On May 9, most of the major currencies are sharply lower after being sharply higher on May 8. OIA will report on these in the May 9 report to be released Monday.

Soybeans: July soybeans will reverse the short-term sell signal generated on May 7 if the daily low is above OIA’s key pivot point of $14.82.

July soybeans advanced 23.25 cents on low volume of 123,721 contracts. Volume was almost the same as May 7 when July soybeans lost 13.25 cents on volume of 123,738 contracts and total open interest declined by 783 contracts. On May 8, total open interest increased by a massive 5,316 contracts, which relative to volume is approximately is 65% above average. The May contract lost 442 of open interest and the November contract gained 4,267 of open interest while advancing 6.75 cents. The large increase of open interest in the November contract was primarily responsible for the total increase of open interest. As this report is being compiled on May 9 after the release of the USDA WASDE report, July soybeans are trading 17.75 cents higher after making a low for the day at 14.53. We will provide an update on the report in the upcoming Weekend Wrap. July soybeans generated a short-term sell signal on May 7, but remains on an intermediate term buy signal. Continue to stand aside.

Soybean meal:

July soybean meal advanced $5.80 on volume of 49,668 contracts. Total open interest increased by a hefty 3,292 contracts, which relative to volume is approximately 160% above average meaning that new longs were heavily entering the market and driving prices higher. The May contract lost 406 of open interest. As this report is being compiled after the release of the USDA report, July soybean meal is trading $4.20 higher on the day. July soybean meal remains on a short and intermediate term buy signal. Stand aside.

Corn:

July corn advanced 2.50 cents on volume of 202,980 contracts. Total open interest declined by 2,482 contracts, which relative to volume is approximately 45% less than average. The May contract lost 1119 of open interest, July -8033, September -1116 and the December 2014 contract gained 7,284 of open interest while it advanced 2.00 cents. In short, there were open interest declines across the board with the exception of the new crop December as corn prices advanced fractionally. As this report is being compiled after the release of the USDA report, July corn is trading 6.75 cents lower. July corn remains on a short and intermediate term buy signal. Stand aside.

Chicago wheat:

July Chicago wheat lost 2.50 cents on volume of 71,598 contracts. Total open interest increased by 1,779 contracts, which relative to volume is average. The May, July, September 2014 contracts all lost open interest, which totaled 466 lots.The new crop December contract gained 1717 of open interest as it declined 2.50 cents. As this report is being compiled on May 9 after the release of the USDA report, July Chicago wheat is trading 9.75 cents lower and has made a daily low of $7.22, which takes out yesterday’s low of 7.27 3/4. As we said in yesterday’s report, clients should wait for a correction to the 20 day moving average of $7.04 1/8 before considering bullish positions.

Kansas City wheat:

July Kansas City wheat advanced 1.00 cents on light volume of 19,972 contracts. Total open interest declined by a massive 1,122 contracts, which relative to volume is approximately 120% above average meaning that liquidation was very heavy on a fractional advance. The May contract gained 65 of open interest. As this report is being compiled after the release of the USDA report, July Kansas City wheat is trading 1.25 cents lower on the day and has made a low of 8.28, which is above yesterday’s low of 8.28 1/4. As mentioned in yesterday’s report, we think clients should wait for a test near the 20 day moving average of 7.85 5/8 before considering bullish positions.

Cocoa: On July cocoa generated an intermediate term sell signal after generating a short-term sell signal on May 1.

July cocoa lost $5.00 on volume of 31,825 contracts.Volume was the highest since April 10 when 50,844 contracts were traded. On May 8, total open interest increased by 788 contracts, which relative to volume is average. However, the July contract lost 1,148 of open interest, which makes the total open interest increase much more oppressive (bearish). Yesterday, the market made a new low for the move at $2849.00, which is the lowest print since January 27 when July cocoa made a low of 2792.00.Wait for a rally before considering bearish positions. An advance to the 20 day moving average of 2963.00 would be an ideal place to initiate bearish positions.

Live cattle:

August live cattle gained 20 points on volume of 46,796 contracts. Total open interest declined by 1,021 contracts, which relative to volume is approximately 15% below average. The June contract lost 7,415 of open interest. As this report is being compiled on May 9, August cattle is trading 45 points higher and has made a daily high of 1.38350, which is the highest print since May 7 (1.38725). Also, on May 9, the June-August 2014 spread is trading at even money. We consider this to be negative, and advise liquidating the spread if this has not been done already. Although we are bullish cattle, we think this is an inopportune time to be long considering the negative action in the June-August spread. First notice day for the June contract is 3 weeks away.

WTI crude oil:

June WTI crude oil lost 51 cents on volume of 551,072 contracts. Total open interest increased by 2238 contracts, which relative to volume is approximately 80% less than average. However, the June contract lost 24,747 of open interest, which makes the total open interest increased more impressive (bearish).For the past 2 days, open interest action relative to price advances and declines has been decidedly bearish. As this report is being compiled on May 9, June WTI is trading 20 cents lower after making a daily high of 101.18, which took out the previous high of 100.99 made on May 7. On April 30, June WTI generated a short-term sell signal, and on May 2, OIA recommended that clients write out of the money calls, and clients should continue to hold this position.

