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In the Weekend Wrap of April 29, I performed an analysis of Apple Computer and concluded that the stock had made a temporary top. This may be of interest to those readers who trade stocks.
July soybeans advanced 9 cents on fairly light volume of 245,202 contracts. Open interest increased by a meager 425 contracts. Open interest in the July contract declined by 4,358 contracts on volume of 131,249 contracts. The past two trading sessions have seen soybeans advance a total of 35 cents and total open interest has increased by a mere 2,413 contracts. Open interest for the July contract during the two-day period has declined by a total of 7,237 contracts. Since the market topped out on May 2, open interest in the July contract has declined by a total of 46,568 contracts. Clearly, enthusiasm on the long side has diminished. On May 16, the July contract gained on the back months, which is a positive. I am bullish on soybeans and soybean meal, but the open interest action in soybeans has to improve and volume has to increase when the market moves higher. Stand aside.
July corn closed 22 3/4 cents higher on volume of 285,512 contracts. Volume was the highest since May 11. Total open interest declined by 1,823 contracts. Open interest in the July contract declined by 8,331 contracts on volume of 153,375 contracts and for the three day period, open interest in the July contract has declined by 19,717 contracts. During the past three sessions corn has advanced a total of 39 cents and total open interest has declined by 19,456 contracts. This is bearish open interest action in relation to the price advance. Stand aside.
June crude oil lost $1.17 on heavier than normal volume of 664,792 contracts. Volume was the highest since May 4 when 884,050 contracts were traded. Open interest declined by 1,708 contracts. The market made a new low at $91.81 which was the lowest price for crude oil since November 3, 2011 when the market made a low of $90.12. Stand aside.
June gasoline closed 2.32 cents lower on fairly light volume of 125,403 contracts. Open interest increased by 1,682 contracts. May 16 was the fourth session in a row that open interest increased and price declined. The four day open interest increase amounts to 5,311 contracts and during this time gasoline has lost a total of 8.93 cents. Stand aside.
July copper lost 4.35 cents on volume of 75,321 contracts. Open interest increased by 295 contracts. Ever since Monday, the market has been in freefall and at this juncture the best bet is to wait for a rally before implementing bearish positions. The market is massively oversold and is more than due for a good-sized rebound.
June gold lost $20.50 on extremely heavy volume of 307,291 contracts. Open interest declined by 5,135 contracts. The market made a new low for the move at $1526.70 which was the lowest price since December 29, 2011 when the low was $1523.90. This low provided support going back to July 2011. In my view, the heavy capitulation volume exhibited on May 16 indicates that the market may have made an important low. As I write this on May 17, gold is nearly $40.00 higher. Speculators should use the low of $1523.90 as a exit point for any bullish positions they may have in gold. Before getting into the bull camp, I want to see the market forming a bottom and that open interest and price action move congruently.
July silver lost 88.4 cents on heavy volume of 66,029 contracts. Open interest declined by 545 contracts. July silver made a low of $26.73, which was the lowest price since December 29, 2011 when silver made a low of $26.39. This was the lowest price for silver going back to November 2010. It is important to note that both gold and silver made their lows on December 29, 2011 and the May 16 lows for both metals were the lowest since December 29, 2011. Speculators should use the December 29, 2011 lows for both gold and silver as an exit point for any long positions. Like gold, silver has to show that it is forming a bottom and that open interest and price action move congruently.
The June Euro lost 12 points on extremely heavy volume of 365,494 contracts. Open interest increased by a minuscule 304 contracts. The market made a new low at 1.2683, which was the lowest price since January 13 when the market reached a low of 1.2624. I have been cautioning speculators about getting overly bearish down at these levels. As I have pointed out before, there is a tremendous amount of support at the 1.2600 level going back to July of 2010. The heavy volume on May 16 combined with the meager increase in open interest is indicating to me that market participants are wary of entering the market at current levels. Stand aside.
S&P 500 E mini:
The June S&P 500 E mini lost 5.75 points on heavy volume of 2,287,720 contracts. Open interest increased on the decline by 14,329 contracts. May 16 was the fourth day in a row that the E mini declined and open interest increased. For example, the total open interest increase during the past four sessions is 102,928 contracts while the S&P 500 E mini declined a total of 35.00 points.
I want to bring to your attention that the percentage of stocks above their 50 day moving average is down at levels where rebounds have occurred in the past. For example, on May 16 the percentage of stocks on the New York Stock Exchange above their 50 day moving averages was 24.30%. On April 10, 2012 the percentage was 25.77%, and on November 25, 2011 the percentage of stocks above their 50 day moving averages reached a low of 24.86%. Shortly after reaching the lows of November 25, 2011 and April 10, 2012, the market staged good-sized rallies. I’m not claiming that history will repeat itself, but it is worth noting because the S&P 500 cash index is significantly below its 50 day moving average of 1384 and as I write this on May 17, the index is approaching its 150 day moving average of 1312. For speculators that have long put protection, please be aware that a rally can occur at any moment. On the other hand, if there is a significant negative financial event in Europe, the market has the capacity to fall sharply.