Live cattle: On April 24, we released a research note on live cattle and recommend that clients review it.
June live cattle advanced 2.15 cents on volume of 46,888 contracts. Volume increased approximately 10% from April 25 when the June contract gained 1.95 on volume of 41,977 contracts and total open interest declined by 1,588. The average volume for the past two days has been approximately 25% below year to date average daily volume, which indicates a lack of participation on the rally.
On April 26, total open interest declined by a massive 3,901 contracts, which relative to volume is approximately 230% above average meaning that both longs and shorts were liquidating as prices rebounded from Friday’s contract low. The April contract lost 1,503 of open interest, June -2,412, August -634.
In summary, liquidation occurred across the board and this is no surprise considering the large numbers of speculators who are long cattle and are looking to recoup any kind of gain. We pointed out in previous reports that rallies would be met by selling due to the heavy long position of managed money. As this report is being compiled on April 27 the June contract is trading lower, down 1.525 after taking out yesterday’s high with a print of 119.350. We have no recommendation.
July corn advanced 5.50 cents on volume of 449,739 contracts. Volume was the weakest since April 8 when 446,199 contracts were traded and the July contract closed at 3.65. On April 26, total open interest declined by a massive 26,187 contracts, which relative to volume is approximately 135% above average meaning that liquidation was extremely heavy on yesterday’s advance. The May contract accounted for loss of 22,701 of open interest and there were additional open interest losses in the forward months.
Yesterday’s performance is a disappointment to the bulls for two reasons: volume was the lowest in over two weeks and the massive decline of open interest on a price advance and prices could not advance to the April 25 high of 3.89 1/2. As this report is being compiled on April 27, the July contract is trading 3.00 cents lower after making a daily high of 3.87 3/4, which matches yesterday’s high. We have no recommendation.
July soybeans advanced 17.50 cents on light volume of 412,897 contracts.Volume was the lowest since April 18 when the July contract lost 1.75 cents on volume of 379,218 contracts and total open interest increased by 14,715. On April 26, total open interest declined by 17,134 contracts, which relative to volume is approximately 30% above average. The May contract lost 19,633 of open interest.
As this report is being compiled on April 27 the July contract is trading 1.50 lower and has made a daily high of 10.29 3/4, which is slightly above yesterday’s print of 10.28 1/4 and matches the April 25 high. Although we think soybeans will move higher, it will trade in the consolidation pattern to shakeout both longs and shorts. We have no recommendation.
New York Sugar: On April 26, July New York sugar generated a short-term buy signal and remains on an intermediate term buy signal.
July New York sugar advanced 16 points on volume of 137,424 contracts. Total open interest declined by 5,104 contracts, which relative to volume is approximately 25% above average meaning liquidation was substantial on yesterday’s modest advance. However, the May contract, which is expiring shortly lost 14,007 of open interest. As this report is being compiled on April 27 the July contract has closed 22 points lower. We have no recommendation except to say that sugar should be traded from the long side due to the golden cross of the 50 and 200 day moving averages and that sugar is on buy signals.
WTI crude oil:
June WTI crude oil advanced $1.40 on surprisingly light volume of 844,397 contracts. Volume was the weakest since April 22 when the June contract gained 55 cents on volume of 837,856 contracts and total open interest declined by 10,304. On April 26, total open interest increased by 12,136 contracts, which relative to volume is approximately 40% below average. The June contract gained 11,808 of open interest.
Yesterday’s price action was very positive and the June contract made a new contract high of 44.83. However, volume on the advance was disappointing and the open interest increase left much to be desired. Despite this, on April 27, the June contract is trading 54 cents above yesterday’s close and has made a new contract high of 45.18. We have no recommendation.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.0 million barrels from the previous week. At 540.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 1.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.7 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.3 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 5.2 million barrels last week.
The June British pound advanced 1.01 cents on strong volume of 105,522 contracts. Volume increased from April 25 when 90,124 contracts were traded and the June contract gained 71 pips. Additionally volume was above April 22 when the pound gained 81 pips on volume of 98,866. On April 26, total open interest increased by a massive 4,922 contracts, which relative to volume is approximately 75% above average.
For the past three days beginning on April 22, the June pound has advanced each day and open interest has not only increased each day, but has been higher on each successive day. Yesterday, was the tabulation date for the upcoming Commitment of Traders report (Friday release) and it will be fascinating to see what impact the past three trading days have had on the managed money long/short ratio.
At this juncture, we see higher prices and in yesterday’s trading, the June contract made a high of 1.4641, which was the highest print since early February. On April 20, OIA announced the June British pound generated a short-term buy signal and an intermediate term buy signal on April 25. Remain on the sidelines.
10 Year Treasury Note: On April 26 the June 10 year note generated an intermediate term sell signal after generating a short-term sell signal on April 21.
The June 10 year treasury note lost 6.5 points on volume of 1,062,131 contracts. Total open interest declined just 2,356 contracts. As this report is being compiled on April 27, the June contract is having its first counter trend rally, trading 11 points higher on the day on low volume. The market should experience another day or two of upward corrective activity before resuming its downtrend. We have no recommendation.