May 21 Report:
Soybeans: On May 21, July soybeans generated an intermediate term buy signal. The short-term buy signal was generated on May 9.
July soybeans gained 13.75 cents on volume of 213,329 contracts. Volume increased approximately 35,000 contracts from May 20 when soybeans advanced 16 cents and open interest declined by 966 contracts. Additionally, volume was the highest since April 23 when 242,237 contracts were traded and July soybeans closed at $13.58 1/2. On May 21, total open interest increased by 2,898 contracts, which relative to volume is approximately 40% less than average. The July contract accounted for a gain of 2,655 of open interest. For the past 3 trading sessions beginning on May 17, soybeans have advanced 50.75 cents while open interest has increased only 4,472 contracts. As we stated in yesterday’s report, the tepid increase of open interest indicates that speculators are not buying into the soybean rally. Although the market is massively overbought, and due for correction, it appears that ultimately the market is headed higher than we originally thought. For example, since May 7, July soybeans has rallied from a low of $13.67 1/2 to 14.88 3/4 as of May 22 without a correction. Usually, after the generation of a buy signal, a pullback lasting 1-2 and possibly 3 days occurs. Do not initiate new long positions at current levels.