Soybeans:

July soybeans gained 1.25 cents on volume of 107,928 contracts. Volume fell somewhat from May 28 when July soybeans advanced 9.00 cents on total volume of 114,317 contracts and total open interest increased by 1,220 contracts. On May 29, total open interest increased by 788 contracts, which relative to volume is approximately 60% below average. However, the July contract lost 1,865 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on May 30, July soybeans are trading 0.75 cents lower and have not taken out yesterdays high of $15.08 3/4.

Although we think the direction of soybean prices is higher, we are somewhat concerned about the apparent deflationary cycle we are seeing throughout most commodities. For example, the metals are sharply lower along with the petroleum complex and the grains are trading lower as well. Most of the commodities we follow are on sell signals, both short-term and intermediate. As we have said before, our preference is to be long soybean meal, however we expect that soybeans will eventually take out the high of 15.36 3/4 made on May 22. Soybeans remain on a short and intermediate term buy signal and should only be traded from the long side.We are still waiting for confirmation of the uptrend, and this will occur when July soybeans make a low for the day above OIA’s key pivot point of 14.97 3/4.

The export numbers released by the USDA were respectable for soybeans with 60.3 thousand metric tons  sold in the recent reporting week bringing total commitments season to date of 1.651 billion bushels versus USDA projections for the entire season, which ends August 30 of 1.600 billion bushels.In other words, with 3 months left in the season, soybean sales will have to slow dramatically in order to meet the current USDA projection. Thus far, cancellations have been minimal.

Soybean meal:

July soybean meal lost 10 cents on volume of 47,963 contracts. Total open interest increased by a massive 2,708 contracts, which relative to volume is approximately 120% above average meaning there was a battle between longs and shorts and at the close neither side was able to move the market beyond unchanged. The July contract lost 1,274 of open interest, which makes the total open interest increase more impressive (bullish). July soybean meal made a high of $502.40, but did not take out the May 27 high of 502.60, nor the contract high of 508.00 made on May 22. As this report is being compiled on May 30, July soybean meal is trading 70 cents higher and has not taken out yesterday’s high.

In the May 27 report, we suggested that bullish positions be initiated in soybean meal,  and this could include 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 lost 3.00 cents on volume of 280,521 contracts. Volume was heavier than May 15 when July corn lost 11.25 cents on volume of 251,947 contracts and total open interest declined by 8,811 contracts. Additionally, the previous time that volume exceeded trading on May 29 occurred on May 9 when July corn lost 9.00 cents on volume of 416,471 contracts and total open interest increased by 735 contracts. On May 29, total open interest increased by a massive 10,060 contracts, which relative to volume is approximately 40% above average meaning new short sellers were extremely aggressive about entering new positions and driving prices lower. The July contract lost 10,286 of open interest, which makes the total open interest increased much more impressive (bearish).

The remarkable aspect of trading on May 29 was that open interest increased by the largest amount seen during the decline in corn, which began in early May. The heavy volume combined with the large open interest increase makes May 29 the most bearish day seen since the beginning of the decline. As this report is being compiled on May 30, July corn is trading 3.50 cents lower, and has taken out the low of 4.66 1/2 made on May 28. Corn remains on a short and intermediate term sell signal. The market has not had a sufficient countertrend rally to merit the initiation of bearish positions. Stand aside.

The USDA reported sales of corn totaling 621.3 thousand metric tons bringing total commitments season to date of 1.796.8 billion bushels versus USDA projections for the season of 1.900 billion bushels. Sales of corn in the recent reporting period was the highest since the week of April 24. The current season ends on August 30.

Chicago wheat: Today is our last report on Chicago wheat until we see a trading opportunity, or a signal change. Chicago wheat remains on a short and intermediate term sell signal.

