May corn closed 4 1/2 cents higher on heavy volume of 456,44 contracts. Open interest declined by 18,751 contracts. The decline of open interest on the rally is somewhat worrisome. This is the second day in a row that open interest has declined, which brings the total decline for the past two days to 42,560 contracts. The decline in open interest on February 24 was accompanied by a slight increase in price of 1 1/4 cents. The key pivot point to watch for on the upside is 6.44 3/4. If May corn’s low is above 6.44 3/4, then the market should be traded from the long side.
May soybeans closed 15 3/4 cents higher on relative heavy volume of 243,783 contracts. Open interest declined by 956 contracts. During the past two days, open interest declined by a total of 12,823 contracts while the market has advanced $.18. If long from lower levels, continue to move up stops to protect capital and profits. If not long, stand aside.
May sugar closed 33 points higher on heavy volume of 170,720 contracts. Open interest increased by 5,184 contracts. The market made a new high at 25.81, and since February 21 when the market made a low of 23.81, sugar has advanced two cents, or approximately 8%. When I suggested that speculators enter into long positions, I recommended that stops be placed at 23.81. At this juncture, stops should be moved up to protect capital and profits. The market is clearly overbought and sugar occasionally has devastating corrections. Do not chase this market. If not long, wait for a correction of about 75-100 points before entering long positions.
April crude oil closed $.93 higher on volume of 687,880 contracts. Open interest increased by 12,408 contracts. Volume declined by approximately 110,000 contracts from the previous day and was the lowest since February 22. The market is over extended and due for a correction. Stand aside.
April gasoline closed 3.72 cents lower on light volume of 106,593 contracts. Open interest declined by 2,875 contracts. Open interest declines and lower volume on declines is very positive market action. If the correction gathers further momentum, volume will increase. On February 24, when gas reached a new high, and closed higher by 3.67 cents, open interest declined by 3,910. This occurred on light volume, which indicated the market was exhausted on the upside. Continue to wait for lower prices.
April gold closed $1.50 lower on volume of 146,390 contracts. Open interest increased by 2,469 contracts. The market made a low of 1762.60, which was the lowest price since February 22, when the market made a low of 1750.70. As I have said before, pullbacks are buying opportunities. The stock market and the direction of the dollar index will continue to influence the direction of gold, at least in the short term. In earlier posts, I mentioned that options were an excellent way to participate in gold because the gold volatility index (GPZ) is near 18 month lows. This is an important component of options pricing, and it makes sense to take advantage of inexpensive volatility.
May silver closed higher by approximately $.18 on very heavy volume of 122,577 contracts. Open interest declined by a hefty 4,856 contracts. Although the open interest action doesn’t seem to be as favorable as gold’s, the increase in volume is most definitely impressive. The volume on February 27 was the highest volume in many months, but before February 21, volume ranged from 50,000 to 60,000 contracts daily. From February 21 through the 27th, volume has ranged from a low of 84,212 contracts to the high made during Monday’s trading. From February 21 through February 27, silver advanced $2.32, or 6.98%, and open interest increased by 6,386, which is a rather small number relative to silver’s volume.
The March Euro closed lower by 62 points on light volume of 261,685 contracts. Open interest declined by 3,459 contracts. The market was unable to penetrate the previous session’s high of 1.3488. The sessions low was 1.3367, which is below my key pivot point of 1.3408. Remember, the Euro’s daily low must be above that key pivot point in order for the market to move higher. Until that happens, the trend of the market is lower.
S&P 500 E mini:
The March S&P 500 E mini closed 4.00 points higher on volume of 1,666,240 contracts. Open interest increased by 9,547 contracts. My view is that the market is topping and that long put protection should be in place.
10 Year Treasury Notes:
March 10 year treasury notes closed 12 1/2 points higher on extremely heavy volume of 3,117, 994 contracts. Open interest increased by a minuscule 3,506 contracts. This was the third day in a row that volume in the 10 year treasury note market exceeded that of the S&P 500 E mini contract. Based upon the extremely heavy volume, and the very light increase in open interest, my conclusion is that new longs were replacing old longs, and new shorts were replacing old shorts, which would explain the negligible change in open interest. For a period of time, I thought the market might be headed lower based upon the very bearish open interest action in relation to price over a period of several days. At this juncture, it seems that the market may be looking to go higher. I will continue to monitor the action and will notify you of any change in trend. Stand aside.