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Corn:
May Chicago corn lost 7 cents on volume of 276,432 contracts. Open interest declined by 12,963 Contracts. The market closed at the lowest level since January 23, 2012 when May corn closed at $6.25 3/4. I did an open interest analysis from the January 23 close through March 27 close, and this showed during the January 23 through March 27 time frame, open interest increased by 89,384 contracts. The purpose of computing this was to determine the number of new entrants into the corn market since January 23, which would indicate the amount of potential selling pressure. Corn has been a crowded trade for a number of months and the Commitment of Traders Report tabulated on March 19 and released March 23 showed that the number of longs held by the managed money category is 309,002 contracts. The number of contracts held short in the managed money category is a mere 32,168 contracts. In other words, the big-money speculative crowd is long corn by nearly 10 to 1 ratio going into the March 30 report to be issued by the USDA. Corn will move to a sell signal when the daily high is below the key pivot point of $6.33 5/8. The May-July corn spread went to even money on yesterday’s decline, which is potentially negative. As I write this on May 28, May corn is lower by 5 1/2 cents. If the market is to hold up, it is important that the May-July bull corn spread continue to work. Do not initiate either long or short positions prior to the March 30 report.
Soybeans:
May Chicago soybeans closed 9 3/4 cents lower on volume of 239,623 contracts. Open interest increased by 5,600 contracts. Volume on Tuesday was the highest since March 9 when 283,147 contracts were traded and May soybeans closed at $13.37 3/4. Ideally, longs would prefer to see volume decline as price declines, which is the opposite of what happened on Tuesday. Open interest is at record levels, and the market has become a very crowded trade. The big question at this juncture is how much of the March 30 USDA report has been discounted by the huge upside move in beans. Temporary tops or long-term tops are characterized by record high open interest. Do not initiate either long or short positions prior to the March 30 report.
Sugar #11:
May New York sugar closed 48 points lower on volume of 131,952 contracts. Open interest declined by 172 contracts. The sugar market has declined 1.61 cents per pound during the past three sessions and open interest has declined by a total 6,414, which is positive for a market that is still on a buy signal. I will apprise speculators when and if it is appropriate to re-enter the market on the long side.
Crude oil:
May New York crude oil closed 30 cents higher on very light volume of 403,832 contracts. Open interest increased by 12,242 contracts. On Tuesday, the trading range was $1.21, which is the second day in a row that crude has traded in a narrow range. The 21 day average true range is $2.09. As I’m writing this on March 28, crude is down $2.35. The market has been trading in a lackluster fashion for quite a while and has been in a consolidation pattern since late February. The key areas support are $104.50, which was made on March 22, and $104.43, which was made on March 15. Stand aside.
Gasoline:
May gasoline closed 1.23 cents lower on volume of 146,888 contracts. Open interest declined 6,237 contracts, which was the fourth day in a row that open interest declined. The total of the four day open interest decline is 19,810 contracts during which time gasoline prices increased by 4.12 cents. This is very bearish price and open interest action. As I am writing this on March 28, May gasoline is trading 4.06 cents lower. I have been suggesting for quite a while that speculators stand aside in both the crude and gasoline markets. I continue to recommend that stance.
Gold:
April New York gold closed $.70 higher on heavy volume of 270,274 contracts. Open interest declined by a massive 19,833 contracts. On March 22 the gold market made a low of $1627.50 per ounce and rallied to close at $1642.50 on that day. From that low the market rallied to a high of $1696.90 on March 27, which was approximately a $70.00 rally from the low to the high. During that time, open interest decreased by 17,921 contracts. This is bearish price and open interest action. There continues to be a significant amount of upside resistance based upon the 50 day and 150 day moving averages, and at my pivot point of $1707.50. As I have mentioned in previous posts, the gold market is on a sell signal. But despite its lackluster performance, speculators should be looking to acquire gold at lower prices. I believe gold is in a long-term bull market. As I write this on March 28, gold is lower by $28.60.
Silver:
May New York silver closed $.13 lower on light volume of 39,764 contracts open interest declined by 1,533 contracts. The price and open interest action continues to be dismal, and as I write this on March 28, silver is down 76 cents per ounce. Stand aside.
Euro:
The June Euro closed eight points lower on very light volume of 182,780 contracts. Open interest increased by 1,023 contracts. Although the price and open interest action of March 23 and March 26 has been bearish, the market appears to have support at current levels. Stand aside.
S&P 500 E mini:
The June S&P 500 E mini closed 8.50 points lower on very light volume of 1,254,838 contracts. Open interest increased on the decline by 21,778 contracts. The market reached a new high for the move at 1419.75, and reversed to close lower. The Shanghai Composite Index has been weak since March 6, 2012 and the ETF (FXI) that represents 25 of the largest Chinese companies has declined by 4.90% while the S&P 500 cash index has appreciated by 3.50% since March 6. This has ominous implications for equities markets around the world and for copper in particular. Well over a month ago, I recommended that long positions in copper that were acquired at significantly lower levels, be liquidated in the $3.85 area. After my recommendation to liquidate copper, I stated there was no reason to be involved in the copper market. The slowdown in China has been apparent for a number of months, and this is going to affect US equities. Long put protection should be in place.
Interest Rates:
June 10 year treasury notes closed 17 points higher on volume of 973,130 contracts. Open interest declined by 7,411 contracts. From the time when notes made their low of 127-23 on March 20, the market has rallied to a high of 129-22.5 on March 27, or a rally of 63.5 points from low to high. The rally began in earnest on March 21, and therefore I am not including the open interest stats for March 20. Even so, open interest declined by 29,187 contracts from March 21 through March 27. This is bearish price and open interest action. Speculators certainly have been able to implement bearish positions in June notes. As I have said before, money stops should be based upon risk tolerance, however the March 14 high of 130-01 is a reasonable stop loss point.
