The USDA will release the world agriculture supply and demand report (WASDE) on May 9.

Soybeans: If the May 7 high of $14.57 1/2 holds, July soybeans will generate a short-term sell signal.

July soybeans lost 3.75 cents on light volume of 138,289 contracts. Volume increased from May 5 when 99,590 contracts were traded and July soybeans lost 7.50 cents while total open interest increased by 1,251 contracts. On May 6, total open interest declined by 6,618 contracts, which relative to volume is approximately 75% above average. the May contract lost 1,850 of open interest. For the past 2 days, we have seen soybean prices decline and make new lows for the move, yet it is occurring on low volume. This tells us large numbers of market participants are refusing to liquidate as prices decline.As this report is being compiled on May 7, July soybeans are trading 14.25 cents lower and have made a new low for the move at 14.41 3/4, which is the lowest print since April 3 (14.37 1/4). Stand aside.

Soybean meal:

July soybean meal lost $1.20 on volume of 52,734 contracts. Total open interest declined by a massive 4,959 contracts, which relative to volume is approximately 275% above average meaning that liquidation was off the charts heavy. The May contract accounted for loss of 1,244 of open interest. As this report is being compiled on May 7, July soybean meal is trading $3.50 lower and has made a daily low of 471.80, but this has not taken out yesterday’s low for the move of 471.00.Soybean meal continues to be the leader of the bean complex and consequently will not generate a short-term sell signal until the high for the day is below $469.10. Stand aside.

Soybean oil: We are suspending coverage on soybean oil until such time as we see a trading opportunity. July soybean oil generated a short-term sell signal on May 1, and we are waiting for a rally before recommending the initiation of bearish positions.

Corn:

July corn advanced 9.50 cents on volume of 213,185 contracts. Volume increased slightly from the 202,929 contracts traded on May 5 when corn advanced 8.50 cents and total open interest declined by 3,615 contracts. On May 6, total open interest increased by a healthy 6,638 contracts, which relative to volume is approximately 20% above average. The May contract lost 1,146 of open interest. As this report is being compiled on May 7, July corn is trading 5.25 cents lower, but has not taken out yesterday’s high of 5.19. The market is expecting a reduction in ending stocks for the 2013-2014 season, and this will be resolved by the May 9 USDA report. The central question is: how much of the report has already been discounted. July corn remains on a short and intermediate term buy signal. Stand aside.

Chicago wheat:

July Chicago wheat advanced 10.00 cents on volume of 87,154 contracts. Total open interest increased by 3,861 contracts, which relative to volume is approximately 75% above average meaning that large numbers of new longs entered the market and drove prices to new highs for the move (7.44). As this report is being compiled on May 7, July Chicago wheat is trading 4.50 cents lower and has not taken out yesterday’s high. The market is massively overbought and at this juncture OIA cannot recommend bullish positions.

Kansas City wheat:

July Kansas City wheat advanced 13.75 cents on volume of 25,326 contracts. Volume was the highest since May 2 when 29,896 contracts were traded and July KC wheat advanced 17.75 cents while total open interest increased by 1,573 contracts. On May 6, total open interest increased by massive 2,381 contracts, which relative to volume is approximately 280% above average meaning that large numbers of new longs were entering the market and driving prices to new contract highs of $8.55 1/2. From April 29 through May 6, total open interest has increased 9145 contracts and there was an open interest decline on only one day (May 5). In short, market participants have stampeded into Kansas City wheat, which makes it vulnerable to a very sharp pullback. Stand aside.

Live cattle:

August live cattle advanced 67.5 points on volume of 46,397 contracts. Total open interest increased by 1,899 contracts, which relative to volume is approximately 55% above average. The June contract lost 2,617 of open interest, which makes the total open interest increased much more oppressive (bullish). As this report is being compiled on May 7, August cattle is trading 50 points lower and has made a daily low of 1.37000, which is above the May 5 low of 1.36800. Stand aside for now. If holding the June 2014- August bull spread, continue to do so only if your risk parameters allow it.

WTI crude oil:

June WTI crude oil lost 26 cents on volume of 534,900 contracts volume and increase dramatically from May 5 when 362,666 contracts were traded and WTI crude oil lost 28 cents while total open interest declined by 1,116 contracts. On May 6, total open interest declined by 7,114 contracts, which relative to volume is approximately 45% less than average. The June contract accounted for loss of 11,870 of open interest. As this report is being compiled on May 7, June WTI is trading 99 cents higher on the day and has made a daily high of 100.99. On May 2, OIA recommended writing out of the money calls, and this position should continue to be held, especially since heating oil generated a short and intermediate term sell signal on May 6 and gasoline generated a short-term sell signal on May 6 as well.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.8 million barrels from the previous week. At 397.6 million barrels, U.S. crude oil inventories are above the average range for this time of year. Total motor gasoline inventories increased by 1.6 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.4 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 3.7 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 7.2 million barrels last week.

Heating oil: On May 6, June heating oil generated a short and intermediate term sell signal.

Gasoline: On May 6, June gasoline generated a short-term sell signal, but remains on an intermediate term buy signal.

