Soybeans:

July soybeans advanced 17.50 cents on fairly heavy volume of 172,535 contracts. Volume with the highest since May 1 when 189,404 contracts were traded and July soybeans lost 51.75 cents while total open interest declined by 10,635 contracts. On May 9, total open interest increased by a paltry 773 contracts, which relative to volume is approximately 80% below average. The May through July 2014 contracts lost a total of 3,435 of open interest, but this was offset by a 4,023 contract increase in the November contract. The November contract advanced 2.25 cents on Friday. The liquidation in the July contract (-2797) as prices moved higher on the USDA WASDE report portends lower prices. As this report is being compiled on May 12, July soybeans are trading 16.50 cents lower and have made a daily low of 14.63 1/2. As the weekend report stated, the daily low in July soybeans would have to be above $14.82 before reversing the short-term sell signal. We thought it was possible that a follow through rally would occur on Monday accompanied by a disappointing close.Stand aside.

From the May 11 Weekend Wrap:

“On May 7, July soybeans generated a short-term sell signal, and as of Friday, the July contract has rallied 2 days, which is consistent with OIA’s protocol for a 1-3 day countertrend rally after the generation of a sell signal. However, July soybeans are at a crucial juncture and could rally one more day and still not generate a short-term buy signal unless the low for the day is above $14.82. Conceivably, soybeans could have a follow-through rally on Monday and then have a disappointing close.

The USDA reported that imports of soybeans will increase 25 million bushels and that exports will increase 20 million bushels from the April report. The carry out was cut by 5 million bushels. Yield per acre and acres planted remained unchanged from the April report. Soybean crush was increased by 10 million bushels. For the 2014-2015, the anticipated stocks to usage ratio is 9.6%, which is a major increase from the 2013-2014 season of 3.8%. All in all,The new crop balance sheet is tight and old crop is decidedly bearish.

Soybean meal:

July soybean meal advanced $6.60 on volume of 72,693 contracts. Total open interest increased by 2,351 contracts, which relative to volume is approximately 30% above average. The May contract lost 626 of open interest and there was open interest increases in the forward months. As this report is being compiled on May 12, July soybean meal is trading $7.30 lower and is several dollars above the recent low of $471.00 made on May 6.

The USDA reported that imports would increase by 100 thousand metric tons, and exports were increased by 100 thousand metric tons. We like soybean meal, and think new contract highs are in the offing, but the market needs to go through a corrective-consolidation phase.

Corn: The new crop December 2014 contract will generate a short-term sell signal on May 12.

July corn lost 9.00 cents on heavy volume of 416,471 contracts. Volume was the highest since April 22 when 433,504 contracts were traded and July corn closed at $5.02. On May 9, total open interest increased by 735 contracts, which is minuscule and dramatically below average. The May 2014 through September 2014 contracts lost a total open interest of 3,474 contracts. The new crop December contract gained 3,267 of open interest. As this report is being compiled on May 12, July corn is trading 7.75 cents lower and has made a daily low of $4.98 1/2, Which is the lowest print since May 5 when July corn reached 4.97 1/2. We have consistently warned clients away from the long side of corn, especially since managed money remains massively long and the path of least resistance is lower.

The USDA reported that ending stocks totaled 1.146 billion bushels, which is a 185 million bushel cut from the April report. Additionally, exports were increased 150 million bushels, leaving a stocks to usage ratio for the 2013-2014 season of 8.4% versus the April report of 9.9%. The anticipated stocks to usage ratio for 2014-2015 is 12.9%.

Chicago wheat:

July Chicago wheat lost 12.75 cents on heavier than normal volume of 119,014 contracts. Volume was the highest since April 24 when 136,636 contracts were traded and July Chicago wheat closed at $6.96 1/2. On May 9, total open interest increased by 4,842 contracts, which relative to volume is approximately 55% above average meaning that new short sellers were aggressively entering the market and driving prices lower. This is bearish. Although, the May contract lost 43 of open interest, the July contract gained 2,368 contracts of open interest. As this report is being compiled on May 12, July Chicago wheat is trading 9.75 cents lower and has made a daily low of $7.00. Our initial target on May 7 was the 20 day moving average of 7.04 1/8, but we have changed our minds and think it is wise to wait for a pullback to at least the 50 day moving average of 6.92 5/8. However, our preference is to be long Kansas City wheat, not Chicago wheat.