Natural gas:

June natural gas lost 16.8 cents on heavy volume of 367,602 contracts. Volume was the highest since April 17 when 406,021 contracts were traded and June natural gas closed at $4.754. On May 8, total open interest declined by a massive 16,299 contracts, which relative to volume is approximately 75% above average meaning that liquidation was massive on the hefty price decline. The June contract lost 18,624 of open interest.As this report is being compiled on May 9, June natural gas is trading 6.4 cents lower. Although it will not generate a short-term sell signal because the daily high of 4.598 is above OIA’s new key pivot point of 4.578, it appears inevitable that a short-term sell signal will be generated on Monday. Although a loss was taken on the bullish position recommended in the May 5 report (written on May 6), this was offset by the gain in the partial position and the short call, which continues to make money. The partial position was the remainder of the original bullish position recommended on April 14 and liquidated in part on April 22 for a profit. The position remaining should have been liquidated yesterday at a profit.

From the May 7 report:

“In the May 6 report we recommended liquidating the new bullish positions at 4.651 and therefore this position should have been closed out either before the report or some time after. On May 2, OIA recommended that the partial bullish position recommended in the April 22 report be liquidated if natural gas penetrated the April 25 low of 4.644, but the short call position should continue to be held. Continue to hold the short call position.”

Euro: The June euro will generate a short-term sell signal if the daily high is below OIA’s key pivot point of 1.3797. The high on May 9 is 1.3843. 

The June euro lost 63 pips on huge volume of 359,200 contracts.Volume was the highest since March 13 when 562,086 contracts were traded and the June euro made a high of 1.3966, which was the highest print since yesterday when the June euro reached 1.3993. On May 8, total open interest declined by 7,033 contracts, which relative to volume is approximately 20% below average.The move into new high territory and the subsequent intraday reversal, is very bearish, and caught large numbers of speculators off guard. As this report is being compiled on May 9, the June euro is trading 99 pips lower and has made a new low for the move at 1.3749. We think the June euro has more to go on the downside, especially since the decline of open interest on May 8 was below average. Stand aside.

Australian dollar:

The June Australian dollar advanced 38 pips on volume of 79,273 contracts. Total open interest increased by 3,500 contracts, which relative to volume is approximately 75% above average meaning that new longs were heavily and aggressively entering the market and driving prices to new highs for the move (93.71). As this report is being compiled as most major currencies are sharply lower, the Australian dollar is outperforming and trading only 18 pips lower on the day. The Australian dollar remains on a short and intermediate term buy signal. We have no recommendation at this juncture.

Canadian dollar:

The Canadian dollar advanced 64 pips on volume of 57,027 contracts. Total open interest increased by a massive 3,253 contracts, which means that new longs were heavily entering the market and driving prices to a major new high of 92.40, which is the highest print since early January 2014. As this report is being compiled on May 9, the June Canadian dollar has made a complete reversal and is currently trading 68 pips lower and has made a daily low of 91.53. The Canadian dollar remains on a short and intermediate term buy signal.We have no recommendation.

Platinum: 

July platinum advanced $3.30 on volume of 11,746 contracts. Total open interest declined by 325 contracts, which relative to volume is average. As this report is being compiled on May 9, July platinum is trading $5.20 lower, and has made a daily low of 1426.60, which is above yesterday’s low of 1425.10. May 9 is the second day of the pullback since July platinum generated a short and intermediate term buy signal on May 5. Our sentiment is reflected by our comments in yesterday’s report.

From the May 7 report:

“Yesterday, was the first day of the pullback and we believe the market will continue to correct. However, from a practical point of view, we do not see platinum breaking out if gold and silver continue to be in the  doldrums. Additionally, the buy signals generated on May 5 may turn out to be false if gold and silver continue to lead the way lower. Stand aside.”

S&P 500 E mini:

The June S&P 500 E mini lost 2.00 points on volume of 1,756,896 contracts.Total open interest increased by 13,533 contracts,  which relative to volume is 60% below average.As this report is being compiled on May 9, the E mini is trading 4.00 points lower after making a daily high of 1875.00. In yesterday’s action, the E mini made a high of 1884.75 and closed at 1872.25. This was the 4th time the E mini traded at the very top of the range and was unable to close at the highs. We discussed this in yesterday’s report and are reprinting it in order to provide context. The bottom line: since April 4 when the E mini made its all-time high, it has been unable to close at the highs. We think the market is highly vulnerable to a substantial correction, and continue to advise holding long puts if clients hold long equity positions.

From the May 7 report:

“Ever since April 4 when the June E mini made its all-time high at 1892.50, whenever the market approaches this high, it is unable to hold it and closes lower on the day.”

“For example, on April 4 when the E mini reached its all-time high of 1892.50 it closed sharply lower on the day at 1860.00. On April 24, the E mini made a high of 1882.50 and closed at 1873.00. On May 2, the E mini made a high of 1886.00 and closed at 1874.50. In short, during 3 previous occasions over the past month, the E mini has not been able to close at its highs for the day when it trades at the very top of the range. In short, sellers come of the woodwork at the highs to drive prices lower. We continue to recommend long put protection for those clients who hold long equity positions.”