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Corn: On February 9, March corn generated a short-term sell signal, which reverses the January 19 short term buy signal. March corn remains on an intermediate term sell signal. This will be our last report on corn until we see a trading opportunity or announce a signal change.

March corn lost 1.25 cents on heavy volume of 512,009 contracts. Volume was the strongest since January 12 when March corn gained 5.00 cents on volume of 488,576 contracts and total open interest declined by 4,652. On February 9, total open interest increased by a massive 30,254 contracts, which relative to volume is approximately 140% above average meaning that huge numbers of new short-sellers were entering the market and driving prices fractionally lower. The March contract lost 16,003 of open interest, 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.

Although the total open interest increase was large, it did not move prices substantially lower by the close, however March corn made a new low for the move of 3.59 1/4. As this report is being compiled on February 10, the March contract is trading nearly unchanged on the day, and has not taken out yesterday’s low. We have no recommendation.

Live cattle: On February 9, April live cattle generated a short-term sell signal, which reverses the February 4 short-term buy signal. The April contract remains on an intermediate term sell signal. This will be our last report on live cattle until we see a trading opportunity or announce a signal change.

April live cattle lost 25 ticks on volume of 57,871 contracts. Total open interest declined by 1,433 contracts, which relative to volume is average. The February through June contracts lost a total of 3,168 of open interest. As this report is being compiled on February 10, the April contract is trading 62 ticks above yesterday’s close and has not taken out yesterday’s low of 1.30400, which is the lowest print since 1.30300 made on January 22. We have no recommendation.

WTI crude oil:

March WTI crude oil lost $1.75 on huge volume of 1,603,711 contracts. It appears likely that yesterday’s volume was an exchange record and took out the previous volume high of 1,582,871 made on February 3 when the March contract gained $2.40 and total open interest increased by 20,407.

On February 9, total open interest increased by 21,092 contracts, which relative to volume is approximately 45% below average, however an open interest increase on yesterday’s sharp decline confirms the bearish set up. The March contract lost 56,360 of open interest, 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.

As this report is being compiled on February 10, the March contract is trading 11 cents lower after making a new contract low of 27.39, which takes out the previous contract low of 27.56 made on January 20, and made a spike high of 29.22 on heavy volume after the release of the EIA report. Remarkably, March heating oil remains on a short-term buy signal, which was generated on February 8. This signal will reverse and a new sell signal generated if the daily high for the March contract is below OIA’s key pivot point for February 10 of 99.34.

Gasoline is on short and intermediate term sell signals and the March contract made a new contract low of 89.75 in yesterday’s trading, which takes out the January 2009 low of 96.69. The next major low to be tested for gasoline occurred in the month of December 2008 at the height of financial crisis when the January contract made a multiyear low of 78.50.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.8 million barrels from the previous week. At 502.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories remained unchanged while blending components inventories increased last week. Distillate fuel inventories increased by 1.3 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 3.3 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 0.3 million barrels last week.

Swiss franc: On February 9, the March Swiss franc generated an intermediate term buy signal after generating a short-term buy signal on February 5.

The March Swiss franc advanced by a very strong 1.33 cents on volume of 44,537 contracts. Total open interest declined by 1,139 contracts, which relative to volume is average. According to the latest COT report, leverage funds are short the Swiss franc by a ratio of 1.86:1, and whenever the Swiss franc rallies, total open interest declines indicating that short sellers are powering the market higher.

Yesterday, the March contract made a high of 1.0329, which is the highest print in over three months. From February 3 through February 9, the Swiss franc has advanced by over 5.00 cents from the low of 98.23 made on February 3 through yesterday’s high. This undoubtedly is making shorts uncomfortable and we expect to see a substantial reduction in the net short position in the upcoming COT report. We have no recommendation.

Euro:

The March euro advanced 74 pips on heavy volume of 283,008 contracts. Volume was the strongest since February 5 when the March contract lost 67 pips on volume of 283,426 contracts and total open interest increased by 2,199. On February 9, total open interest increased by 5,632 contracts, which relative to volume is approximately 20% below average, but an open interest increase on yesterday’s strong advance indicates that new buyers were entering the market and driving prices to a new high for the move of 1.1348, which is the highest print since October 22 when the March contract printed 1.1378.

As this report is being compiled on February 10, the March contract is trading 36 pips lower after making a daily low of 1.1170, which is two pips below yesterday’s print of 1.1172. Whenever equity rallies, the euro begins to correct and when equities fall, the euro advances. The direction of the euro is in the hands of the European Central Bank, which makes it hazardous to trade. As a consequence, we recommend a stand aside posture. On February 4, the March euro generated short and intermediate term buy signals.

Yen:

The March yen advanced 25 pips on volume of 273,276 contracts. Total open interest increased just 546 contracts, substantially below average. As this report is being compiled on February 10, the March contract is trading sharply higher, up 81 pips or + 0.93% and has made a new contract high of .8799, which takes out yesterday’s print of .8764. We continue to recommend a stand aside posture. If the equity market declines, we expect the yen to continue its advance. Frankly, it is just too hazardous to trade. On February 4, the March yen generated short and intermediate term buy signals.

S&P 500 E-mini:

The March S&P 500 E-mini lost 3.75 points on volume of 2,803,408 contracts. Volume exceeded the previous two days when the March contract lost 23.25 points on February 8 and 32.50 on February 5. On February 9, total open interest declined just 6,345 contracts. As this report is being compiled on February 10, the March contract is trading 15.50 points above yesterday’s close and has made a daily high of 1877.75, which takes out yesterday’s print of 1863.75 and is the highest price for the March contract since 1884.50 made on February 8.

Even after relentless selling, the market has been unable to mount a rally and much of today’s advance is due to the strong performance of the NASDAQ 100. Additionally, Janet Yellen is giving testimony before Congress today and tomorrow, and markets tend to react somewhat positively whenever she speaks. At this juncture, we think the E-mini can go either way and in order to trade it successfully, clients must approach the market in a highly tactical manner. Take small measured risks in short time frames, looking to catch a substantial move. We recommend using options, but as we have pointed out before, do not initiate short naked puts in the E-mini. For clients who subscribe to OIA-Direct, call with any question.