Soybeans:

May soybeans lost 13.75 cents on volume of 204,905 contracts. Volume was the highest since March 28 when 310,890 contracts were traded and open interest increased by 12,525 contracts while May soybeans declined by 49 cents. On April 3, open interest increased by 9,951 contracts, which in relation to volume is approximately 95% above average. The May contract added 495 of open interest.

The number of open interest increases when soybeans decline has been quite rare during the past 2 months. For example, on April 1, open interest increased by 1,022 contracts on a decline of 14 cents. This 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. Also, the open interest increase 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.

Prior to March 12, the last increase of open interest on a price decline occurred on February 8 when May soybeans lost 34.25 cents and open interest increased by 2,308 contracts on volume of 319,712 contracts. On February 7, May soybeans lost 0.75 cents on volume of 267,908 contracts and open interest increased by 8,997 contracts. Until April 3, the open interest increase of 8,997 when soybeans lost 0.75 cents was the largest open interest increase on a price decline for of 2013. In short, the open interest increase on April 3 is anomalous and the largest for 2013. This represents a major shift in the way soybeans have traded for the past 3 months. April 3 marked the first time that a large number of new shorts aggressively entered soybeans to drive prices lower. Additionally, this occurred at the lower end of the trading range which makes this either a courageous move, or one that is foolhardy. Although the market is weak and is trading in a very negative fashion, we prefer to wait for rallies before implementing bearish positions. As time passes, the loading of soybean cargoes in Brazil will eventually begin increasing, which will provide surplus product.

The USDA reported that 392,700 tons of soybeans were sold for 2012-2013 and 355,100 tons sold for 2013-2014. This week sales were above expectations and were the highest for the past 2 weeks. Areas of support for May soybeans are $13.44, which was the January 11, 2013 low, 13.37 3/4, which was the November 16, 2012 low and 13.23 3/4, which was the low for June 28, 2012. Soybeans remain on a short and intermediate term sell signal, but we recommend that clients remain on the sidelines until a bear market rally occurs.

Corn:

May corn gained 1 cent on heavier than normal volume of 358,075 contracts. Open interest declined by 12,249 contracts, which in relation to volume is approximately 40% above average, meaning that liquidation was fairly heavy. The May contract accounted for loss of 23,679 of open interest. As this report is being compiled, May corn is making new lows and trading 12.50 cents lower. Corn generated a short and intermediate term sell signal on March 28.

From the April 2 report:

For the past 3 trading sessions, corn has fallen a total of 94.75 cents, and open interest has declined by a total of 26,929 contracts. The minor decline of open interest combined with a large number of speculative longs point to more selling ahead. The market looks extremely weak, and 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.

The USDA reported that 354,300 tons and been sold for the 2012-2013 crop year and 33,000 for the 2013-2014 year. Weekly sales were considered to be positive. On April 4, corn broke decisively below support of $6.36, which is the low going back to June 29, 2012. There is no support for corn until $5.66 3/4.

Wheat:

May wheat advanced 25.75 cents on heavy volume of 219,206 contracts. Volume was the heaviest since November 9, 2012 when 231,721 contracts were traded and May wheat closed at $9.08. Remarkably, volume on April 3 was higher than April 1 when wheat declined by 23.75 cents on volume of 153,296 contracts while open interest increased 1,694 contracts. Additionally, it was higher than March 28 when 193,109 contracts were traded and May wheat lost 49 cents while open interest declined 4,539 contracts. Open interest and price action acted in a bullish congruent manner on April 3 by increasing 4,099 contracts, which in relation to volume is approximately 25% less than average. What made the total open interest increase more impressive was the May contract lost 2,523 of open interest, but open interest increased in the July 2013 through December 2014 contracts. The large numbers of managed money shorts, combined with extremely heavy volume and an open interest increase, is a strong indication that the bottom is in for wheat, and that higher prices may be in the offing. Wheat remains on a short and intermediate term sell signal, and needs to advance beyond $7.16 1/2, before a short-term buy signal could be generated. Additionally, May wheat needs to close over $7.00 3/4 in order to maintain its upward momentum. Stand aside.

The USDA reported that wheat sales for the 2012-2013 season totaled 141,200 tons and 174,800 tons for 2013-2014.

Crude oil:

May crude oil lost $2.74 on volume of 675,832 contracts. Volume was the highest since March 19 when 680,198 contracts are traded and open interest declined by 30,003 contracts while May crude oil declined $1.59. On April 3, open interest declined by 5,762 contracts, which in relation to volume is 70% below average. It was surprising to see a minor open interest decrease considering the magnitude of the decline. This tells us there is much more liquidation ahead.  On April 3, May Brent crude oil lost $3.58 on huge volume of 1,115,691 contracts. Open interest increased 26,422 contracts, which in relation to volume is 5% below average, but a significant increase on a major price decline. As we pointed out previously, Brent crude needs to show independent strength, and generate a short-term buy signal before we can become bullish on WTI. As this report is being compiled, May WTI is trading $1.42 lower and May Brent is trading $1.01 lower.

For the past 8 trading sessions beginning on March 22 through April 3, open interest in WTI has increased 76,027 contracts and May crude oil has advanced $2.00. In short, since March 22 through April 3, May crude oil has advanced just $2.00, and it has taken an increase of 76,027 contracts to move the needle. This is not the stuff that bull markets are made of. Brent crude oil advanced 14 cents in the same 8 day period. From March 22 through April 3, open interest in Brent crude has declined 6,334 contracts. The performance of WTI and Brent from a price and open interest standpoint could not be more different. Stand aside.

