May corn closed 1 1/2 cents lower on volume of 325,481 contracts. Open interest increased for the sixth day in a row by 13,959 contracts. The bull spread continued to widen with May corn selling at a 6 cent premium to July. The high of the day was $6.63 3/4, which was 2 cents shy of the high made on April 3. Corn is currently on a buy signal, but as I mentioned in the post of April 3, there is a gap between $6.44 and 6.46 1/2 that was made between the high of March 30 and the low of April 2. Before entering long positions, I would like to see that gap filled. The market is exhibiting a great deal of strength, and the decline of equities, precious metals and the petroleum complex has not affected the corn market.
May soybeans closed 2 3/4 cents higher on volume of 306,839 contracts. Open interest increased by 14,457 contracts. As of April 4, open interest has increased 11 consecutive days for a total of 134,695 contracts. To say the market is overbought is an understatement. The market is going to have a setback, but where it comes from is anybody’s guess. Stand aside. Do Not Short This Market.
May sugar closed 17 points higher on volume of 147,019 contracts. Open interest increased by 6,769 contracts. As I watch sugar trade, one striking observation is that the market does not stay down for long. There have been numerous tests of the low 24 cent range, but the market is unable to break lower. For example, the market made a low of 24.11 cents per pound on March 28, and made a secondary low of 24.15 on April 4. The market remains on a buy signal, and has never generated a sell signal. If May sugar can reach 24.80, this would indicate that a possible retest of the highs of the low 26 cent area is more likely than not. May sugar’s 50 day moving average is 24.33, 150 day 24.38, 200 day 24.89. A reasonable sell stop stop for long positions would be at 24.11.
May crude oil closed $2.54 lower on volume of 682,076 contracts. Open interest declined by 378 contracts. I checked my records and found that the biggest volume days occur when the market closes lower. For example, on March 20 crude oil closed $2.02 lower and volume was 672,108 contracts. On March 14 volume was 671,171 contracts and crude oil was down $1.28. On March 15, crude oil was down 32 cents and volume was 842,057 contracts. The reason this is important is because volume expands in the direction of the underlying trend. The market is on a short-term sell signal. Stand aside.
May gasoline closed 6.18 cents lower on heavy volume of 248,860 contracts. Open interest increased on the decline by 5,016 contracts. Stand aside.
June gold closed $55.90 lower on volume of 211,769 contracts. Open interest declined by 1,265 contracts. An extraordinary aspect of the trading on April 4 was the significant decrease in volume on the decline. The market declined on April 3, and volume was light at 169,331 contracts while open interest declined by 1,572. The two-day decline on lighter than usual volume and declining open interest is a positive factor for gold. I want to call attention to the fact that there is a gap of $22.50 between the close of gold on April 3 of $1672.00 and the high of the day of $1649.50 made on April 4. This is a sizable gap that may act as short-term resistance. The market closed at $1614.10, which was the lowest close since January 9, 2012 when June gold closed at $1610.80.
May silver closed $2.22 lower on heavy volume of 73,079 contracts. Open interest increased on the decline by 654 contracts. The low for the day was $30.98, which was the lowest price for silver since January 20 when silver reached $30.37. It is interesting to compare the volume in gold to the volume in silver on April 4. While gold’s volume was fairly light, silver printed the highest volume (84,737) since March 14 when silver closed $1.40 lower. Stand aside.
The June euro closed 79 points lower on volume of 274,488 contracts. Open interest increased on the decline by 11,486 contracts. Open interest has increased three days in a row as the market fell from its highs, which is bearish. The Euro fell apart after the Federal Open Market Committee minutes were released, and subsequent to that news of the failed Spanish bond auction. A sell signal was generated on April 4 because the high of the day (1.3245) was below the pivot point of 1.3259. Before recommending any bearish positions, I want to see how the Euro performs on a rally. The market has come down rather quickly, and is due for a bounce. For now stand aside.
The June Australian dollar closed 42 points lower on volume of 142,434 contracts. Open interest increased on the decline by 2,058 contracts (bearish). For the past three days the Australian dollar has exhibited all the signs of a market that is headed lower. On April 2 the market rallied by 84 points, but open interest was down 622 contracts (bearish). On April 3, the Australian dollar was down 1.35, but open interest went up (bearish). The market went on a short-term sell signal on March 28. If the high of April 5 holds, a longer term sell signal will be generated.
S&P 500 E mini:
The S&P 500 E mini closed 15.50 points lower on volume of 1,835,713 contracts. Open interest declined by 29,334 contracts. Long put protection should be in place.
June treasury notes closed 14 1/2 points higher on relatively heavy volume of 1,279,466 contracts. Open interest increased by a massive 42,897 contracts. It appears that longs have taken control of the note market once again and that a flight to safety is on due to the shaky equities market and an uncertain situation in Europe. In previous posts, I noted that I expected the note market to rally on a equity market decline. At this juncture, I suggest that bearish positions be liquidated due to what I perceive is a potentially larger slide in equity indices. The 130-02 area is where I have previously suggested that bearish positions be exited.