The Chicago Mercantile Exchange announced that new daily limits have been implemented for soybeans, corn and wheat. The new daily limit for soybeans has been raised to $1.00 from 70 cents while the daily limit in corn has been reduced from the current 40 cents to 35. The daily limit in wheat has been reduced from the current 60 cents to 45. All changes are effective May 1. 

Soybeans:

For the week, May soybeans lost 16.00 cents, July -8.00, November + 0.50. The COT report revealed that managed money liquidated 15,062 contracts of their long positions and added 1,126 contracts to their short positions. Commercial interests added 14,701 contracts to their long positions and liquidated 13,061 contracts of their short positions. As of the latest report, managed money is long soybeans by ratio of 6.63:1, which is down from the previous week of 7.42:1 and slightly above the ratio of 2 weeks ago of 6.44:1.

The very strong export picture for soybeans is well-known, and this has been fueling rallies of late. However, on a global basis, there are plenty soybeans, but the current bottleneck is one of logistics rather than one of supply. Although on a year-to-date basis, July + 18.17% is significantly outperforming new crop November + 9.23%. During the 2nd quarter, November is keeping pace with the July contract with a gain of 4.42% versus July of 4.53%. However, the May contract is trailing with a gain of only 2.32% in the 2nd quarter. From April 21 through April 25 November soybeans gained 1.31% versus July of + 0.47%. From April 17 when the November contract topped out at 12.44 1/2 through April 25, the November contract has gained 0.04% while the July contract lost 0.53%.

On April 23 , we first wrote about the narrowing of the May-July 2014 spread and discussed its implications for soybean prices going forward. On April 24, this spread closed at 2 cents premium to May and by Friday had widened to 3.75 cents premium to May. If the market is as tight as some claim it to be, the May-July spread should not have been narrowing to the extent that it has. In addition, when the market rallied on Friday, the spread widened only 1.75 cents. Since the beginning of the 2nd quarter, it is apparent that the momentum of the May contract has been slowing versus new crop November.

Although front month weakness may not last, especially for the July contract (we expect to see some upside fireworks in the July contract in late May through mid July), we advise against bullish positions at this juncture. Another sign of caution is the preliminary open interest stats for Friday’s trading which show a decline of 1,916 contracts on total volume of 247,971 contracts when July beans advanced 24.25 cents. The preliminary open interest stats are notoriously inaccurate and often change once the final stats were released Monday morning, but if open interest declined on the rally, we would see this as confirmation that there is dearth of new buyers willing to pay ever higher prices for soybeans at this time. Both May, July and November soybeans remain on short and intermediate term buy signals.

Soybean meal:

For the week, May soybean meal advanced $2.30, July +3.40, new crop December +2.50. The COT report revealed that managed money liquidated 4,285 contracts of their long positions and also liquidated 404 contracts of their short positions. Commercial interests added 734 contracts to their long positions and liquidated 6,733 contracts of their short positions. As of the latest report, managed money is long soybean meal by ratio of 4.27:1, which is down slightly from the previous week of 4.39:1 and the ratio of 2 weeks ago of 4.30:1.

Soybean oil:

For the week, May soybean oil lost 49 points, July -51, new crop December -45. The COT report revealed that managed money added 826 contracts to their long positions and liquidated 4,475 contracts of their short positions. Commercial interests liquidated 6,115 contracts of their long positions and also liquidated 8,208 contracts of their short positions. As of the latest report, managed money is long soybean oil by ratio of 1.82:1, which is up from the previous week of 1.60:1 and up substantially from the ratio of 2 weeks ago of 1.22:1.

Corn:

For the week, May corn advanced 12.25 cents, July +12.25, new crop December +9.50. The COT report revealed that managed money liquidated 9,430 contracts of their long positions and also liquidated 4,605 contracts of their short positions. Commercial interests liquidated 11,542 contracts of their long positions and also liquidated 31,048 contracts of their short positions. As of the latest report, managed money is long corn by ratio of 6.09:1, which is up from the previous week of 5.75:1, but substantially below the ratio of 2 weeks ago of 7.50:1.

Chicago wheat:

For the week, May Chicago wheat advanced 9.00 cents, July +9.25, new crop December +9.50. The COT report revealed that managed money liquidated 6,340 contracts of their long positions and added 2,835 contracts to their short positions. Commercial interests added 2,278 contracts to their long positions and liquidated 5,782 contracts of their short positions. As of the latest report, managed money is long Chicago wheat by ratio of 1.60:1, which is down from the previous week of 1.80:1 and the ratio of 2 weeks ago of 1.87:1. The current ratio is the lowest since the COT tabulation date of March 25 when managed money was long wheat by ratio of 1.68:1.

