Corn: On April 14, May and July corn generated short and intermediate term buy signals.
May corn advanced 0.50 cents on heavy volume of 665,938 contracts. Volume declined from April 13 when the May contract gained 10.75 cents on volume of 853,919 contracts and total open interest declined by 9,595 contracts. On April 14, total open interest declined again, this time by 21,073 contracts, which relative to volume is approximately 10% above average meaning liquidation was substantial on the modest advance.
Yesterday, the May contract made a high of 3.74 1/2, which was slightly below the April 13 print of 3.74 3/4. However, on April 15 the May contract has made another new high for the move of 3.79 1/4, up 4.50 cents, which is the highest print since 3.79 1/2 made on December 18, 2015.
Now that corn is on short and intermediate term by signals, we expect a pullback, and this could last from 1-3 days. As everyone knows the fundamentals for corn are anything but bullish, but at the very least this move is going to blow out large numbers of short-sellers who got massively bearish at the lows based on the report of March 31 from the USDA.
WTI crude oil:
May WTI crude oil lost 26 cents on volume of 999,097 contracts. Volume was the lowest since April 5 when the May contract gained 19 cents on volume of 820,360 contracts and total open interest increased by 4,468. On April 5, the May contract made its low for the move of $35.24. On April 14, total open interest declined by 30,266 contracts, which relative to volume is approximately 5% above average meaning liquidation with substantial on the modest decline. The May contract lost 47,305 of open interest.
It is notable that the April 13 high of 42.42 has remained intact and 42.16, was yesterday’s high for the day. However, the April 13 print was several cents below the high for the move of 42.49 made on March 18. By the end of today’s session, all clients should be flat going into the OPEC meeting to be held in Doha this weekend. May WTI currently is trading $1.18 lower and has made a daily low of 39.98, which slightly takes out the April 12 print of 40.09. May WTI remains on short and intermediate term buy signals.
June gold lost $21.80 on volume of 215,645 contracts. Total open interest declined by 4,750 contracts, which relative to volume is approximately 10% below average, but a total open interest decline accompanying yesterday’s loss is perfectly healthy. Yesterday, the June contract made a low of $1225.40 and this low remains intact on April 15.
Yesterday, the June contract closed at 1226.50 and had a small gap opening at 1228.50 in last night’s evening session, and the daily low on April 15 is 1226.80, above yesterday’s low. On April 12, OIA announced that June gold generated a short-term buy signal, which reversed the March 24 short-term sell signal. As is usually the case after the generation of buy signals, markets have a tendency to pullback from 1-3 days and gold’s corrective activity took place on April 13 and 14.
As this report is being compiled on April 15, the June contract is trading $9.10 higher on the day. As we pointed out in previous reports, on a seasonal basis, the next couple of months are not terribly good for precious metals, but if the equity market begins to roll over, gold will continue its uptrend. We remain concerned about the out-sized net long position of managed money, but the path of least resistance is higher for now.
May silver lost 15.2 cents on volume of 74,026 contracts.Volume was the lowest since April 8 when 56,560 contracts were traded and the May contract closed at $15.384. On April 14, total open interest increased by 3,576 contracts, which relative to volume is approximately 85% above average, meaning that new short-sellers were entering the market in large numbers and drove prices lower (15.925). Although silver’s performance has been outstanding lately, yesterday’s large total open interest increase on the modest decline concerns us.
As this report is being compiled on April 15, the May contract is trading 14.7 cents higher and has made a new high for the move of 16.395, which takes out the previous high of 16.345 made on April 13 and is the highest print since 16.380 made on October 28, 2015.As we have said in prior reports, due to silver’s volatility, we recommend that it be traded using options.
Dow Jones Transportation Index: On April 14, the Dow Jones Transportation Index generated a short-term buy signal, which reversed the April 7 short-term sell signal. This increases the likelihood of a continuing rally in the broad market.
S&P 500 E-mini:
The June S&P 500 E-mini gained 0.50 points on volume of 1,364,886 contracts. Total open interest declined 2,632. For the past couple of days, open interest relative to price advances and declines have been slightly bearish. For example, on April 13 when the June contract gained 20.20 points on volume of 1,639,638 contracts, total open interest increased just 7,360. On April 12, when the June contract advanced 21.25 points on volume of 1,832,992, total open interest declined by 14,323. On April 11, the June S&P 500 E-mini lost 6.25 points on volume of 1,682,760 contracts and total open interest increased by 10,393.
From the April 10 note on SPX:
“For the rally to continue, it must make a daily low above OIA’s pivot point of 2049.28. During the current rally, this has occurred on three occasions: March 30, 31 and April 4. If SPX is unable to make a low above the pivot point, it will trade sideways to lower.”
As we pointed out in our research note on April 10, SPX would have to make a daily low above our pivot point of 2049.28 and this occurred on April 13. The rally in the S&P 500 is likely to continue, and it should be noted that April is one of the best performing months for the index with an average return of 2.1% during the past 20 years. If we assume a 2.1% return for April, this would take SPX to a high of 2102.98, or a gain of 43.25 points for the month. On March 31, SPX closed at 2059.73.
Yesterday, SPX made its high for the move of 2087.84, or a gain of 28.11 points from April 1 through April 14. This is more than half the gain required for the index to perform in accordance with its twenty-year average. SPX Remains in a bearish moving average set up with the 50 day standing at 1990.06, 100 day 1994.25, 200 day 2014.00.