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Note: Starting on Monday, April 16 the report month on grain contracts will roll over to July.
Corn:
May corn lost 8 1/4 cents on volume of 365,024 contracts. Open interest increased on the decline by 2,951 contracts. The May-July bull spread continued to work and was unchanged at 8 1/2 cents premium to May. The fact that May corn continues to sell at a premium over July when the corn market is in decline is extremely positive. The problem with corn is that there are many thousands of speculative longs who purchased corn at significantly higher prices. Ideally, I would like to see open interest decline indicating that the longs are throwing in the towel. The market began its recent decline in earnest on April 10 when the high for the day was $6.53 3/4. From April 10 through April 13, open interest has increased by 12,413 contracts indicating that new shorts and new longs are taking up new positions as the market moves lower. Adding fuel to the downside move has been unusually high volume. For example, average volume for the April 10 through April 13 time frame was 417,701 contracts per day. In short, corn prices have been in a downtrend since April 10 and open interest and volume have increased on the down move. This is bearish market action, but I remain friendly to the corn market, though some speculative excesses by longs have to be trimmed. As I’ve mentioned before, we are in a time of some seasonal weakness. Additionally, I believe the broad markets are entering a period of weakness, especially equities. Stand aside.
Soybeans:
May soybeans loss 4 1/4 cents on volume of 267,705 contracts. Open interest increased by 6,912 contracts. The market is extremely overbought. Stand aside.
Sugar #11: April 16’s report will begin using July as the front month
May sugar lost 85 points on very heavy volume of 176,387 contracts. Open interest increased on the decline by 1,888 contracts. Since being stopped out at 24.11, I have suggested that speculators stand aside in sugar market. As I write this on the morning of April 16 May sugar is down 45 points. If the April 16 high of 23.43 holds, an intermediate term sell signal will be generated. Stand aside.
Crude oil:
May crude oil lost 81 cents on light volume of 501,173 contracts. Open interest increased on the decline by 5,439 contracts. The market generated a short-term sell signal on March 29, but has not generated an intermediate term sell signal. May crude oil made a low of $100.68 on April 10 and that low has not been violated. Although the market has pulled back, it doesn’t seem to have a lot of follow through on the downside. This may change if the broad markets decline significantly, but for now it appears the market is the process of consolidating. I continue to suggest that speculators stand aside.
Gasoline:
May gasoline lost 1.06 cents on volume of 190,809 contracts. Open interest increased by 577 contracts. Stand aside.
Copper:
May copper lost 9.35 cents on heavy volume of 108,932 contracts. Open interest increased on the decline by 9,268 contracts. The open interest increase was massive in relation to the volume, which also was large, meaning that both longs and shorts have strong convictions about the direction of the copper. On April 9, copper generated a short-term sell signal, however an intermediate term sell signal has not been generated. It is imperative that speculators read the April 15 Weekend Wrap for the special report I wrote on copper.
Gold:
June gold closed $20.40 lower on light volume of the 134,993 contracts. Open interest declined by 2,989 contracts. Although gold is on an intermediate term and short term sell signal, the price, volume, and open interest action is indicative of a market that is in a corrective phase. The light volume was especially positive considering that the range for the day was $30.90, which is about 10% more than the 21 day average true range of $28.20. This corrective phase should be used by speculators to accumulate gold at lower prices. Please consult your investment advisor or broker before acquiring gold.
Silver:
May silver lost $1.13 on heavier than normal volume of 58,993 contracts. Open interest declined by 92 contracts. The market is on a short and intermediate term sell signal, however do not short the market. Stand aside.
Euro:
The June Euro lost $1.17 on volume of 242,442 contracts. Open interest increased on the decline by 10,269 contracts. The price and open interest action continues to be negative, however, I want to see the market rally before suggesting that bearish positions be implemented. Alternatively, if the 1.30 level is significantly penetrated, this would indicate the likelihood another leg down. In a future post I will discuss the tactics of implementing a bearish strategy on weakness.
Australian dollar:
The June Australian dollar lost 57 points on volume of 138,359 contracts. Open interest increased on the decline by 2,987 contracts. The market consistently displays poor open interest action. For example, when the Australian dollar rallies, open interest goes down and when the Australian dollar declines open interest goes up. This is a classic bearish market action. The market made a high of 1.0380, a level which has recently shown a considerable amount of resistance. Although the market has generated a short-term sell signal, an intermediate term sell signal has not been generated. A strategy that could be employed for a bearish position in the Australian dollar would be to wait for the market to rally within 50 points near the March 28 resistance of 1.0388 before implementing bearish positions and use the 1.0388 level as a benchmark to liquidate bearish positions. Before implementing this strategy, please consult with your investment advisor or broker.
Recent highs for June Australian Dollar:
April 13 high: 1.0380
April 12 high: 1.0376
April 3 high: 1.0380
March 28 high:1.0388
S&P 500 E mini:
The June S&P 500 E mini closed 21.00 points lower on fairly heavy volume of 1,937,459 contracts. Open interest declined by 1,663 contracts. Long put protection should already be in place.