Kansas City wheat:

For the week, May Kansas City wheat advanced 17.75 cents, July +14.50, new crop December +14.75. The COT report revealed that managed money added 1,099 contracts to their long positions and also added 1,757 contracts to their short positions. Commercial interests liquidated 2,568 contracts of their long positions and also liquidated 825 contracts of their short positions. As of the latest report, managed money is long Kansas City wheat by ratio of 6.50:1, which is down substantially from the previous week of 8.68:1 and the ratio of 2 weeks ago of 10.72:1. The current ratio is lower than 7.14:1 derived from the March 18 COT report, but is above the March 11 report of 4.73:1.

 Thus far in the 2nd quarter July soybean oil is the out performer with a gain of 6.20%, July soybeans +4.53%, July soybean meal +3.84%, July Kansas City wheat +1.86%, July corn +1.18%, July Chicago wheat +0.96%.

Year to date, July Kansas City wheat is the out performer with a gain of 21.13%, July soybean meal + 20.08%, July soybeans +18.17%, July corn +17.33%, July Chicago wheat +14.84%, July soybean oil +8.25%.

Cotton: On April 22, July cotton generated a short-term buy signal, which reversed the short-term sell signal of April 10. July cotton remains on an intermediate term buy signal.

For the week, May cotton advanced 2.78 cents, July + 91 points, new crop December +77. The COT report revealed that managed money added 2,880 contracts to their long positions and liquidated 1,967 contracts of their short positions. Commercial interests liquidated 1,243 contracts of their long positions and added 4,999 contracts to their short positions. As of the latest report, managed money is long cotton by ratio of 6.69:1, which is a substantial increase from the previous week of 5.34:1, but below the ratio of 2 weeks ago of 7.15:1.

Sugar #11:

For the week, May sugar advanced 54 points, July +52, October +51. The COT report revealed that managed money liquidated 1,406 contracts of their long positions and also liquidated 1,104 contracts of their short positions. Commercial interests added 8,938 contracts to their long positions and also added 12,503 contracts to their short positions. As of the latest report, managed money is long sugar by ratio of 2.97:1, which is nearly the same as the previous week of 2.94:1, but down from the ratio of 2 weeks ago of 3.54:1.

Coffee:

For the week, May coffee advanced 3.55 cents, July +2.90, September +2.85. The COT report revealed that managed money added 668 contracts to their long positions and liquidated 243 contracts of their short positions. Commercial interests liquidated 2,259 contracts of their long positions and also liquidated 1,997 contracts of their short positions. As of the latest report, managed money is long coffee by a stratospheric 10.05:1, which is up from the previous week of 9.40:1 and up substantially from the ratio of 2 weeks ago of 6.48:1. The current ratio is the highest recorded since the beginning of the bull market in late January 2014.

Thus far in the 2nd quarter July coffee is the out performer with a gain of 15.00%, July cotton -0.32%, July Cocoa -0.51%, July sugar -1.54%.

Year to date, July coffee is the out performer with a gain of 79.84%, July cotton +11.04%, July Cocoa +8.41%, July sugar +6.69%.

Live cattle: For June cattle to generate a short-term buy signal, the low of the day must be above 1.36540. June cattle remains on an intermediate term buy signal. For the August contract to generate a short-term buy signal, the low the day must be above 1.34390. Since the June contract has approximately 30 days before 1st notice day, we recommend the August contract for bullish positions.

For the week, April live cattle advanced 80 points, June +2.40 cents, August +2.78. The COT report revealed that managed money liquidated 454 contracts of their long positions and added 703 contracts to their short positions. Commercial interests liquidated 2,818 contracts of their long positions and also liquidated 6,386 contracts of their short positions. As of the latest report, managed money is long cattle by ratio of 14.29:1, which is down from the previous week of 15.44:1 and down substantially from the ratio of 2 weeks ago of 17.30:1.

It appears likely that June cattle will generate a short-term buy signal, possibly as early as Monday. The Cattle On Feed report released Friday afternoon showed that on numbers of fed cattle were lower-than-expected at 99.4% and the number placed on feed was sharply lower at 95.3%. Cattle marketing of 95.3% was close to expectations, but still remains the lowest on record since at least 1996.

