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July soybeans closed 28 1/2 cents higher on heavy volume of 343,746 contracts. Open interest declined by 1,884 contracts. The action on Friday was uncharacteristic for beans in that the market rose substantially on heavy volume, yet open interest declined as the market made a new high of $14.58 3/4. The open interest action indicates that both longs and shorts were liquidating as the market moved into new high territory. My interpretation of this is that the market is losing steam on the upside. As I’ve said in previous posts, markets correct not because of smart sellers at the top, but because there are fewer and fewer buyers who are willing buy at ever increasing prices. The market remains massively overbought and at the very least, should correct down to the 50 day moving average of $13.58.
July corn lost 9 cents on volume of 370,941 contracts. Open interest declined by a massive 28,330 contracts. The May-July corn bull spread widened by 1/2 cent to close at 9 1/2 cents. This is positive action. In previous posts, I’ve mentioned that I wanted to see major declines in open interest to get the old longs out of the market. It looks like the process has started in earnest, and I will be monitoring the market to determine when, and if long positions should be implemented.
June crude oil closed $1.16 higher on very light volume of 449,851 contracts. Open interest declined by 5,070 contracts. Volume was the lightest since April 9 when 424,067 contracts changed hands. The decrease of open interest on the advance, in combination with low volume is bearish market action. The previous time crude oil advanced was on April 17 when the market closed $1.27 higher, and open interest declined a massive 22,261 contracts. In other words, during the past four trading days crude oil closed higher on two occasions, yet open interest declined on both days. Crude oil has been on a short-term sell signal since March 29, and as of April 20, an intermediate term sell signal has not been generated. Do not short the market. Stand aside.
June gasoline closed .58 (about 1/2 cent) on volume of 180,630 contracts. Open interest declined a massive 11,595 contracts. It is healthy for the market to lose open interest as the market has been heavily bought by the managed money crowd. For example, as of the latest Commitment of Traders Reports released on April 20, there are 89,591 long contracts held by managed money interests, and only 1,545 contracts sold short by managed money interests. This is a long to short ratio of 58 to 1. Gasoline generated a short-term sell signal on April 17, however, an intermediate term sell signal has not occurred yet. I am looking for a correction down to the 200 day moving average of approximately the $2.90 area.
May copper closed 7.05 cents higher on relatively heavy volume of 78,809 contracts. Open interest increased by 1,335 contracts. The market is on a short-term sell signal. See the Weekend Wrap of April 15 for the special report on copper. Stand aside.
June gold closed $1.40 higher on extremely light volume of 96,776 contracts. Open interest increased by 2,514 contracts. The open interest increase was respectable in relation to the volume, but volume was lower than the 97,189 contracts traded on April 9. Those that are participating in the market are enthusiastic buyers and sellers, but the level of participation is low. The market has been on a intermediate term sell signal since March 15. As I’ve said before lower prices in gold are providing speculators with an opportunity to acquire positions at lower prices. Please consult with your investment advisor or broker.
May silver lost 12.8 cents on volume of 57,634 contracts. Open interest increased by 1,248 contracts. In the April 22 Weekend Wrap, I mentioned that silver might be in a bottoming process. In the report I stated I wanted to see how silver performed on a day when all the markets were sharply lower. As I write this on April 23, silver is $1.15 lower, which negates the possibility that silver is bottoming. Also, as mentioned on April 22 silver remains on the short and intermediate term sell signal. Do not short the market. Stand aside.
The June Euro closed 83 points higher. Open interest declined by 11,525 contracts, which is typical of the way the Euro has been trading for the past couple of months. Considering the magnitude of the upside move, volume was abysmal. The market reached a high of 1.3229, which was the highest price for the June Euro since April 4 when it reached 1.3245. The market remains on the short and intermediate term sell signal. Stand aside.
The June Australian dollar closed 43 points higher on light volume of 102,381 contracts. Open interest increased by 1,286 contracts. The Australian Dollar generated a short-term sell signal on March 28, but has not yet generated and intermediate term sell signal. As I pointed out previous posts, for speculators who are looking to implement bearish positions, the March 28 high of 1.0388 should be used as an exit point for these positions.
S&P 500 E mini:
The June S&P 500 E mini closed 2.75 points higher on heavy volume of 1,809,268 contracts. Open interest declined by 13,546 contracts. Please see the April 22 Weekend Wrap for a brief analysis on the equity markets of France, Spain and Italy. Long put protection should already be in place.