The markets surged on talk about a third round of quantitative easing (QE3) from the Federal Reserve. As a result, the dollar index dropped sharply, and all markets surged. The action of the markets on Thursday April 12 has to be viewed through that lens.
May corn 1 1/2 cents higher on heavy volume of 405,871 contracts. Open interest increased by 8,656 contracts, which is about an average increase relative to its volume. However, volume was high considering that the range for the day was 8 1/2 cents, which is approximately 40% less than the 21 day average true range of 14 1/4 cents. I will be looking for a spot where long positions can be implemented, but as mentioned in previous posts, corn is entering into a period of some seasonal weakness. Stand aside
May soybeans surged 20 1/4 cents on volume of 256,621 contracts. Open interest increased by 5,033 contracts. The market made a new closing high of $14.41. As I have mentioned before, the market is extremely overbought and is due for a setback. The lack of increased volume on the move reinforces the vulnerability of beans to a setback. The range for the day was 24 1/2 cents, which was only slightly higher than the 21 day average true range of 21 3/4 cents, yet volume rose by only approximately 1000 contracts from the previous day when the market closed 4 cents lower. It is worth mentioning again that markets correct because most buyers have bought and sellers have gotten blown out. When markets stop going up because of an absence of buyers, they start going down, which accelerates the selling. Stand aside
May sugar closed 24 points higher on relatively heavy volume of 145,664 contracts. Open interest increased by 3,983 contracts. Stand aside.
May crude oil closed 94 cents higher on heavier than normal volume of 741,063 contracts. Open interest increased by 13,929 contracts. Volume was the highest since March 15 when 842,057 contracts were traded. In relation to volume, the open interest increase was about average. However, the range for the day was $1.85, which is approximately 20% less than the 21 day average true range of $2.35. In other words, you had expanding volume with a narrow trading range, a moderate close higher, and an average open interest increase. The market remains on a short-term sell signal, and an intermediate term sell signal has not yet been generated. Under no circumstances should speculators attempt short this market. Stand aside.
May gasoline closed 6.12 cents higher on volume of 158,543 contracts. Open interest increased by a minuscule 1,193 contracts. The range for Thursday’s trading was 8.09 cents, and the 21 day average true range is 6.22 cents. It is interesting to compare trading on April 12 to the action of April 11. On April 11 the trading range was 6.78 cents, open interest increased by 2,547 contracts, volume was 200,757 contracts, and gasoline closed 4.59 cents higher. On April 12, gasoline had a wider range (8.09 cents) than the previous day, closed higher than the previous day (6.12 cents), and yet volume shrank by 42,214 and open interest declined by 1354 contracts (2,547-1,193) from the previous day. Speculators should always be wary of a move higher when the trading range is expanding, but volume and open interest declines significantly. Stand aside.
May copper closed 8.10 cents higher on heavy volume of 97,186 contracts. Open interest increased by a minuscule 1,016 contracts. On Thursday, copper’s trading range was 9.70 cents, which was significantly above the trading range of April 11 of 4.25 cents. Despite closing 8.10 cents higher on April 12, with range expansion, volume shrank by 9,429 contracts from the previous day. Remember, volume is the gauge that tells you the level of participation by speculators.
June gold closed $20.30 higher on fairly light volume of 162,193 contracts. Open interest increased by 2,957 contracts. The market made a new high for the move at $1681.30 and closed at $1680.60, which was the highest close since March 27 when June gold closed at $1687.70. Again, volume gives clues about the strength of the move. On April 12, volume was 42,333 contracts lighter than volume on April 10 when June gold closed $16.80 higher. To sum this up, gold made a new high on April 12 and closed at the highest point in two weeks, yet participation by speculators on the upside move declined from April 10 when the market also closed higher.
May closed $1.00 higher on fairly light volume of 56,621 contracts. Open interest increased by 2,262 contracts. The open interest increase was fairly heavy in relation to the volume, but the volume was disappointing. For example, on April 11 silver traded 54,040 contracts, but the range for the day was only 45 cents and the market closed 15 cents lower. Another example that highlights the poor volume of April 12 is to compare it to the market action of April 10. On that day, silver’s trading range was 83 cents, volume was 67,721 contracts, and the market closed 15 cents higher. In short, silver closed $1.00 higher with large range expansion and yet volume was paltry compared to other days when ranges and closes were significantly less. Silver remains on a short and intermediate term sell signal. Stand aside.
The market action of gasoline, copper gold and silver on April 12 is a prime example of the role that volume plays in the analysis of the markets. The markets’ daily trading range is an important measure of of how volume is impacting range expansion or contraction.
The June Euro close 96 points higher on volume of 274,774 contracts. Open interest increased by a minuscule 703 contracts. The low increase in open interest is actually a negative for the market. The market made a high of 1.3218, which was the highest price since April 4 when the market reached 1.3245. There is a tremendous amount of support at the 1.30 level going back to January. The market is on a short and intermediate term sell signal, however, I suggest speculators wait until the 1.30 area is definitively penetrated. Stand aside for now.
The June Australian dollar closed 1.49 cents higher on volume of the 158,795 contracts. Open interest declined on the rally by 178 contracts. The market continues to act in a bearish fashion, and although a short-term sell signal has been generated, an intermediate term sell signal has not occurred. The recent highs are as follows: April 12 1.0376, April 3 1.0380, March 28 1.0388. Speculators should keep these resistance points in mind when bearish positions are implemented. Stand aside.
S&P 500 E mini:
The June S&P 500 E mini closed 22.00 points higher on healthy volume of 1,853,757 contracts. Open interest increased by 27,540 contracts. The open interest increase was less than average when comparing it to the volume. Long put protection should already be in place.