Since June cattle bottomed on April 17 at 1.34375, the market has rallied 2.45 cents while the August contract has gained 2.80 cents. From April 21 through April 24 (final stats only) total open interest has increased by only 1,669 contracts during which time June cattle advanced 1.50 cents while the August contract gained 2.08 cents. This is unimpressive open interest action considering the magnitude of the gain over 4 sessions. Additionally, the preliminary report for April 25 shows that open interest increased only 455 contracts on fairly light volume of 46,510 contracts as the June contract advanced 92 points (August +70). We know the long to short ratio of managed money is at a stratospheric level on a historical basis, which may explain the tepid increase of open interest and low volume. However, for prices to continue to advance, new buyers must step in and be willing to pay ever higher prices if the rally is to continue.

Lean Hogs: We recommend against holding long positions in lean hogs until the June contract makes a daily low above 1.26200. Until this occurs, June hogs will trade sideways to lower. However, under no circumstances should anyone short this market.

For the week, June hogs lost 30 points, August -1.45 cents, October +2.47. The COT report revealed that managed money liquidated 815 contracts of their long positions and liquidated a massive 2,021 contracts of their short positions. Commercial interests liquidated 3,151 contracts of their long positions and also liquidated 4,972 contracts of their short positions. As of the latest report, managed money is long hogs by an unbelievable 49.42:1, which is more than double the previous week’s ratio of 21.20: 1 and more than 3 times the ratio of 2 weeks ago of 15.67:1. The reason for the massive increase in this week’s ratio was due to the liquidation of short positions. According to the latest COT report, managed money is holding 73,582 contracts long and only 1,489 contracts short.

On March 18, June hogs made their 52-week high at 1.33425, and as of Friday’s close is trading 6.67% below this high. Additionally, the 20 day moving average is 1.23675 and the 50 day is trading at 1.20875. In short, hogs have plenty of room to correct and yet continue to be in a bullish set up. With the current stratospheric long to short ratio, there is a surplus of funds to fuel a further downside move. 

Thus far in the 2nd quarter June cattle is the out performer with a loss of 0.53%, June lean hogs – 2.08%.

Year to date, June hogs is the out performer with a gain of 24.34%, June cattle +5.68%.

WTI crude oil:

For the week, June WTI crude oil lost $2.77, July -2.37, August -2.11. The COT revealed that managed money liquidated 8,656 contracts of their long positions and also liquidated 69 contracts of their short positions. Commercial interests liquidated 29,354 contracts of their long positions and also liquidated 20,981 contracts of their short positions. As of the latest report, managed money is long WTI crude oil by ratio of 10.99:1, which is down slightly from the previous week of 11.23:1 and the ratio of 2 weeks ago of 11.36:1.

OIA has been actively discouraging bullish positions in WTI crude oil and we have seen the rally as one more of logistics about moving crude out of Cushing Oklahoma rather than of supply shortages. Additionally, any narrative regarding the impact of the Russian-Ukraine situation is a red herring because although Brent crude has advanced, and remains on a short and intermediate term buy signal, the move has been fairly muted. Apparently, participants in the Brent crude market do not think there is an imminent cut off of crude/natural gas supply to Europe. When looking at performance of WTI on the year to date basis, the June contract has only advanced 3.45% while June Brent has gained just 1.90%, not exactly a strong performance over a period of nearly 5 months.

OIA thinks that WTI will generate a short-term sell signal, perhaps early next week. Based upon Friday’s pivot point, June WTI would need to make a daily low above $102.27 to resume its rally.

Heating oil:

For the week, May heating oil lost 2.16 cents, June -2.03, July -2.02. The COT report revealed that managed money added 9,630 contracts to their long positions and liquidated 2,968 contracts of their short positions. Commercial interests added 1,568 contracts to their long positions and added 13,372 contracts to their short positions. As of the latest report, managed money is long heating oil by ratio of 2.72:1, which is up substantially from the previous week of 1.92:1 and the ratio of 2 weeks ago of 1.81:1. The current ratio is the highest since the March 11 COT report when managed money was long heating oil by ratio of 3.34:1.

Gasoline:

For the week, May gasoline advanced 2.04 cents, June +38 points, July +19. The COT report revealed that managed money added 5,001 contracts to their long positions and also added 2,272 contracts to their short positions. Commercial interests liquidated 1,734 contracts of their long positions and added 247 contracts to their short positions. As of the latest report, managed money is long gasoline by ratio of 5.76:1, which is down from the previous week of 6.35:1, but above the ratio of 2 weeks ago of 4.78:1.

