Volume and open interest analysis for April 24, 2013.

On April 25, all markets are rallying with the exception of treasury notes and the dollar index. In short, many of the markets that are on sell signals (metals, petroleum complex, grain complex) are trading higher.

Soybeans:

July soybeans lost 13.25 cents on volume of 208,970 contracts. Interestingly, volume declined by approximately 34,000 contracts from April 23 when soybeans lost 5.75 cents while open interest increased by 2,874 contracts. The low on April 23, was $13.53, and the low made on April 24 was 13.41. In other words, soybeans made a new low and closed significantly lower on April 24, yet the volume shrank approximately 15% from the day before. On April 24, open interest declined 7,982 contracts, which relative to volume is approximately 50% above average, meaning that liquidation was much heavier than usual on the decline. The May contract accounted for loss of 17,575 of open interest. The new low for the move on April 24 accompanied by lower volume may signal a temporary bottom. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Corn:

July corn gained 4.25 cents on volume of 273,033 contracts. Open interest declined by 3,944 contracts, which relative to volume is approximately 40% less than average. The May contract accounted for loss of 18,425 of open interest. For the past 3 trading sessions beginning on April 22, July corn has declined by 14.75 cents while open interest has declined by 16,840 contracts. This is bullish open interest action relative to the price decline. However, corn remains on a short and intermediate term sell signal. Stand aside.

Wheat:

July wheat lost 3.50 cents on volume of 92,997 contracts. Open interest increased by 1,488 contracts, which relative to volume is approximately 35% less than average. The May contract lost 6,452 of open interest, which makes the total open interest increase of 1,488 more impressive though the new short selling was relatively light. Wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil:

June WTI crude gained $2.25 on light volume of 497,695 contracts. Volume shrank approximately 126,000 contracts from April 23 when June crude oil lost 1 cent and open interest declined 9,960 contracts. Volume on April 24 was only 50,000 contracts above the volume on April 22 when crude oil advanced 92 cents and open interest declined by 18,127 contracts. Although the volume was light on April 24, open interest increased by 13,012 contracts, which relative to volume is average. Remarkably, crude oil had the largest daily advance in price since the beginning of 2013, yet open interest increased at an average rate and volume was below the average daily volume year to date of 568,043 contracts. As this report is being compiled, crude oil is trading $2.36 higher and has made a new high for the move at $ 93.87. This is the highest price for June crude oil since April 12 when the contract reached 93.85. In the report of April 23, our target on the upside for WTI was $90.51 to $91.98. In light of the market breaking above our initial resistance areas, we have recalculated the next point of resistance to be at the 50 day and 200 day moving averages of $93.54 and 93.42, respectively. Despite the sharp move higher from the low of $85.90 on April 18, WTI remains on a short and intermediate term sell signal. We think it is likely that crude oil can advance to its 50 and 200 day moving averages, which mean that bearish strategies may be appropriate at that juncture. We want to review the volume and open interest stats for April 25 before recommending bearish positions.

Heating oil:

June heating oil gained 2.97 cents on volume of 109,148 contracts. Open interest increased by 2,380 contracts, which relative to volume is approximately 10% less than average. As this report is being compiled on April 25, June heating oil is trading 3.03 cents higher. Heating oil remains on a short and intermediate term sell signal. Stand aside.

Gasoline:

June gasoline gained 3.51 cents on volume of 196,267 contracts. Volume was the highest since April 11 when 215,428 contracts were traded and gasoline lost 3.41 cents while open interest declined 8,478 contracts. On April 24, open interest declined 3,057 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on April 25, June gasoline is trading 4.12 cents higher, but this is not a typical day due to the robust performance of commodities that are on short and intermediate term sell signals. Gasoline remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

June natural gas lost 7.5 cents on very light volume of 281,837 contracts. Volume was the lightest since March 11 when 279,668 contracts were traded and June natural gas closed at $3.734. We have seen a consistent pattern of low volume when natural gas declines, which is positive. Natural gas remains on a short and intermediate term buy signal. We think a healthy correction would take natural gas down to $4.08, and possibly to 4.04. Stand aside.

Copper:

May copper gained 6.40 cents on volume of 117,678 contracts. Volume was the lightest since April 16 when 114,375 contracts were traded and May copper advanced 3.25 cents while open interest declined 2,192 contracts.

From the April 22 report: “Copper is embroiled in a vicious downtrend, and when-where this stops, if only temporarily, is difficult to ascertain. During the past 2 days when equities, gold and petroleum were rallying, copper continued its weakness. We discourage chasing the market lower on the short side, and suggest that clients wait for a rally to the $3.26-3.31 level before contemplating bearish positions.”

With all the markets rallying strongly on April 25, we suggest that clients wait for a further rally in copper, to the to the $3.31 area. It is likely the rally continues through on April 26. Copper remains on a short and intermediate term sell signal.

Gold:

June gold gained $14.90 on volume of 153,465 contracts. Interestingly, volume declined by approximately 86,000 from April 23 when gold lost $12.40 and open interest declined 1,507 contracts. In short, volume shrank dramatically on the upside move, and expanded on the downside move. To put the low volume on April 24 in context, the previous volume low occurred on April 11 when 153,313 contracts were traded and gold advanced $6.10 while open interest declined 3,698 contracts. On April 24, open interest declined by 3,972 contracts, which relative to volume is average. As this report is being compiled on April 25, gold is trading $43.10 higher and has made a new high for the move at $1467.90. The next area of resistance is $1471.00 and 1503.00. In yesterday’s report, we discussed the possibility of writing out of the money calls, coupled with buying calls that are further out of the money. We would hold off on this until we see the volume and open interest stats for April 25.

Silver:

May silver gained 1.6 cents on heavy volume of 107,385 contracts. Open interest declined by 1567 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on April 25, May silver is trading 1.452 higher, and is made a new high for the move at $24.315. First resistance is at $24.89 and resistance number two is $25.75. Silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The Australian dollar gained 33 points on volume of 93,739 contracts. Open interest increased by 292 contracts, which is minuscule and dramatically below average. The June Australian dollar generated a short and intermediate term sell signal on April 23. We have recommended to wait for a rally to 1.0300-1.0315 before implementing bearish positions

Euro:

The June euro gained 32 points on volume of 242,022 contracts. Open interest declined by 1,645 contracts, which relative to volume is approximately 65% below average. Previously, we had recommended that clients implement bearish positions and use the high of April 22 of 1.3089 and 1.3090 high of April 23 as an exit point for short futures positions. However, the euro rallied to a high of 1.3098, therefore those who placed buy stops at the recommended exit points have been stopped out. For those who are trading put options, stay with these positions.

S&P 500 E mini:

The S&P 500 E mini gained 0.50 points on very light volume of 1,437,107 contracts. Volume was lighter than the 1,447,055 contracts that were traded on April 8. On April 24, open interest increased by 16,220 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on April 25, the S&P 500 E mini is trading 13.50 points higher on very low volume. We continue to advise put protection, especially for those who are long stocks, ETF’s. When markets are at stratospheric levels, there is a higher probability of a major accident on the downside.