Kansas City wheat:

July Kansas City wheat lost 13.75 cents on volume of 28,059 contracts. Volume was the heaviest 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 9, total open interest declined by a massive 3,715 contracts, which relative to volume is approximately 410% above average meaning that liquidation was off the charts heavy. The May through December 2014 contracts lost open interest. The massive decline of open interest is healthy for the market because there had been a massive build up in open interest during the past couple of weeks. The decline of open interest relieves some potential selling pressure going forward. As this report is being compiled on May 12, Kansas City wheat is trading 4.25 cents lower after making a daily low for the move at $8.09 1/2, which is the lowest print since May 2 when the July contract reached 8.05 1/2.We want to see more declines of open interest, and our initial target is 7.93 5/8, the 20 day moving average.

The USDA reported they were increasing imports by 10 million bushels, and this was the only change in the report from April. For 2013-2014. Stocks to usage was pegged at 23.9%, and for the 2014-2015 season, 24.9%.

Coffee:  July coffee will generate a short-term sell signal on May 12.

July coffee lost 11.60 cents on heavy volume of 42,466 contracts.Volume was the highest since April 16 when 49,044 contracts were traded. On May 9, total open interest increased by a hefty 1,487 contracts, which relative to volume is approximately 40% above average.As we pointed out in the weekend report, from the time that coffee topped out on April 23, through May 8, total open interest increased, and with the action on Friday, total open interest has increased by 9,127 contracts while July coffee has declined 29.50 cents.This is very bearish open interest action relative to the price decline. Speculators are refusing to liquidate, which means the carnage is far from over. At this juncture, we think rallies will be muted because there are masses of speculators who are looking to recover losses or lost profits.

From the May 11 Weekend Wrap:

“Just as managed money got extremely bullish, the coffee market collapsed last week. It looks inevitable that a short-term sell signal will be generated, perhaps on Monday. If the high for the day in the July contract is below OIA’s key pivot point of 1.9080, a short-term sell signal will be generated. The downside target is OIA’s  support area of 1.6600, which is slightly above the 100 day moving average of 1.6460.”

“We think the move lower will accelerate due to the huge long position of managed money, and there is more bad news to come: Since topping out on April 23, July coffee has declined 8.39%, or 17.90 cents through May 8, yet open interest has increased by 7,640 contracts during this time. In short, despite the massive long position of managed money, there has not been liquidation as prices have declined. Because managed money is refusing to liquidate, significant selling is ahead.”

Live cattle:

August live cattle gained 60 points on heavy volume of 70,154 contracts. Volume was the highest since May 1 when 74,414 contracts were traded and August cattle closed at 1.38575. On May 9, total open interest increased by 2,787 contracts, which relative to volume is approximately 55% above average meaning that aggressive new longs were entering the market at a substantial pace and driving prices higher. The June contract lost 10,973 of open interest, which makes the total open interest increased much more impressive (bullish). As this report is being compiled on May 12, August cattle is trading near unchanged on the day. We think cattle prices are headed higher, but with the weakness in the June contract, August may consolidate before resuming its uptrend. The June contract is now selling at a major clear discount to August, which we view as a short-term negative for the forward contracts.

WTI crude oil:

June WTI crude oil lost 27 cents on volume of 558,653 contracts. Total open interest increased by 4,321 contracts, which relative to volume is approximately 60% below average. The June contract lost 21,032 of open interest. As this report is being compiled on May 12, June WTI is trading 51 cents higher and is made a daily high of 100.93, which is far from the high of 101.18 made on May 9. On April 30, June WTI crude oil generated a short-term sell signal and on May 2, OIA recommended writing out of the money calls. Although not much money has been made on the position at this juncture, we see crude oil moving sideways to lower. Keep in mind that June heating oil is on a short and intermediate term sell signal while June gasoline is on a short-term sell signal. Brent crude has not generated a short-term sell signal, and remains on an intermediate term buy signal.