Natural gas:

For the week, May natural gas lost 9.4 cents, June -9.6, July -9.3. The COT report revealed that managed money added 5,119 contracts to their long positions and also added 5,742 contracts to their short positions. Commercial interests liquidated 11,442 contracts of their long positions and also liquidated 13,792 contracts of their short positions. As of the latest report, managed money is long natural gas by ratio of 1.65:1, which is down slightly from the previous week of 1.68:1 and the ratio of 2 weeks ago of 1.66:1.

Thus far in the 2nd quarter June natural gas is the out performer with a gain of 5.77%, June gasoline +4.07, June heating oil +1.90%, June Brent crude oil +1.69%, June WTI crude oil -0.07%, June ethanol -8.97%.

Year to date, June ethanol is the out performer with a gain of 26.55%, June natural gas +12.84%, June WTI crude oil +3.45%, June gasoline +3.29%, June Brent crude -0.08%, June heating oil -1.49%.

Copper: On April 24, July copper generated a short-term buy signal, it remains on an intermediate term sell signal.

For the week, May copper advanced 7.95 cents, July + 5.90. The COT report revealed that managed money added 2,956 contracts to their long positions and liquidated 8,415 contracts of their short positions. Commercial interests liquidated 4,262 contracts of their long positions and also liquidated 4,330 contracts of their short positions. As of the latest report, managed money is short copper by ratio of 1.11:1, which is down substantially from the previous week of 1.51:1 and the ratio of 2 weeks ago of 1.46:1. The current ratio is the lowest since the March 4 COT report when managed money was short copper by ratio of 1.07:1.

Palladium:

For the week, June palladium advanced $4.10. The COT report revealed that managed money added 183 contracts to their long positions and liquidated 348 contracts of their short positions. Commercial interests added 343 contracts to their long positions and liquidated 233 contracts of their short positions. As of the latest report, managed money is long palladium by ratio of 6.27:1, which is up from the previous week of 5.68:1 and up substantially from the ratio of 2 weeks ago of 5.11:1.

Platinum: On April 21, July platinum generated an intermediate term sell signal after generating a short-term sell signal on April 16.

For the week, July platinum lost $4.40. The COT report revealed that managed money liquidated 3,005 contracts of their long positions and also liquidated 205 contracts of their short positions. Commercial interests added 91 contracts to their long positions and liquidated 1,834 contracts of their short positions. As of the latest report, managed money is long July platinum by ratio of 8.04:1, which is down from the previous week of 8.34:1, but above the ratio of 2 weeks ago of 6.92:1.

Gold:

For the week, June gold advanced $6.90. The COT report revealed that managed money added 227 contracts to their long positions and liquidated 3,889 contracts of their short positions. Commercial interests added 999 contracts to their long positions and also added 1,904 contracts to their short positions. As of the latest report, managed money is long gold by ratio of 3.70:1, which is up from the previous week of 3.25:1 but down from the ratio of 2 weeks ago of 3.89:1.

Silver:

For the week, July silver gained 8.9 cents. The COT report revealed that managed money added 388 contracts to their long positions and liquidated 749 contracts of their short positions. Commercial interests liquidated 1,971 contracts of their long positions and also liquidated 2,428 contracts of their short positions. As of the latest report, managed money is long silver by ratio of 1.22:1, which is slightly above the previous week of 1.18:1, but down from the ratio of 2 weeks ago of 1.33:1.

Thus far in the 2nd quarter, June palladium is the out performer with a gain of 4.70%, July copper +2.15%, June gold +1.38%, July platinum +0.37%, July silver -0.78%.

Year to date, June palladium is the out performer with a gain of 12.96%, June gold +8.23%, July platinum +3.58%, July silver +1.37%, July copper -8.43%.

Canadian dollar:

For the week, the June Canadian dollar lost 26 pips. The COT report revealed that leveraged funds added 501 contracts to their long positions and liquidated 706 contracts of their short positions. As of the latest report, leveraged funds are short the Canadian dollar by ratio of 2.03:1, which is down slightly from the previous week of 2.09:1 and exactly the same as the ratio of 2 weeks ago of 2.03:1.

Australian dollar:

For the week, the June Australian dollar lost 53 pips. The COT report revealed that leveraged funds added 8,833 contracts to their long positions and liquidated 99 contracts of their short positions. As of the latest report, leveraged funds are long the Australian dollar by ratio of 2.17:1, which is up substantially from the previous week of 1.78:1 and the ratio of 2 weeks ago of 1.51:1.

