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Corn:

March corn lost 1.50 cents on volume of 285,102 contracts. Total open interest increased by a massive 12,530 contracts, which relative to volume is approximately 75% above average. The March contract accounted for loss of 2,287, which means there were more than enough open interest increases in the forward months to offset the decline in March and increase total open interest substantially.

It appears a battle occurred on February 3 between buyers and sellers and sellers were able to edge the market slightly lower. For the past several reports, we have been commenting on corn’s inability to break out of the low 3.70 range, and as this report is being compiled on February 4, the March contract is trading 2.25 cents lower and has made a daily high of 3.73 1/2, which is slightly above the February 3 print and slightly below the February 2 print.

Corn needs a catalyst to move substantially higher from here. Another sign of concern is that the dollar index has moved sharply lower on February 3 and 4 and this has boosted the prices of many commodities including precious metals and even copper, but has done absolutely nothing for the grains.

This is another canary in the coal mine. The dollar index will generate short and intermediate term sell signals on February 4 and this should be positive for the grain complex but is not having any impact. March corn remains on a short-term buy signal, but an intermediate term sell signal. We have no recommendation.

Live cattle: April live cattle will generate a short-term buy signal on February 4.

April live cattle advanced 1.00 cents on volume of 53,155 contracts. Total open interest increased by 581, which relative to volume is approximately 50% below average, however an open interest increase on yesterday’s price advance is positive. Additionally, the February contract lost 2,581 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in February and increase total open interest.

As this report is being compiled on February 4, the April contract is trading 50 points higher and has made a daily low of 1.35225, which is above OIA’s key pivot point for the generation of a short-term buy signal of 1.35135. February is usually a strong month on a seasonal basis for live cattle.

Coffee: March coffee will generate a short-term buy signal on February 4 if the daily low remains above OIA’s key pivot point for February 4 of 1.1900. The March contract remains on an intermediate term sell signal.

March coffee advanced 1.70 cents on heavy volume of 54,327 contracts. Total open interest declined by 1,880 contracts, which relative to volume is approximately 25% above average meaning liquidation with substantial on the modest advance. As this report is being compiled on February 4, the March contract is trading 1.75 cents above yesterday’s close. During the past year, coffee has a tendency to generate buy signals, which are then quickly reversed. The fundamentals are not compelling and we recommend a stand aside posture.

WTI crude oil:

March WTI crude oil advanced $2.40 on huge volume of 1,582,871, which may be record exchange volume for crude oil. Total open interest increased by 20,407 contracts, which relative to volume is an unimpressive 45% below average. The March contract gained 2684 of open interest.

February 3 marked the fifth time in a row in which prices advanced along with open interest. While this is positive, the March contract has been unable to generate a short-term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point for February 4 of $33.63 and the low for trading on February 4 is 31.68.

As this report is being compiled on February 4, the March contract made a high of 33.60, just slightly below the pivot point and a low of 31.68, which is above yesterday’s print of 29.40. March WTI remains on short and intermediate term sell signals.

Silver: March and May silver will generate an intermediate term buy signal on February 4 after generating a short-term buy signal on January 26.

March silver advanced by a strong 44.5 cents on heavy volume of 73,004 contracts. Total open interest increased by 6,841 contracts, which relative to volume is approximately 270% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of $14.820.

As this report is being compiled on February 4, the March contract is trading higher again, up 14.1 cents and has made a new high for the move of 14.930, which is the highest print since 15.085 made on November 6. We have no recommendation.

Gold: On January 7, OIA announced that April gold generated a short-term buy signal and an intermediate term buy signal on January 26.

April gold advanced $14.10 on volume of 198,077 contracts. Total open interest increased by 6,982 contracts, which relative to volume is approximately 20% above average. The February contract accounted for loss of 541 of open interest. As this report is being compiled on February 4, the April contract is rocketing higher, up $15.20 or+ 1.34% and has made a new high for the move of $1157.30. Both gold and silver have broken out into new high territory, and it appears the precious metals have seen their worst days. Both markets are overbought, and in our view setbacks should be bought.

Copper: March and May NY copper will generate short-term buy signals on February 4 but remain on intermediate term sell signals.

March copper advanced by 4.00 cents on heavy volume of 88,271 contracts. Total open interest declined by 1,560, which relative to volume is approximately 25% below average. As this report is being compiled on February 4, the March contract is trading 1.50 cents higher, and has made a new high for the move of $2.1380.

Conceivably, the March contract may generate an intermediate term buy signal in tomorrow’s trading. According to the latest COT report, managed money remains substantially net short copper and this group will provide additional fuel for the upside move. The fundamentals of copper are certainly not bullish, but with the collapse of the dollar index, we are seeing many commodities get a bid. We have no recommendation.

Dollar index: The March dollar index will generate short and intermediate term sell signals on February 4.