July Chicago wheat lost 6.25 cents on volume of 75,676 contracts. Total open interest increased by 1,872 contracts, which relative to volume is average. The July contract lost 2,299 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on May 30, July Chicago wheat is trading 2.25 cents lower and has made a new low for the move at 6.25 1/2, which is the lowest print since March 4, 2014 (6.25 1/4).On May 14 July Chicago wheat generated a short-term sell signal and on May 27 generated an intermediate term sell signal. Unfortunately, Chicago wheat never had a countertrend rally, which would have enablde clients to initiate bearish positions. As a result, we recommend a stand aside posture.

Kansas City wheat:

July Kansas City wheat lost 5.50 cents on volume of 16,790 contracts. Total open interest declined by a massive 1,175 contracts, which relative to volume is approximately 185% above average meaning that liquidation was extremely heavy on the decline. The July contract lost 1,365 of open interest. As this report is being compiled on May 30, July KC wheat is trading 6.25 cents lower and is currently trading on the low of the day of 7.24 1/4, which is the lowest print since April 11 (7.23 1/4). Based upon today’s action, it appears likely that July Kansas City wheat will be generating an intermediate term sell signal on Monday. 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 3/8. Stand aside.

The USDA reported cancellation of sales of 52.4 thousand metric tons bringing total sales season to date of 1.166.1 billion bushels versus USDA projections for the season, which ends on May 31 of 1.185 billion bushels.

Cotton:

July cotton advanced 1.28 cents on volume of 29,373 contracts. Total open interest increased by a massive 2,085 contracts, which relative to volume is approximately 185% above average meaning that new longs were aggressively entering the market and driving prices higher (86.94). The July contract lost 445 of open interest, which makes the total open interest increase more impressive (potentially bullish). Unfortunately, cotton bulls were faked out yesterday because as this report is being compiled on May 30, July cotton is trading 49 points lower on the day.

Yesterday, we posited that cotton may have found support after seeing open interest declined by only 395 contracts during a period of 2 days. However, even with the strong increase of open interest on May 29, there has been no follow through on May 30. For example, the high yesterday was 86.94 and the high on May 30 as of this writing has been 86.69. At the very least, cotton should have experienced some follow-through buying today after yesterday’s rally, if the rally was for real. 

On May 12th, July cotton generated a short-term sell signal and on May 23 generated an intermediate term sell signal.Cotton has not had a decent countertrend rally, which would have enabled more clients to initiate bearish positions. However, for those of you who initiated bearish positions per the May 13 report, these have become significantly profitable. In the report of May 21, OIA advised clients to lower their exit point to the May 22 high of 90.66. Additionally, on May 23, OIA recommended liquidating partial positions, or alternatively buy calls against bearish positions because a major countertrend rally is likely before the bottom is in.

Coffee:

July coffee advanced 5.80 cents on volume of 25,489 contracts. Total open interest increased by 284 contracts, which relative to volume is approximately 50% below average. The July contract lost 1,161 of open interest, which makes the total open interest increase potentially bullish. However, as this report is being compiled on May 30, July coffee has reversed yesterday’s action and currently is trading 4.90 cents lower and has made a daily low of $1.7465, which above the low for the move of 1,7080 made on May 28. July coffee remains on a short-term sell signal having generated this on May 12. 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: This will be our last report on sugar until we see a trading opportunity, or a signal change

July sugar advanced 37 points on volume of 106,173 contracts. Total open interest increased by a massive 8,868 contracts, which relative to volume is approximately 230% above average meaning that large numbers of new longs were aggressively entering the market and driving prices higher (17.57). The July contract gained 1,290 of open interest. As this report is being compiled on May 30, July sugar is trading 10 points lower, and has made a daily high of 17.54, which is not taken out yesterday’s high of 17.57. In other words, there was no follow through on the rally. On May 22, July sugar generated a short-term sell signal and on May 28 generated an intermediate term sell signal. Stand aside.