Natural gas: June natural gas will generate a short-term sell signal on May 12.

June natural gas lost 4.1 cents on volume of 248,138 contracts. Volume declined from the 367,602 contracts traded on May 8 when June natural gas lost 16.8 cents and total open interest declined by 16,299 contracts. On May 9, total open interest declined by 8,367 contracts, which relative to volume is approximately 35% above average meaning that liquidation continued on Friday as prices moved lower. As this report is being compiled on May 12, June natural gas is trading 8.7 cents lower and has made a daily low of 4.429.

We are reprinting the pertinent parts of the May 7 and 8 reports on natural gas, to illustrate how OIA keeps its clients safely out of harm’s way by making timely recommendations, which keep losses to a minimum.

From the May 8 report:

“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 on May 12.

The June euro lost 1.07 cents on volume of 237,618 contracts. Total open interest declined by 3,458 contracts, which relative to volume is approximately 40% below average. During the past 2 days, the euro has declined 1.64 cents and total open interest has declined by 10,491 contracts. The decline of open interest is healthy, however, the June euro will generate a short-term sell signal on May 12.

Swiss franc: The June Swiss franc will generate a short-term sell signal on May 12.

British pound:

The June British pound lost 1.01 cents on volume of 93,096 contracts. Total open interest declined by 4,032 contracts, which relative to volume is approximately 70% above average meaning that liquidation was very heavy on the decline. As this report is being compiled on May 12, the June pound is trading 24 pips higher, and has not taken out the May 9 low of 1.6827. The June pound remains on a short and intermediate term buy signal.

Canadian dollar:

The June Canadian dollar lost 69 pips on heavy volume of 72,396 contracts. Volume was the highest since March 27 when 74,874 contracts were traded and the June Canadian dollar closed at 90.47. On May 9, total open interest declined by 1,723 contracts, which relative to volume is average. As this report is being compiled on May 12, the June Canadian dollar is trading 7 pips higher on the day, and has not taken out Friday’s low of 91.53. The June Canadian dollar remains on a short and intermediate term buy signal.

Australian dollar:

The June Australian dollar lost 20 pips on light volume of 46,296 contracts. Total open interest declined by 1,276 contracts, which relative to volume is average. As this report is being compiled on May 12, the June Aussie is trading 9 pips higher on the day, and has not taken out Friday’s low of 93.24.

From the May 11 Weekend Wrap:

“We expect the rally to continue and would look to buy setbacks. For futures traders, we recommend using the May 7 low of 92.94 as an exit point for futures positions. As of Friday’s close, the June Australian dollar is 4.69% away from the 52-week high on the continuation chart of 97.91, which was made on May 10, 2013. We think there is a good chance the Aussie could test this high, and have little doubt that it will test the April 10 high of 94.19. Another positive factor is that leveraged funds are net long by the lowest amount since the April 15 COT report (1.78:1) and the April 8 report of 1.51:1.”

Platinum:

July platinum lost $8.20 on very low volume of 5,346 contracts. Total open interest declined by 359 contracts, which relative to volume is approximately 160% above average meaning that liquidation was heavy on the decline. On May 5, July platinum generated a short and intermediate term buy signal, and since then, July platinum has had a standard correction based upon OIA’s protocol of a 1-3 day pullback after the generation of buy signals. On May 7 and 9, July platinum closed lower and on May 12 made a low of $1422.20, which we regard as the 3rd day of the correction.We have no recommendation at this juncture, however, we are seeing strength in gold and significant strength in silver, which bodes well for the long side of platinum.

S&P 500 E mini:

The June S&P 500 E mini gained 1.25 points on volume of 1,478,253 contracts. Total open interest increased by 1,346 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on May 12, the June E mini is trading 17.25 points higher on the day and has made a high of 1891.50,, which is just shy of the all-time high made on April 4 of 1892.50. For those holding long equity positions, we continue to recommend long put protection.