Heating oil:

May heating oil lost 8.54 cents on volume of 143,290 contracts. Open interest increased by 4,424, which in relation to volume is approximately 20% above average meaning that new shorts were entering the market and driving prices lower. Heating oil remains on a short and intermediate term sell signal. Stand aside.

Gasoline:

May gasoline lost 12.68 cents on heavy volume of 232,669 contracts. Volume was the highest since March 12 when 237,274 contracts were traded and May gasoline closed at $3.1502. It was surprising that open interest declined only 2916 contracts considering the massive decline, and the very high net long position of managed money. Relative to volume, the open interest decline was approximately 45% less than average. This tells us there is more liquidation ahead. Gasoline remains on a short and intermediate term sell signal. Stand aside.

Natural gas:

May natural gas lost 6.9 cents on volume of 333,237 contracts. Open interest increased by 2,457 contracts, which in relation to volume is approximately 60% less than average.

For the past 12 trading sessions beginning on March 18 through April 3, open interest has increased 145,370 contracts while natural gas has advanced 0.60 cent. The massive open interest increase combined with a fractional advance shows the bears are in control. As we have been saying for at least the past 10 days, heavy selling is keeping a lid on prices. The market remains 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 4.55 cents on heavy volume of 79,587 contracts. Volume was the highest since March 18 when 87,703 contracts were traded and May copper closed at $3.4170. Open interest increased by a massive 5,587 contracts, which in relation to volume is approximately 175% above average. The open interest increase on April 3 was larger than March 13 when it advanced 5,074 contracts while May copper lost 2.95 cents and closed at $3.5095. We checked our records going back to February 1 and couldn’t find a day when open interest increased by an amount  equal to, or greater than the 5,587 contract increase on April 3. On April 3, May copper made a new low at $3.3200, which is the lowest price since August 3, 2012 when May copper made a low of 3.2985. The massive increase in open interest, tells us that a short-term bottom is at hand, and we would expect a bear market rally from current levels. Copper remains on a short and intermediate term sell signal. Stand aside.

Gold:

June gold lost $22.40 on volume of 224,535 contracts. Volume was the highest since March 27 when 238,713 contracts were traded and open interest declined by 1,921 contracts while June gold advanced $11.50. On April 3, open interest declined 1,123 contracts, which in relation to volume is approximately 75% below average. Gold made a new low for the move at 1549.70, which is the lowest since June 28, 2012 when gold made a low of 1547.60. This low has been taken out on April 4, and the next area to watch is the May 30, 2012 low of 1532.10. Gold remains on a short and intermediate term sell signal. Stand aside.

Platinum:

July platinum lost $32.30 on volume of 16,932 contracts. Open interest declined by 437 contracts, which in relation to volume is average. Remarkably, volume was low considering the magnitude of the decline, and that platinum made a new low for the move at 1534.00. This low has already been taken out on April 4 at 1511.10. Platinum remains on a short and intermediate term sell signal. Stand aside.

Silver:

May silver lost 45.1 cents on heavy volume of 75,010 contracts. Volume increased approximately 3,500 contracts from April 2 when silver declined 69.6 cents and open interest increased by 646 contracts. On April 3, open interest declined 1,423 contracts, which in relation to volume is approximately 25% less than average. Silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The Australian dollar gained 17 points on volume of 84,211 contracts. Open interest declined by 3,645 contracts, which in relation to volume is approximately 65% above average, meaning that liquidation was heavy. We have stated before that for the Australian dollar to move higher, we wanted to see declines of open interest due to the massive open interest increase on the rally. As this report is being compiled, the Australian dollar is trading 30 points lower, and made a low of 1.0329, which is slightly above the low made on April 1 of 1.0327. Additionally, volume is heavier than usual on April 4, which may prove to be a positive factor for the implementation of new bullish positions.This will depend upon the performance of open interest. Undoubtedly, the collapse of the Japanese yen on April 4, was the impetus for the sharply lower Australian dollar. The Australian dollar remains on a short and intermediate term buy signal.

Euro:

The June euro gained 31 points on light volume of 216,086 contracts. Open interest increased by 151 contracts, which is minuscule and dramatically below average.

From the April 2 report:

“The June euro lost 34 points on very light volume of 217,546 contracts. Open interest increased by a massive 11,110 contracts, which in relation to volume is approximately 100% above average. On March 27, open interest increased by 15,496 contracts on volume of 289,611 contracts. Relative to volume the open interest increased was approximately 115% above average. The market looks weak, but a surprise rally could be on the horizon. Managed money is massively short the euro at this juncture.”

The massive increases of open interest during the past couple of days is setting up the large rally in the euro on April 4 on heavy volume. We like the short side of the euro, but want to see more shorts get blown out before contemplating bearish positions.

S&P 500 E mini:

The S&P 500 E mini lost 16.00 point on volume of 2,270,417 contracts. Open interest increased by 6,247 contracts, which is minuscule and dramatically below average. Stocks trading above their 50 day moving average on the New York Stock Exchange fell to 1,260 on April 3, which was the lowest since November 30, 2012 when 1269 stocks were trading above their 50 day moving average. On April 2, the number of stocks trading above their 50 day moving average on the New York Stock Exchange was 1,465.We continue to advocate writing calls that are significantly out of the money, and/or writing calls that are significantly out of the money combined with buying calls that are further out of the money.