Live cattle:

August live cattle advanced 2.075 cents on volume of 62,470 contracts. Total open interest increased by 3,372 contracts, which relative to volume is approximately 120% above average meaning that aggressive new longs were entering the market and driving prices higher (1.39875). As this report is being compiled on May 30, August cattle is trading 15 points lower, but has not taken out yesterday’s high. On May 30, August cattle is trading above OIA’s key pivot point of 1.37690, which increases the likelihood of a continued move higher. Because the market may continue to trade in an erratic pattern, we prefer that clients initiate a bull call spread, which is buying a call and selling a call that is further out of the money.In short, if the market doesn’t do much, the short call premium decay will offset the decay in the long call and if the market declines, the gain in the short call will offset some of the loss in the long call.

WTI crude oil:

July WTI crude oil advanced 86 cents on volume of 405,592 contracts. Volume declined from the 497,805 contracts traded on May 28 when July WTI lost $1.39 and total open interest declined by 2,927 contracts. On May 29, total open interest increased by a massive 15,109 contracts, which relative to volume is approximately 45% above average, meaning that new longs were aggressively entering the market and moving prices higher.The July contract gained 3,443 of open interest, and July through November 2014 all gained open interest.The increase of open interest in the July contract was the first since May 22 when July added 1,427 of open interest and July WTI closed 33 cents lower. In short, the price rise in yesterday’s trading garnered a very large bullish following, but the same traders must be very disappointed on May 30 as July WTI is trading 76 cents lower and has made a new low for the move at 102.40, which takes out yesterday’s low of 102.61. July WTI remains on a short and intermediate term buy signal, and we see no reason to be involved in the market at this juncture.

Natural gas:

July natural gas lost 5.6 cents on volume of 284,100 contracts. Volume increased from May 28 when July natural gas advanced 10.4 cents on volume of 252,807 contracts and total open interest declined by 8,398 contracts. On May 29, total open interest increased by 4,539 contracts, which relative to volume is approximately 35% less than average, but an open interest increase on the price decline is bearish. The June contract lost 418 of open interest. As this report is being compiled on May 30, July natural gas is trading unchanged on the day and has made a daily low of 4.489, which is the lowest print since 4.488 made on May 28. Natural gas remains on a short and intermediate term sell signal. Stand aside.

Gold:

August gold lost $2.20 on volume of 185,539 contracts. Total open interest declined by only 220 contracts, which is minuscule and dramatically below average. Yesterday, August gold made a new low for the move at $1251.40, and as this report is being compiled on May 30, has made another new low at 1242.20, which is the lowest print since February 3 when the February contract made a low of 1241.20. On April 17, June gold generated a short-term sell signal and on May 28, August gold generated an intermediate term sell signal. Stand aside.

British pound: On May 29, the June British pound generated a short-term sell signal, but remains on an intermediate term buy signal.

The June British pound gained 12 pips on volume of 78,448 contracts. Total open interest declined by 1,945 contracts, which relative to volume is average. As this report is being compiled on May 30, the June pound is trading 51 pips higher, which conforms to OIA’s 1-3 day countertrend rally protocol after the generation of a sell signal.We’ll take another look at the pound on Monday and see if it merits the initiation of bearish positions.

Australian dollar:

The June Australian dollar advanced 66 pips on volume of 86,741 contracts. Volume was higher than that traded on May 20 when the June Australian dollar lost 72 pips on volume of 86,706 contracts. It is very positive that volume increased on yesterday’s rally, however, the Australian dollar remains on a short-term sell signal, which was generated on May 20, but is on an intermediate term buy signal. For the June Aussie to generate a short-term buy signal, the low the day must be above OIA’s key pivot point of 93.15.

S&P 500 E mini:

The June S&P 500 E mini gained 9.00 points on low volume of 996,815 contracts. Total open interest increased by 14,208 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on May 30, the E mini is trading 1.25 points lower, but has made a new high for the move at 1919.75. Maintain long put protection if holding long equity positions.