Soybeans:

May soybeans lost 14 cents on volume of 175,311 contracts. Volume declined approximately 135,000 contracts from March 28 when soybeans lost 49 cents on volume of 310,890 contracts while open interest declined 12,525 contracts. On April 1, open interest increased by 1,022 contracts, which in relation to volume is approximately 80% less than average. The May contract accounted for loss of 4,606 of open interest. The open interest increase was the first since March 21 when soybeans gained 29.25 cents on 164,744 contracts and open interest increased by 1,283 contracts. Additionally, April 1, was the first day that open interest increased on a price decline since March 14 when May soybeans lost 11.50 cents and open interest increased by 586 contracts. The open interest increase also was the largest since March 12 when May soybeans lost 10.75 cents on volume of 135,773 contracts and open interest increased by 3,123 contracts. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Soybean meal:

May soybean lost $6.10 on volume of 75,109 contracts. Open interest declined by 1,030 contracts, which in relation to volume is approximately 45% less than average. The May contract accounted for loss of 4,079 of open interest. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

May soybean oil closed 5 points lower on volume of 96,580 contracts. Open interest increased by 2,038 contracts, which in relation to volume is approximately 10% less than average. The May contract lost 4,789 of open interest. Soybean oil remains on a short and intermediate term sell signal. Stand aside. 

Corn:

May corn lost 53 cents on heavy volume of 595,940 contracts. Volume declined from March 28 when 655,122 contracts were traded and open interest increased by 16,834 while May corn lost 40 cents. On April 1, open interest declined 16,499 contracts, which in relation to volume is average. The May contract accounted for loss of 28,032 of open interest. Despite the sharp move lower on April 1, the decline of open interest was average, which means there are huge numbers of speculative longs who have yet to liquidate. For the past 2 trading sessions, corn has fallen a total of 93 cents, and open interest has declined by a total of 335 contracts.  This points to much more selling.The market looks extremely weak, and it is likely that any rally will be met by major selling from longs with large losses. Therefore, it is likely that rallies will be shallow and short-lived until the bulk of speculative longs have liquidated. On March 28, May corn generated a short and intermediate term sell signal.

Wheat:

May wheat lost 23.75 cents on volume of 153,296 contracts. Open interest increased by 1,694 contracts, which in relation to volume is approximately 55% below average. With the decimation of corn, wheat now sells at a premium, which will likely decrease the use of feed wheat. Wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil:

May crude oil lost 16 cents on volume of 457,858 contracts. Open interest increased by 8,451, which in relation to volume is approximately 25% less than average. For the past 6 trading sessions beginning on March 22, open interest in WTI has increased 75,262 contracts and May crude oil has advanced $4.62. Brent crude oil advanced $4.11 in the same 6 day period. From March 22 through April 1, open interest in Brent crude has increased only 15,207 contracts. In short, open interest in WTI has increased approximately 5 x greater than Brent in the same 6 day period. 

Although price and open interest had been acting in a very bullish manner for WTI, we posit that until Brent crude and either heating oil or gasoline generate a short-term buy signal, advances in WTI will be muted. Brent remains on a short and intermediate term sell signal and gasoline remains on a short-term sell signal and an intermediate term buy signal, while heating oil remains on a short and intermediate term sell signal. Yesterday we thought it was likely that an intermediate term buy signal would be generated in Brent crude on April 2, but this has not occurred.

Heating oil:

May heating oil gained 2.17 cents on volume of 113,782 contracts. Open interest increased by 5,396 contracts, which in relation to volume is approximately 75% above average, meaning that new longs were entering the market aggressively and bidding prices higher. From March 22 through April 1, heating oil has advanced 3.37%, but open interest has fallen from a total of 291,312 on March 22 to 290,344 contracts (-968) on April 1. This is bearish open interest action relative to the price advance. Even though heating oil has been far stronger than gasoline during the past 6 trading sessions, it still remains on a short and intermediate term sell signal. The dismal open interest action on the rally is an additional negative for the petroleum complex.