Natural gas:

June natural gas advanced 11.1 cents on volume of 238,692 contracts. Volume was the highest since April 17 when 406,021 contracts were traded and natural gas advanced 21.1 cents while total open interest declined by 1,114 contracts. On May 6, total open interest declined by 2,257 contracts, which relative to volume is approximately 50% below average. The June contract accounted for loss of 6,462 of open interest. The open interest stats are a major disappointment, and it shows as prices rally, market participants are liquidating. This probably explains the action on May 7 when the June contract is trading 7.8 cents lower on the day. Yesterday, we recommended the initiation of bullish positions and suggested using the May 5 low of 4.651 as the exit point for bullish positions. Additionally, we said to maintain the previous partial bullish position along with the short call position recommended on April 22.

We are disappointed with today’s trade and our immediate concern is the impact of tomorrow’s natural gas storage report, which is released at 9:30 a.m. CDT. The decision to continue holding the new bullish position should be made before the release of the storage report.We continue to like natural gas, and what we are seeing is basic consolidation. The 5 day moving average is $4.719, 20 day moving average 4.701, 50 day moving average 4.567. In short, there is a bullish moving average set up wherein the shorter averages are above the longer averages. The decision to stay with the trade should be based upon your risk parameters and sound money management.

Australian dollar:

The June Australian dollar advanced 79 pips on volume of 84,708 contracts. Volume was the highest since May 2 when 92,977 contracts were traded and total open interest declined by 2,763 contracts while the June contract lost 4 pips after making a daily low of 91.75. On May 6, total open interest increased by 2,751 contracts, which relative to volume is approximately 30% above average meaning that new longs were entering the market and driving prices to new highs for the move (93.43). As this report is being compiled on May 7, the June Aussie is trading 18 pips lower and has made a daily low of 92.94, which is above OIA’s key pivot point of 92.64. It appears that the June Australian dollar is going to test the April 10 high of 94.19. The June Australian dollar remains on a short and intermediate term buy signal. We have no recommendation.

Euro:

The June euro advanced 56 pips on volume of 168,779 contracts. Total open interest increased by 4846 contracts, which relative to volume is average. The June euro made a new high for the move at 1.3950, which is the highest print since 1.3966 made on March 13. The June euro remains on a short and intermediate term buy signal. We have no recommendation.

British pound:

The June British pound had a strong advance of 1.16 cents on volume of 98,297 contracts.Total open interest increased by a massive 8,067 contracts, which relative to volume is approximately 230% above average. The June contract made a new contract high at 1.6992, which is the highest print since August 5, 2009 when the British pound made a high of 1.70. The June pound remains on a short and intermediate term buy signal. We have no recommendation.

Canadian dollar:

The June Canadian dollar advanced 59 pips on volume of 58,565 contracts. Total open interest increased by 3,482 contracts, which relative to volume is approximately 140% above average. The June Canadian dollar made a high of 91.88, which is the highest print since 91.95 made on April 9. The Canadian dollar remains on a short and intermediate term buy signal. We have no recommendation.

Yen: On May 6, the June yen generated a short and intermediate term buy signal.

The June yen advanced 53 pips on volume of 114,289 contracts. Total open interest declined by 2,386 contracts, which relative to volume is approximately 20% less than average. the June yen made a high of.9855, Which is its highest print since.9856 made on April 15. We have no recommendation.

Gold:

June gold lost 70 cents on volume of 126,858 contracts. Total open interest increased by 6,064 contracts, which relative to volume is approximately 75% above average meaning that longs and shorts waged a major battle, but June gold declined by only a fraction. Additionally, June gold was unable to take out the May 5 high of 1315.80. As we stated in the report of May 5, June gold had to make a low above OIA’s first key pivot point of $1305.90. Yesterday the low was 1304.40 and as this report is being compiled on May 7, the low for the day has been 1286.60. In short, despite positive open interest action relative to price advances, gold has been unable to generate a short-term buy signal. On the other hand, June gold has not generated an intermediate term sell signal. At this juncture we have no recommendation.

From the May 5 report:

“The price and open interest action for May 2 and 5 has been extremely positive, but as we stated in yesterday’s report, for gold to generate a short-term buy signal, the low the day must be above $1305.90 and then 1315.00.”

Platinum:

July platinum gained $9.70 on volume of 10,145 contracts. Total open interest increased by 292 contracts, which relative to volume is average. July platinum has sprinted higher beginning on April 23 with no setback of any consequence. Therefore, it is not unexpected  on May 7, that July platinum is trading $18.50 lower on the day. On May 5, July platinum generated a short and intermediate term buy signal, and is usually the case after the generation of the signals, the market tends to pullback from 1-3 days, and May 7 is the first day of the correction. We have found that platinum tends to lead the precious metals complex higher and lower. The question that remains unanswered is whether the rally is a reaction to the decline which began on April 15 through April 22, or the start of something big.. We will be monitoring platinum closely to see if there is a trading opportunity on the long side. We would be less enthusiastic about platinum if gold was unable to rally with platinum..

S&P 500 E mini:

The June S&P 500 E mini lost 11.50 points on volume of 1,381,913 contracts. Total open interest declined by 3,600 contracts, which is minuscule and dramatically below average. As this report is being compiled on May 7, the E mini is trading 4.50 higher on heavier than normal volume. It appears that the E mini is in a topping formation, and we don’t think it’s going significantly higher unless the performance of the NASDAQ 100 and the Russell 2000 becomes more positive.The Russell 2000 is currently trading below its 200 day moving average and the NASDAQ 100 has been unable to trade above its 50 day moving average since early April. Some may attribute this to a garden-variety rotation, however, it could be the sign of something more serious. We continue to recommend holding long puts to protect long equity positions.