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July soybeans closed 25 cents higher on volume of 219,686 contracts. Open interest increased by 5,501 contracts. The open interest increase occurred in the August 2012 through 2013 contracts. For the July contract, open interest actually declined by 2,573 contracts on volume of 109,436. As I have pointed out numerous times, the market is massively overbought, and the failure to see significant open interest declines should be worrisome for anyone long the market. The soybean market is loaded with speculative longs, which makes it very dangerous to be long. As I write this on May 11, soybeans are down 38 1/2 cents. Once there has been demonstrable liquidation, soybeans could be a terrific trade from the long side. Stand aside.
July corn closed 19 3/4 cents lower on heavy volume of 388,948 contracts. Open interest increased on the decline by 8,244 contracts. Open interest in the July contract increased by 5,140 on volume of 205,193 contracts. This is bearish price and open interest action. The market made a new low ($5.85 1/2) and new closing low ($5.87 1/2) which was the lowest price for July corn since March of 2011. The reason for the decline was that the USDA revised ending stocks upward to 851 million bushels, when the market was expecting 750 million bushels. Previously, I had suggested that speculators who were long the market place stops at either $6.04 or $5.99. It will be important to see whether this price decline gets farmers to part with some of their corn inventory. If farmers panic due to the price decline and start selling in earnest, the market could experience another leg down. Stand aside.
June crude oil closed $.27 lower on volume of 568,617 contracts. Open interest declined for the fourth day in a row by 16,864 contracts. The four day cumulative open interest decline amounts to 57,054 contracts. The market is oversold and is due for a bounce. On the continuation chart, the 200 day moving average is at 96.30, which is the mid-point of the range that crude oil has been trading in since May 7. Crude oil is on a short and intermediate term sell signal. Stand aside.
June gasoline lost 1.39 cents on volume of 154,997 contracts open interest declined by 1,846 contracts. On April 17, gasoline generated a short-term sell signal, but as of May 10 it has not generated in intermediate term sell signal. Stand aside.
July copper closed 3.10 cents higher on volume of 63,203 contracts. Open interest increased by a modest 647 contracts. On April 9, 2012 copper generated a short-term sell signal, and as of May 10, it has not generated in intermediate term sell signal. Once this occurs, I think copper will be a terrific candidate on the short side. The problem with copper is that it’s extremely volatile, and the options market is illiquid. One way to play the short side of copper is to use the ETN ticker symbol JJC. In the weekend wrap I will perform an analysis to see how well the ETN tracks copper futures.
June gold closed $1.30 higher on volume of 164,026 contracts. Open interest declined by 5,218 contracts. Please consult your investment advisor or broker before embarking upon a plan to acquire gold for a longer term investment.
July silver closed 6 cents lower on very low volume of 35,615 contracts. Open interest declined by 921 contracts. Stand aside.
The June Euro closed five ticks higher on volume of 254,062 contracts. Open interest increased by 11,398 contracts. The trading range on May 10 was only 56 points, which is considerably below the 21 day average true range of approximately 100 points. Despite the narrow range, the volume was healthy and the open interest increase was significant. This is the seventh day in a row that open interest has increased. Despite the massive increase in open interest, which clearly shows the shorts are in control, new positions should not be taken on the short side. One never knows when Euroland finance ministers will try to pull a rabbit out of their hat, which could cause a sharp short covering rally.
S&P 500 E mini:
The June S&P 500 E mini closed 6.50 points higher on heavier than normal volume of 1,840,695 contracts. Open interest declined by 13,934 contracts. The market looks weak, but just possibly the market could have a rally. What has occurred during the past four trading days, and continues today Friday May 11 is a consolidation pattern that is bounded by 1370.25 on the upside and 1339.25 on the downside. Protective long puts should already be in place.