Gasoline:

May gasoline declined by .0091 on volume of 112,861 contracts. Open interest declined by 2,258 contracts, which in relation to volume is approximately 25% less than average. From March 22 through April 1, May gasoline has advanced 1.56%, which is 50% less than  the advance in heating oil during the same time frame. What’s worse is that open interest has declined from 320,501 contracts on March 22 to 315,414 contracts on April 1. In short, open interest declined by 5,087 contracts as gasoline prices increased. This is bearish open interest action relative to the price advance. The dismal price and open interest action, is going to weigh on the entire petroleum complex. Another negative is that the May contract has been losing steadily to the deferred months. For example, on March 1, the May-July gasoline spread closed at 12.57 cents premium to May. On April 1, that spread has narrowed to 5.24 cents premium May. This is the lowest price for the spread since December 6, 2012 when the spread closed at 5.47. In short, the spread is selling at a price that is reflective of winter gasoline consumption, not the usual robust consumption pattern beginning in spring. This is counter seasonal spread action and is another negative factor.  The negative price and open interest action for Brent, heating and gasoline reinforce our view that any price increases in WTI will be muted.

Natural gas:

May natural gas lost .009 cent on light volume of 340,670 contracts. Open interest increased by a massive 18,496 contracts, which in relation to volume is approximately 120% above average. For the past 10 trading sessions beginning on March 18, open interest has increased 138,735 contracts while natural gas has advanced 12.1 cents. The massive open interest increase compared to the relatively small advance should concern anyone long the market. There is heavy selling as the market advances, which is capping prices. Speculators have rushed into the long side, which makes the market vulnerable to a significant pullback. For clients who are long futures or options, we have suggested they write out of the money calls. We recommend that sell stops be placed at $3.885. Natural gas remains on a short and intermediate term buy signal.

Copper:

May copper lost 2.75 cents on volume of 43,516 contracts. Open interest increased by 59 contracts. May copper made a new low for the move at $3.3400, which is the lowest price since August 2012. Copper remains on a short and intermediate term sell signal. Copper is extremely weak, but we would not chase the market at current levels.

Gold:

June gold gained $5.20 on light volume of 64,976 contracts. The United Kingdom had a national holiday on April 1, which is the likely reason that volumes in currencies and metals were significantly lower than usual. Open interest declined by 1,482 contracts, which in relation to volume is approximately 5% below average. As this report is being compiled, June gold is trading $24.20 lower. The market has been weak for quite some time, and we recommend a stand aside position.

Platinum:

July platinum gained $24.20 on very light volume of 7,083 contracts. Open interest increased by a massive 591 contracts, which in relation to volume is approximately 230% above average. Platinum remains on a short and intermediate term sell signal. Stand aside.

Silver:

May silver lost 37.9 cents on volume of 41,487 contracts. Open interest increased by 1,197 contracts, which in relation to volume is average. During the past 3 trading sessions beginning on March 27, open interest has increased by 3541 contracts while May silver has declined by 73.5 cents. This is bearish open interest action relative to the price decline. As this report is being compiled, May silver is trading 60.9 cents lower. Silver remains on a short and intermediate term sell signal.

Australian dollar:

The Australian dollar gained 13 points on light volume of 37,490 contracts. Open interest increased by 595 contracts, which in relation to volume is approximately 35% less than average. As we said in yesterday’s report, we want to see more liquidation before new bullish positions are implemented. When the Australian dollar generated a short-term buy signal on March 15, we recommended that clients write out of the money puts, and this trade has been working well. As we pointed out in an earlier report, the 50 day moving average crossed below the 200 day moving average on the Australian dollar continuation chart.

Euro:

The June euro gained 33 points on light volume of 95,799 contracts. Open interest increased by 395 contracts, which in relation to volume is approximately 80% less than average. Euro remains on a short and intermediate term sell signal.

S&P 500 E mini:

The S&P 500 E mini lost 6.75 points on light volume of 1,136,712 contracts. Open interest increased by 28,856 contracts, which in relation to volume is average. The number of stocks trading above their 50 day moving average on the New York Stock Exchange fell to 1,496 on April 1 from 1,609 on March 28. The number of stocks trading above their 50 day moving average on April 1 is below the 200 day moving average of 1,508. As this report is being compiled, the S&P 500 E mini is trading 9.25 points higher on very light volume. We continue to think the market can move higher but it is likely that advances will be unimpressive. Keep in mind that April 15 is the deadline for the payment of taxes due for 2012. With large numbers of US citizens reporting capital gains, it is likely that tax selling will begin shortly. Based upon your risk tolerance, we continue to think that writing out of the money calls is a reasonable trade. Another more conservative approach is to write out of the money calls and then buy a call that is further out of the money. In this way, if the market continues to move higher, any loss on short calls will be offset in part by long calls.