Corn: On April 1, May and July corn generated short and intermediate term sell signals.
May corn advanced 2.50 cents on heavy volume of 533,150 contracts. Total open interest increased by 32,704 contracts, which relative to volume is approximately 140% above average meaning huge numbers of new buyers and sellers entered the market and buyers were able to edge the market slightly higher. On Friday, the May contract made a new contract low of 3.47 1/4 and traded as high as 3.54 1/2 and this has been taken on April 4 out with a print of 3.55. Huge numbers of new short-sellers have entered the market and yet the 52 week continuation low of 3.46 3/4 made the week of June 15, 2015 has not been taken out. We advise against entering new bearish positions at current levels.
Lean hogs: On April 1 June lean hogs generated a short-term sell signal, but remain on an intermediate term buy signal.
June lean hogs lost 1.475 cents on volume of 35,030 contracts. Total open interest declined by a massive 2,514 contracts, which relative to volume is approximately 185% above average meaning liquidation was extremely heavy on the sizable decline. The April contract accounted for a loss of 1,281 of open interest. As this report is being compiled on April 4, the June contract is trading 40 points lower, but has not taken out Friday’s print of 78.800. Wait for a counter trend rally before initiating bearish positions.
Cotton: On April 1, May and July cotton generated short-term buy signals, and remain on intermediate term sell signals.
May cotton advanced 76 points on healthy volume of 43,614 contracts. Total open interest increased by 1,310 contracts, which relative to volume is approximately 10% above average. Additionally, the May contract lost 3,586 of open interest, which means there was more than enough open interest increases in the forward months to offset the decline in May and increase total open interest above average. Friday’s price and open interest action was outstanding, and this followed the very positive action on March 31 when the May contract gained 77 points on volume of 37,840 contracts and total open interest increased by 876 while the May contract lost 2,242 of open interest.
Remarkably, the USDA increased US acreage substantially, however this did not dissuade the bulls from entering the market in substantial numbers and driving prices to a new high for the move of 59.39, which has been taken out slightly on April 4. Although the fundamentals are anything but bullish, it appears the path of least resistance is higher for now. For those of you contemplating bullish positions, cotton should have a setback that lasts from 1-3 days and this would be the opportune time to initiate light bullish positions if you are so inclined. One warning: from the seasonal point of view, cotton tends to decline from spring into late summer.
WTI crude oil: On April 4, May and June WTI crude oil will generate short term sell signals, but remain on intermediate term buy signals.
May WTI crude oil lost $1.55 on volume of 896,831 contracts. Surprisingly, total open interest increased only 2,621 contracts, which is a dramatic decline from March 31 when total open interest increased by a massive 22,799 contracts, but the open interest increase confirms that new short-sellers were entering the market, though it appears they were rather timid about it. The May contract lost 4642 of open interest.
As this report is being compiled on April 4, the May contract is trading 51 cents lower and has taken out Friday’s print of 36.63 and May crude currently is trading at levels last seen in early March. Now that crude is on a short-term sell signal, the market should have a counter trend rally lasting 1-3 days and this will be the opportunity to initiate bearish positions.
Brent crude oil: On April 4, June and July Brent crude oil will generate short-term sell signals, but remain on intermediate term buy signals.
Heating oil: On April 4, May and June heating oil will generate short-term sell signals, but remain on intermediate term buy signals.
May natural gas lost 3 ticks on volume of 265,787 contracts. Total open interest increased by 5,767 contracts, which relative to volume is approximately 15% below average, and it appears that a battle ensued between buyers and sellers and the market closed essentially unchanged. The May contract accounted for loss of 7,857 of open interest.
As this report is being compiled on April 4, the May contract is trading 5.8 cents higher and has made a daily high of $2.074, which is the highest print since $2.093 made on February 11. On March 16 May natural gas generated a short-term buy signal, and though it has traded sideways to higher, nat-gas has been unable to generate an intermediate term buy signal. For this to occur, the May contract must make a daily low above OIA’s key pivot point of 2.042.
In the March 30 missive, we recommended the initiation of two kinds of options strategies and if initiated, the trades are working well. Continue to hold the positions, however keep in mind the fundamentals for natural gas are not bullish and that the market can turn, although, it is quite a distance away from generating a short-term sell signal.
From the March 30 note on natural gas:
“Mind you, we are not suggesting that natural gas has entered into a new bull market, rather it is a seasonal move characterized by stronger natural gas prices in the April- May- June time frame. Clients may want to consider options strategies such as buying out of the money calls or shorting out of the money puts. The short puts should be in the nearby months to take advantage of time decay.”
Silver: On April 4, May and July NY silver will generate short-term sell signals, but remain on intermediate term buy signals.
Copper: On April 1, May and July copper generated short-term sell signals, but remain on intermediate term buy signals.
May copper lost 2.00 cents on substantial volume of 75,984 contracts. Total open interest increased by a massive 4,724 contracts, which relative to volume is approximately 140% above average meaning that large numbers of new short-sellers were entering the market and driving prices lower (2.1585). As this report is being compiled on April 4, the May contract is trading lower and has taken out Friday’s print with another new low of 2.1365, which is the lowest price since 2.1355 made March 2. No recommendation.
The June British pound lost 1.56 cents cents on heavy volume of 133,739 contracts. Volume was the strongest since March 17 when the pound advanced 2.55 cents on volume of 135,931 contracts and total open interest declined by 1,247. On April 1, total open interest increased by a sizable 3,625 contracts, which relative to volume is average. As this report is being compiled on April 4, the June contract is trading 64 pips higher and has made a daily high of 1.4324, which is below Friday’s print of 1.4375.
The June British pound remains on a short-term buy signal, but an intermediate term sell signal, and has refused to break substantially lower. Currently the pound is trading around its 50 day moving average. The short-term moving average set up is bullish: the 5 day moving average is above the 20 day which is above the 50 day.
The COT report was released Friday and this revealed that leverage funds increased their net short exposure and are short by ratio of 1.97:1, which is up from the previous week of 1.86:1, a substantial increase from the ratio two weeks ago of 1.33:1. April tends to be a strong month for the pound and a continued rally seems realistic, at least enough to blow out more short-sellers. The vote on Britain leaving the European union is 2 1/2 months away and there is more than enough time to blow out more bears and get speculators somewhat bullish before reversing course. We continue to advocate a stand aside posture.