From April 10, when the June Australian dollar topped out at 94.19 (close 93.84), through April 24 (final stats only) when it closed at 92.28, the June Aussie has lost 1.56 cents. During this time frame, total open interest increased by 11,720 contracts. This is bearish open interest action relative to the 9 day total decline in prices. In short, rather than liquidate as prices moved lower, market participants, especially managed money had been adding to long positions. The hefty long position of managed money will begin to pressure prices as the June Australian dollar moves lower. On Friday, the June contract closed at 92.38, which is below the 20 day moving average of 92.77. It appears likely the June Aussie is headed for the 50 day moving average of 90.97.

As a result, the June Australian dollar may generate a short-term sell signal. For the rally to resume, the June Australian dollar must make a daily low above 92.63. However, we think rallies will be muted due to the very large number of speculative longs showing losses on positions. We think speculators will use advances to liquidate positions, which will serve to cap any major rally.

Swiss franc:

For the week, the June Swiss franc gained 16 pips. The COT report revealed that leveraged funds liquidated 2,173 contracts of their long positions and also liquidated 2,422 contracts of their short positions. As of the latest report, leveraged funds are long the Swiss franc by ratio of 1.41:1, which is above the previous week of 1.34:1 and the ratio of 2 weeks ago of 1.35:1.

British pound:

For the week, the June British pound gained 3 pips. The COT report revealed that leveraged funds added 8,938 contracts to their long positions and also added 4,876 contracts to their short positions. As of the latest report, leveraged funds are long the British pound by ratio of 4.68:1, which is down from the previous week of 5.14:1, but above the ratio of 2 weeks ago of 4.18:1.

Euro:

For the week, the June euro advanced 17 pips. The COT report revealed that leveraged funds liquidated 4,425 contracts of their long positions and also liquidated 3,570 contracts of their short positions. As of the latest report, leveraged funds are long the euro by a ratio of 1.98:1, which is up slightly from the previous week of 1.93:1 and the ratio of 2 weeks ago of 1.90:1.

Yen:

For the week, the June yen advanced 26 pips. The COT report revealed that leveraged funds added 2,507 contracts to their long positions and also added 3,313 contracts to their short positions. As of the latest report, leveraged funds are short the yen by ratio of 2.97:1, which is down from the previous week of 3.15:1 and the ratio of 2 weeks ago of 3.73:1. 

Dollar index:

For the week, the June dollar index lost 9 points. The COT report revealed that leveraged funds liquidated 3,200 contracts of their long positions and also liquidated 1,603 contracts of their short positions. As of the latest report, leveraged funds are short the dollar index by ratio of 3.35:1, which is above the ratio of the previous week of 2.63:1, but down from the ratio of 2 weeks ago of 5.53:1. 

Thus far in the 2nd quarter the June yen is the out performer with a gain of 1.02%, June pound +0.79%, June euro +0.44%, June Swiss franc +0.34%, June Australian dollar +0.14%, June Canadian dollar +0.12%, June dollar index -0.52%.

Year to date, the June Australian dollar is the out performer with a gain of 4.63%, June yen +2.98%, June British pound +1.50%, June Swiss franc +0.79%, June euro +0.33%, June dollar index -0.64%, June Canadian dollar – 3.45%.

S&P 500 futures (250) On April 23, June S&P 500 futures generated a short-term buy signal which reversed the short-term sell signal of April 11.. This contract remains on an intermediate term buy signal.

For the week, June S&P 500 (x250) futures gained 2.20 points. The COT report revealed that leveraged funds added 1,982 contracts of their long positions and liquidated 2,975 contracts of their short positions. As of the latest report, leveraged funds are short the S&P 500 by a ratio of 1.28:1, which is down significantly from the previous week of 2.13:1, but up from the ratio of 2 weeks ago of 1.14:1.

Thus far in the 2nd quarter the New York Composite Index is the out performer with a loss of 0.22%, S&P 500 cash index -0.48%, Dow Jones Industrial Average cash index -0.58%, NASDAQ 100 cash index -1.74%, S&P 400 cash index -2.27%, Russell 2000 cash index -4.26%.

Year to date, the New York Composite Index is the out performer with a gain of 1.01%, S&P 500 cash index +0.81%, S&P 400 cash index +0.35%, Dow Jones Industrial Average cash index – 1.30%, NASDAQ 100 cash index -1.64%, Russell 2000 cash index -3.49%.