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Soybeans:

July soybeans advanced 22.50 cents on light volume of 226,900 contracts. Volume declined considerably from May 5 when the July contract lost 21.75 cents on volume of 347,170 contracts and total open interest declined by 6,394. On May 6, total open interest increased by 4,712, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s on Fridays advance is positive. The substantially reduced volume on Fridays rally compared to Thursday’s decline is a bit troubling and though open interest increases have accompanied price advances, they have been muted of late.

The COT report released on Friday showed that managed money was long by a stratospheric ratio of 6.15:1, which is up from the previous week of 5.53:1 and the ratio two weeks ago of 3.65:1. Three weeks ago, managed money was long soybeans by ratio of 2.01:1.

In summary, any speculator that has wanted to be long soybeans is most likely in the market. This means that for prices to continue their advance, new buyers must be willing to pay ever higher prices, and we do not think this is in the cards at this time unless there is a new catalyst. As this report is being compiled on May 9 the July contract is trading 11.75 cents lower after making a daily high of 10.44, which exceeds Friday’s print of 10.38 1/2 and is the highest since 10.47 1/2 made on May 5.  Do not short soybeans.

Chicago wheat: On May 9, July Chicago wheat will generate short and intermediate term sell signals.

Live cattle: On May 9, June and August live cattle will generate short-term buy signals, but remain on intermediate term sell signals.

WTI crude oil:

June WTI crude oil advanced 34 cents on volume of 1,203,659 contracts. Total open interest declined by 6,359 contracts, which relative to volume is approximately 75% below average and a total open interest decline on Friday’s minor advance is negative. The June contract accounted for a loss of 47,027 of open interest.

Though open interest action has been acting positive, the market has encountered resistance at the upper end of its trading range. Overnight, the June contract made a high of $45.94 on a change in the oil ministry cabinet in Saudi Arabia and the massive fires in Alberta Canada. However, the crude has been on a downtrend ever since making the high in the early evening session. Currently, the June contract is trading 1.15 lower and has made a daily low of 43.35, which is the lowest print since 43.22 made on May 4. Despite lower prices, the June contract remains on short and intermediate term buy signals. We have no recommendation.

Copper: On May 6 July copper generated a short-term sell signal, but remains on an intermediate term buy signal, and we think an intermediate term sell signal will be generated in tomorrow’s trading.

Gold:

June gold advanced $21.70 on heavy volume of 294,315 contracts. Volume exceeded that of May 4 when the June contract lost 17.40 on volume of 238,899 contracts and total open interest increased by 2,596. Additionally, volume was the highest since April 29 when the June contract gained 24.10 on volume of 300,076 contracts and total open interest increased by 24,106.

On May 6, total open interest exploded higher, up 21,848 contracts, which relative to volume is approximately 185% above average meaning aggressive new buyers were entering the market in large numbers and driving prices higher (1297.70), which is the highest price since 1303.90 made on May 3.

As this report is being compiled on May 9, the new buyers on Friday are very unhappy if they did not liquidate before today because the June contract is currently trading $25.60 lower and has made a daily low of 1263.60, which is the lowest print since 1239.10 made on April 28. The COT report revealed that managed money continued to pile into gold and as of May 3, the tabulation date for the report, managed money added 42,366 contracts to their long positions and liquidated 4.479 of their short positions, which leaves managed money long by a ratio of 8.31:1, which is up substantially from the previous week of 6.00:1 and the ratio two weeks ago of 6.04:1. It appears that large numbers of longs have been caught at the top of the market and we expect to see more liquidation in the days ahead.

From the May 4 research note on gold:

“Yesterday, was the second open interest increase in a row on a price decline. On May 3, June gold lost 6.60 on volume of 248,572 and total open interest increased by a massive 17,273.”

“This indicates that longs are remaining steadfast in the face of declining prices. This is a double edge sword: if gold makes a turnaround shortly, longs will have been vindicated. However, if prices continue to move lower there will be substantially more longs showing losses, which increases the likelihood of additional selling.”

“We like gold in the intermediate and longer term, but as we pointed out in previous reports, the early summer months are not favorable for precious metals’ performance. We envision a move to the 20 day moving average of 1256, or the 50 day moving average of 1247 before the market finds some stability.”

10 Year Treasury Note: The June 10 year treasury note will generate short and intermediate term buy signals on May 9.

Australian dollar: On May 9, the June and September Australian dollar will generate an intermediate term sell signal after generating a short-term sell signal on May 4.

The June Australian dollar lost 90 pips on heavy volume of 125,402 contracts. Total open interest declined by 3,483 contracts, which relative to volume is average. As this report is being compiled on May 9, the June contract is trading lower again, down 52 pips and has made a new low for the move of 72.98, which is the lowest print since 73.37 made on March 4.

Managed money has been caught heavily long at the top of the market and according to the COT report released last Friday they were long by a ratio of 4.55:1, which was down from the previous week (the high ratio) of 5.44:1. Although the June contract generated a short-term sell signal on May 4 the market never had a counter trend rally, which would have enabled clients to initiate bearish positions. The Aussie has headed straight down after the generation of a sell signal. Do not chase the market, wait for the rally.

Canadian dollar: On May 6 the June and September Canadian dollar generated short-term sell signals, but remain on intermediate term buy signals.

The June Canadian dollar lost 44 pips on volume of 86,684 contracts. Total open interest increased by 2,198 contracts, which relative to volume is average and the total open interest increase is bearish. As this report is being compiled on May 9 the June contract is trading 38 pips lower and is made a daily low of 76.82, which is the lowest print since 76.84 made on April 11.

The COT report revealed that leverage funds increased their net long position and as of May 3 were long by a ratio of 1.32:1, which was up from the previous week of 1.06:1 and a complete reversal from the ratio two weeks ago when they were short by a ratio of 1.08:1.Wait for a counter trend rally before initiating bearish positions.

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

The June S&P 500 E-mini advanced 8.75 points on volume of 1,828,566 contracts. Total open interest declined by 4,162 contracts, which is substantially below average and an open interest decline on Fridays advance is bearish. Open interest action for the E-mini during the past week has been bearish and as this report is being compiled on May 9 the June contract is trading nearly unchanged on the day. At this juncture we have no recommendation.