Volume and open interest analysis for April 18, 2013.

Soybeans:

July soybeans gained 10 cents on volume of 222,461 contracts. Open interest declined 6,010 contracts, which relative to volume is average. The May contract accounted for loss of 14,621 of open interest. This was the first day out of the past several that open interest declined while soybeans advanced. We continue to think that soybeans will grind its way higher while the May contract is on the board. First notice day is April 30, which means those with speculative positions will be forced to liquidate. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Corn:

July corn lost 11.5 cents on heavier than normal volume of 326,054 contracts. Volume increased approximately 54,000 contracts from April 17 when July corn gained 0.50 cents and open interest declined 12,149 contracts. On April 18, total open interest declined by 6,169, which relative to volume is approximately 25% less than average. Corn remains on a short and intermediate term sell signal. Stand aside.

Wheat:

July wheat lost 0.50 cents on light or than normal volume of 82,220 contracts. Open interest declined 762 contracts, which relative to volume is approximately 50% less than average. The May contract accounted for loss of 5,713 of open interest. Wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil:

June WTI gained $1.01 on heavy volume of 772,647 contracts. Open interest increased by 7,945 contracts, which relative to volume is approximately 50% less than average. The market continues to look extremely weak, and thus far rallies have been tepid at best. Despite this, we expect a rally to at least the $90.27-91.00 level, possibly 92.00. Brent crude gained $1.44 on volume of 829,449 contracts. Open interest increased by 11,350 contracts, which relative to volume is approximately 45% less than average. Although Brent continues to be the week sister to WTI, a rally to the $104.81 area is realistic. Brent and WTI are massively oversold, and remain on short and intermediate term sell signals. Stand aside.

Heating oil:

June heating oil gained 3.87 cents on volume of 142,155 contracts. Open interest increased by 4,711 contracts, which relative to volume is approximately 35% above average, meaning that new longs were entering the market and pushing prices higher. April 18 was the first day that open interest increased along with price since April 9 when heating oil gained .0076 cents and open interest increased 3,458 contracts on volume of 136,781. This is the first day of positive price and open interest action, but we would need to see a series of these before being convinced that a bottom is in for heating oil. Heating oil remains on a short and intermediate term sell signal. Stand aside.

Gasoline:

June gasoline gained 2.78 cents on volume of 149,938 contracts. Open interest declined 2,601 contracts, which relative to volume is approximately 25% less than average. June gasoline made a fractional lower low on April 18 ($2.6979) from the April 17 low of $2.7038. June gasoline is massively oversold, and a rally to the $2.88-2.92, would relieve some of the oversold condition. Gasoline remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

May natural gas rallied 18.7 cents on volume of 666,421 contracts. Volume exceeded that of April 11 when 661,297 contracts were traded and open interest increased 13,132. Prior to April 11, natural gas advanced 17.8 cents on volume of 792,024 contracts and open interest increased 36,890 contracts. On April 18, open interest increased 23,346 contracts, which relative to volume is approximately 40% above average. Natural gas made a high of $4.429, which is the highest price for natural gas since July 2011. Since Open Interest Analyst announced that natural gas generated a short-term buy signal on March 1, through April 18, the increase of open interest has been nothing short of astounding. During this time, there have only been 4 or 5 days that open interest has declined. Natural gas is massively overbought and is due for a correction, which could come at any time. We advise against entering new positions at current levels.

Copper:

May copper gained 1.70 cents on heavy volume of 155,863 contracts. Open interest declined by 5,810 contracts, which relative to volume is approximately 45% above average. The massive amount of liquidation on a relatively small rally is testament to the inherent weakness of copper. The market is massively oversold and could rally at any time, but we suspect these will be met by new short sellers and longs  selling trying to recoup some of their losses. Copper made a new low at $3.0600, which is the lowest price since July 2011. On October 3, 2011, copper made a low at $3.00, which was the low price for 2011. If this is broken, there is no support until the June 7, 2010 low of $2.73. A rally to the $3.32 level would help to relieve copper’s oversold condition. Copper remains on a short and intermediate term sell signal. Stand aside.

Gold:

June gold advanced $9.80 on volume of 263,329 contracts. Volume was the lowest since April 11 when 153,313 contracts were traded and June gold advanced $6.10 while open interest declined 3,698 contracts. On April 18, open interest increased 1,464 contracts, which relative to volume is approximately 70% below average. On April 19, the market has made a new high for the move at $1424.70, but has sold off and is currently trading unchanged on the day. Gold is going to have to test the lows a number of times, and trade at the lower end of the trading range before we can feel confident that it has bottomed. This may take a number of months. Gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

May silver lost 6.2 cents on volume of 84,343 contracts. Open interest declined 1,447 contracts, which relative to volume is approximately 25% less than average. Like the other metals, silver is falling on its own weight and rallies for the most part have been nonexistent. There is no support for silver until it reaches the $19.00 level. Silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The Australian dollar lost 8 points on heavy volume of 121,930 contracts. Open interest declined by 4,169 contracts, which relative to volume is approximately 40% above average, meaning that liquidation was unusually heavy. The market made a new low for the move at 1.0224 which is the lowest price for the Australian dollar since March 14, when it reached a low of 1.0215. Though the Australian dollar remains on a short and intermediate term buy signal, we caution clients to move to the sidelines because it appears the bull move is over for now.

Euro:

The June euro gained 33 points on volume of 253,348 contracts. Open interest declined on the advance by 3,419 contracts, which relative to volume is approximately 60% below average. The open interest action in the euro has been extremely bearish relative whether prices are advancing or declining. In short, open interest declines when the euro advances and increases when the euro declines. We want to see a retest of the 1.3200 level, before recommending bearish positions. The euro remains on a short and intermediate term sell signal, and the dollar index remains on a short-term sell signal, but an intermediate term buy signal. In other words, we expect to see short-term strength in the euro, but longer-term, we expect the euro to decline against the dollar. 

S&P 500 E mini:

The S&P 500 E mini lost 12.00 points on volume of 2,324,781 contracts. Open interest increased by a minuscule 3,799 contracts. The E mini made a new low for the move at 1530.75, which is the lowest price since March 5 when the June E mini reached 1519.25. Despite the lower move of the past couple of days, the E mini has not yet generated a short-term sell signal, nor has it generated an intermediate term sell signal. Despite this, the market is losing steam, and we view it as only a matter of time before the short-term sell signal is generated. On any rally, we continue to advise writing calls that are significantly out of the money, coupled with buying calls that are further out of the money, or shorting calls that are significantly out of the money, though this is a riskier strategy.