430 contracts. This is bearish open interest action relative to the 3 day price advance. On May 27, it appeared that open interest action was improving on price advance, but the action on May 28 is disappointing. As this report is being compiled on May 29, July natural gas is trading 2.6 cents lower and has made a daily low of $4.529. Natural gas remains on a short and intermediate term sell signal. We have no recommendation.

The Energy Information Administration announced that working gas in storage was 1,380 Bcf as of Friday, May 23, 2014, according to EIA estimates. This represents a net increase of 114 Bcf from the previous week. Stocks were 748 Bcf less than last year at this time and 922 Bcf below the 5-year average of 2,302 Bcf. In the East Region, stocks were 438 Bcf below the 5-year average following net injections of 64 Bcf. Stocks in the Producing Region were 374 Bcf below the 5-year average of 918 Bcf after a net injection of 31 Bcf. Stocks in the West Region were 110 Bcf below the 5-year average after a net addition of 19 Bcf. At 1,380 Bcf, total working gas is below the 5-year historical range.

Gold: On May 28, August gold generated an intermediate term sell signal after the June contract generated a short-term sell signal on April 17, 2014.

August gold lost $5.80 on very heavy volume of 315,282 contracts. Volume fell from the 351,192 contracts traded on May 27 when gold lost $26.20 and total open interest increased by 1,607 contracts. On May 28, total open interest declined by a massive 23,440 contracts, which relative to volume is approximately 180% above average meaning that liquidation was off the charts heavy. We encourage clients to review OIA’s May 26 Weekend Wrap for our views on the gold market.

Platinum:

July platinum gained 40 cents on volume of 15,670 contracts. Total open interest increased by 812 contracts, which relative to volume is approximately 100% above average meaning there was a battle between the longs and shorts, and platinum  was able to close fractionally higher. Platinum remains on a short and intermediate term buy signal. We have no recommendation.

Euro:

The June euro lost 41 pips on volume of 145,299 contracts. Total open interest declined by 1,706 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on May 29, the June euro is trading 9 pips higher and has made a daily low of 1.3586, which is yesterday’s low as well. The June euro generated a short-term sell signal on May 12 and an intermediate term sell signal on May 14. We are waiting for a countertrend rally in order to recommend bearish positions. Until then, stand aside.

British pound:

The June British pound lost 1.01 cents on heavy volume of 99,384 contracts.Volume was the highest since May 21 when the June pound advanced 57 pips on volume of 101,399 contracts and total open interest increased by 3,230 contracts. On May 28 total open interest declined by 2,865 contracts, which relative to volume is approximately 5% above average. As this report is being compiled on May 29, the June pound is trading 2 pips higher and has made a daily low of 1.6691, which is 3 pips lower than yesterday. The June pound will generate a short-term sell signal on May 29.

S&P 500 E mini:

The June S&P 500 E mini lost 0.25 points on light volume of 1,070,711 contracts. Total open interest increased by 10,223 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on May 29, the E mini is trading at the high of the day (1914.00), which was yesterday’s high as well. While interest rates are plunging, the broad indices are soaring, and the question remains how long can this divergence last before one side is proven right and the other wrong. We remain uncomfortable with the rally, especially with the dismal economic statistics and  plunging interest rates. Maintain long put protection, but do not add to the position.

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