The March dollar index collapsed by 1.592 points on heavy volume of 61,822 contracts. Total open interest increased by a massive 3,300 contracts, which relative to volume is approximately 105% above average meaning large numbers of new short-sellers were entering the market and driving prices to a new low for the move of 96.885.

As this report is being compiled on February 4, the March contract is trading sharply lower again, down 71.7 points or -0.73%. In the days leading up to the rout in the dollar index OIA was cautioning clients that the market was not acting well.

From the February 1 report on the Dollar index:

“For the past two days, we have seen either bearish or barely positive open interest action. For example, on January 29 when the March contract skyrocketed by 1.113 points on volume of 55,192, total open interest increased only 169 contracts, which is dramatically below average.”

“And yet when the dollar index declined, total open interest increased indicating that short sellers were piling in. We are unimpressed with the dollar’s performance and with all the talk about the bullish dollar fundamentals, the fact remains the March contract is quite a distance from the December 3 high of 100.70 and the contract high of 102.38 made on March 18, 2015.”

Euro: The March euro will generate short and intermediate term buy signals on February 4.

The March euro advanced by a strong 1.76 cents on heavy volume of 343,042 contracts. Total open interest exploded higher, up 17,761 contracts, which relative to volume is approximately 105% above average meaning aggressive new buyers were entering the market in large numbers and sending prices to their highest level since mid October 2015.

As this report is being compiled on February 4, the March contract is rocketing higher again, up 1.08 cents and has made a new high for the move of 1.1250, which is the highest print since 1.1378 made on October 22, 2015.

In the days leading up to the dramatic move in the euro, OIA was warning clients the euro was trading strongly, and we thought a short-term buy signal would be generated in the not-too-distant future.

From the February 1 report on the euro:

“We continue to be impressed by the robust performance of the euro, and although many currency strategists are calling for euro parity, we are a bit skeptical of this, and would not be surprised to see the euro generate a short-term buy signal in the near future. We think it is much more likely that a short-term buy signal will be generated than euro parity.”

“If the March contract can continue making a daily low above OIA’s pivot point of 1.0880, we think there is an excellent chance that a short-term buy signal will be generated. The daily low on February 2 has been 1.0896. A short term buy signal will be generated if the daily low is above OIA’s key pivot point for February 2 of 1.0941.”

Yen: The March yen will generate short and intermediate term buy signals on February 4.

The March yen rocketed higher by 170 pips on heavy volume of 333,647 contracts. Volume was almost identical to that of January 29 when the March contract lost 161 pips on volume of 333,659 contracts and total open interest increased by 6,430. On February 3, total open interest declined by 5,752, which relative to volume is approximately 25% below average, but this is the third day in a row that open interest has declined beginning on February 1.During the past three days, total open interest has declined by 25,411 contracts while the March yen has gained 213 pips.

Undoubtedly, the volatility is blowing out huge numbers of speculators. As this report is being compiled on February 4, the March contract is strongly advancing, up by 62 pips and has made a new high for the move of .8578, which is the highest print since.8594 made on January 21. We advise a stand aside posture for all clients regardless of your bullish or bearish views.

British pound: The March British pound will not generate a short-term buy signal on February 4.

Australian Dollar: March Australian dollar will generate a short-term buy signal on February 4, but remains on an intermediate term sell signal.

The March Australian dollar advanced 1.30 cents on heavy volume of 134,715 contracts. Total open interest declined by 664 contracts, which relative to volume is approximately 75% below average, but the open interest decline in yesterday’s trading supports that short covering was driving prices to a new high for the move of 71.77.

According to the latest COT report, managed money is short the Australian dollar by over a 2 to 1 ratio. As this report is being compiled on February 4, the March Australian dollar is trading 40 pips above yesterday’s close and has made another new high of 72.31. We have no recommendation.

Canadian dollar: On February 1, OIA announced that the March Canadian dollar generated a short-term buy signal, but remains on an intermediate term sell signal.

The March Canadian dollar advanced by a strong 1.22 cents on heavy volume of 124,204 contracts. Total open interest declined by 825 contracts, which relative to volume is approximately 60% below average, however the open interest decline in yesterday’s trading supports that short covering was driving prices to a new high for the move of 72.69.

According to the latest COT report, leverage funds were massively short the Canadian dollar by a ratio of 6.70:1, which is the highest short ratio held by leverage funds in any of the major currencies. As this report is being compiled on February 4, the March contract is trading 31 pips higher and has made a new high for the move of 73.31, which is the highest print since 73.36 made on December 11.

As we have said before, we think the Canadian dollar will provide an excellent opportunity to initiate bearish positions once distressed of short-sellers have been blown out of the market. The fundamentals for the Canadian economy are terrible, and the loonie is experiencing a typical blow-out of short-sellers who made concentrated bets the Canadian dollar would hit 65 cents.