Soybean oil: On May 20, July soybean oil generated an intermediate term sell signal after generating a short-term sell signal on April 29. The COT report revealed that managed money remains substantially long soybean oil by a ratio of 4.56:1, which is up from the previous week of 3.80:1 and a substantial increase from two weeks ago (3.49:1). Managed money liquidation will continue to pressure bean oil.We have no recommendation.
Live cattle: August live cattle will generate a short-term sell signal on May 23 and remain on an intermediate term sell signal. The short-term sell signal reverses the May 9 short-term buy signal.
The Cattle on Feed report released Friday was extremely bearish and currently the August contract is trading limit down. In April we wrote an analysis of the cattle market from a technical point of view and said it is in a long term bear market. The COT report revealed that managed money increased their net long exposure and added 3,648 contracts to their long positions and liquidated 12,208 of their short positions leaving the long ratio of managed money standing at 2.10:1, which is up from the previous week of 1.43:1 and the ratio two weeks ago of 1.42:1. As usual, managed money increased their net long position at the top.
Lean hogs: On May 20, July and August lean hogs generated short-term sell signals, but remain on intermediate term buy signals.
August lean hogs lost 67.5 points on light volume of 26,037 contracts. Total open interest declined by a massive 3,649 contracts, which relative to volume is approximately 475% above average meaning liquidation was off the charts heavy in Friday’s trading. Accounting for the large total open interest decline was the June contract, which lost 4,038 of open interest as it approaches first notice day.
As this report is being compiled on May 23 the August contract is trading 90 points lower and has made a new low for the move of 78.725, which is the lowest print since 78.725 made on April 27. The COT report revealed that managed money got massively long at the top of the move and according to the report, managed money added 5,131 to their long positions and liquidated 2,630 of their short positions.
As of last Tuesday’s tabulation, managed money is long lean hogs by a ratio of 4.69:1, which is up from the previous week of 3.71:1 and a substantial increase from the ratio two weeks ago of 3.29:1. Three weeks ago, managed money was long lean hogs by 2.59:1. Rallies should be sold.
Gold: June and August New York gold will generate short-term sell signals on May 23, but remain on intermediate term buy signals.
June gold lost $1.90 on heavy volume of 288,904 contracts. Volume was below that of May 19 when the June contract lost 19.60 on volume of 336,038 contracts and total open interest declined by a massive 17,504. On May 20, total open interest declined massively again, this time by 16,559 contracts, which relative to volume is approximately 130% above average meaning liquidation was extremely heavy on the modest decline. The June contract, which is nearing first notice day lost 34,043 contracts.
As this report is being compiled on May 23 the June contract is trading lower, down $4.20 and has made a new low for the move of 1243.50, which takes out the May 19 print of 1244.60. This is the lowest price for the June contract since 1239.10 made on April 28.
The COT report released Friday afternoon revealed that managed money remains massively long gold by a ratio of 7.14:1, which is up from the previous week of 6.93:1, but down from the record high ratio of 8.31:1 made two weeks ago. The next COT report released this Friday will likely show a substantial paring of long positions by managed money. Still, we think gold will trade sideways to lower and is likely to break below the April 28 low.
Now that gold is on a short-term sell signal, the market should have a counter trend rally, and we discourage the initiation of short positions. We recommend waiting until gold generates a short-term buy signal before initiating bullish positions and gold and silver should be traded from the long side only.