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When I feel it is appropriate I like to bring certain important economic news to the attention my readers. Today, April 25, two important news events broke, which should be of interest to anyone involved in the markets. I am presenting this without comment because I think the information speaks for itself.
From Bloomberg: “U.K. succumbs to first double dip recession since 1970s.”
“The U.K. economy shrank in the first quarter as Britain slid into its first double dip recession since the 1970s, forcing Prime Minister David Cameron to defend spending cuts in Parliament.”
“Gross domestic product fell 0.2% from the fourth quarter of 2011 when it declined 0.3%, the Office for National Statistics said today in London. The median of 40 estimates in a Bloomberg news survey was for increase of 0.1%. A technical recession is defined as two straight quarters of contraction.”
From Zero Hedge: “March Durable Goods Implode, Worse Than Lowest Wall Street Forecast and Biggest Drop since January 2009.”
“The March durable goods data comes in and it was a complete disaster: instead of dropping modestly by 1.7% as the consensus expected, the March actual print was a massive 4.2% decline, worse than the worst Wall Street forecast, or the most since January 2009!
July soybeans closed 24 cents higher on volume of 285,886 contracts. Open interest increased by 4,473 contracts. Although the market made a new high at $14.71 1/4, there are two aspects of trading on the 24th that should give speculators caution. First, the trading range on the 24th was 33 1/2 cents, which is approximately 50% greater than the 21 day average true range of 22 3/4 cents. Volume on the 24th was 285,886 contracts, which was only fractionally higher than April 23 when 259,964 contracts were traded and the trading range was 17 1/2 cents. In short, on the 24th the market advanced 24 cents, made a new high for the move, the trading range was significantly greater than on the 23rd, yet volume only increased by only 10%. This contrasts with the market action of April 20 when soybeans advanced 28 1/2 cents and volume was 343,746 contracts. The market remains overbought and when the rally stops is anyone’s guess, but the market will have a correction, and chances are it will be a significant one. Stand aside.
July corn closed 4 1/2 cents lower on fairly heavy volume of 376,563 contracts. Open interest declined for the third day in a row by 9,748 contracts. During the past three days open interest has declined by a massive 47,444 contracts. Since first notice day occurs on April 30, I would expect to see more liquidation ahead. It is apparent that speculators in the May contract are for the most part, liquidating positions rather than roll them into July. There is an extremely high percentage of corn longs that are sitting on pretty good-sized losses. As the market rallies, sellers peel off their positions in the hope of reducing their losses, which puts a cap on rallies. As an example, on April 24, the market rallied to a high of $6.21 3/4 and then proceeded to sell off during the remainder of the session to close at $6.08, near the lows of the day. Until first notice day (April 30), I would expect to see more liquidation.
June crude oil closed $.44 higher on extremely light volume of 369,531 contracts. Open interest increased by a modest 1,645 contracts. What is fascinating about crude is that whether the trading range expands or declines, volume is lackluster. For example on April 23 volume was 374,493 contracts, and the trading range for the day was $2.08. However on the 24th volume was only slightly lower by 4,962 contracts, but the trading range was much smaller at $1.31. For whatever reason, there just seems to be a lack of speculative interest in crude at this time. The market remains on a short-term sell signal, but do not short the market. Stand aside.
June gasoline closed 2.35 cents lower on lighter than usual volume of the 153,944 contracts. Open interest declined for the fourth day in a row by 5,823 contracts. During the past four days, open interest has declined by a total of 25,037 contracts. During this time frame June gasoline has declined 3.20 cents on a close only basis. The liquidation accompanying the price decline is actually quite positive. Stand aside.
May copper closed 4.65 cents higher on very heavy volume of 106,938 contracts. Open interest declined by 585 contracts. The range on the 24th was 6.30 cents which is about one third less than the 21 day average true range of 8.31 cents. Volume was the highest since April 13 when 108,932 contracts changed hands. There is resistance at the $3.73 level going back to April 12. If the market is able to overcome this resistance, a further rally may be in the offing. The market remains on a short-term sell signal. Stand aside
June gold closed $11.20 higher on very light volume of 118,387 contracts. Open interest declined on the rally by 3,902 contracts. On the 23rd, the market declined by $10.20 and open interest was down 2,876 contracts. As I pointed out in the post of April 23, gold has lost over 79,000 contracts of open interest since topping out on February 28. Despite what many pundits say about gold fundamentals, the fact remains that speculators are getting out of gold in droves. However, this presents an opportunity for the wise investor, who can accumulate gold at lower prices. Please consult your investment advisor or broker.
May silver closed 21.5 cents higher on a higher than normal volume of 72,574 contracts. Open interest declined by 402 contracts. Stand aside.
The June Euro closed 45 points higher on light volume of 224,990 contracts. Open interest declined on the advance by 7,429 contracts. The volume and open interest action continues to be bearish. However, due to the possibility of further repatriation of asset sale proceeds into the Euro by European banks, speculators should stand aside.
The June Australian dollar lost 17 points on volume of 124,787 contracts. Open interest declined by 1,684 contracts. The market remains on a short-term sell signal, but has not generated in intermediate-term sell signal. Until the intermediate-term sell signal is generated, the market may rally up to the 1.0320 area. For those with bearish positions, use the March 28 high of 1.0388 as an exit point for all positions.
S&P 500 E mini:
The S&P 500 E mini closed 7.25 points higher on lighter than normal volume of 1,446,952 contracts. Open interest declined by 14,342 contracts. Volume was the lightest since April 9 when 1,084,355 contracts were traded. As I pointed out in the April 22 Weekend Wrap, the bias for the market in the second half of April is to the upside. However, long put protection should be in place, especially with the news of the United Kingdom being in a recession and the awful durable goods orders stats.