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Corn: March corn will generate a short-term buy signal on January 19 provided the daily low in the March contract remains above OIA’s key pivot point for January 19 of 3.63 3/4. 

March corn advanced 5.25 cents on volume of 278,920 contracts. Total open interest increased by 1,623 contracts, which relative to volume is approximately 65% below average. However, the March contract lost 4,561 of open interest, which means there were sufficient 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 January 19, the March contract is trading 5.25 cents above Friday’s close and has made a daily high of 3.69 1/2, which is the highest print since 3.74 1/2 made on December 22. If in fact the March contract generates a short-term buy signal on January 19, expect a pullback lasting from 1-3 days and this is the opportunity to initiate bullish positions if you are so inclined. The March contract made a contract low of 3.48 1/2 on January 7, and it appears that the path of least resistance is higher for now.

Additionally, managed money is massively short according to the most recent COT report released last Friday by a ratio of 2.29:1. This is the highest ratio of speculative shorts in several months. Potentially, this class of trader will provide fuel for the upside move. The downtrend will resume if the high of the day is below OIA’s key pivot point for January 19 of 3.57 5/8. We have no recommendation.

Soybeans: March soybeans will generate a short-term buy signal on January 19 provided the daily low remains above OIA’s key pivot point for January 19 of 8.78.

March soybeans lost 3.25 cents on volume of 202,026 contracts. Total open interest declined by 3,246 contracts, which relative to volume is approximately 35% below average. An open interest decline on Friday’s lower close is not bearish. As this report is being compiled on January 19 the March contract is trading 4.25 cents higher and has made a daily high of 8.88, which is the highest print since 8.88 3/4 made on December 23.

According to the latest COT report, managed money is short soybeans by ratio of 1.67:1 and this is down from the previous week of 2.26:1 and the ratio two weeks ago of 2.06:1. In summary, managed money is becoming less bearish on soybeans. Neither soybean oil nor soybean meal will generate a short-term buy signal on January 19. We have no recommendation.

Live cattle: On January 15, February live cattle generated a short-term sell signal and remains on an intermediate term sell signal.

February live cattle lost the 3.00 cent daily limit on total volume of 54,575 contracts. Total open interest increased by 517 contracts, which relative to volume is approximately 50% below average, however an open interest increase on Friday’s severe price decline is confirming the bearish set up for live cattle. Additionally, the February contract lost 2,910 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 January 19, the February contract is trading 1.225 cents higher on the day. We have no recommendation.

WTI crude oil:

March WTI crude oil lost $1.78 on volume of 961,527 contracts. Total open interest increased by only 3,270 contracts, which relative to volume is approximately 85% below average. However, the February contract lost 23,203 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 January 19, the March contract is trading 39 cents lower on the day and has made a daily low of 29.71, which is above the Friday print of 29.13. Additionally, it is above the low made during the holiday session on January 18 of 29.35.

As we have said before, we do not think WTI bottoms until managed money is net short WTI and according to the most recent COT report managed money remains long by ratio of 1.17:1, but this has been trending lower for several weeks. The previous week’s ratio indicated that managed money was long by a ratio of 1.27:1 and two weeks ago by 1.45:1.

Once managed money assumes a net short position, we will be taking a closer look for a potential bottom or temporary bottom. At this juncture, we have no recommendation.

Natural gas: On January 15, February and March natural gas generated short term sell signals and remain on intermediate term sell signals.

February natural gas lost 5.3 cents on volume of 269,581 contracts. Total open interest increased by 4,949 contracts, which relative to volume is approximately 25% below average. The February contract accounted for a loss of 9,152 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 January 19, the February contract is trading lower, down 1.4 cents and has made a daily low of $2.074, which takes out Friday’s print of 2.086. We have no recommendation.

Euro:

The March euro advanced 46 pips on volume of 273,871 contracts. Total open interest increased by 4,920 contracts, which relative to volume is approximately 25% below average, but an open interest increase on Friday’s advance is positive. As this report is being compiled on January 19, the March contract is trading 19 pips higher and has made a daily high of 1.0947, which is substantially below Friday’s print of 1.1000.

Although the euro remains on short and intermediate term sell signals, the March contract has been unable to make a daily high below OIA’s pivot point of 1.0860, which would indicate the euro has resumed its downtrend. The March contract will generate a short-term buy signal if the daily low is above OIA’s key pivot point for January 19 of 1.0974.

It appears the euro is well supported due to its flight to safety status, and explains its buoyancy as equities trade in a consistent weak fashion.  In the event of a major market meltdown, we expect the euro to rally sharply. At this juncture, we have no recommendation.

Yen:

The March yen advanced by a strong 82 pips on volume of 221,196 contracts. Total open interest increased by a massive 10,474 contracts, which relative to volume is approximately 75% above average meaning huge numbers of new buyers were entering the market aggressively and driving prices to a new high for the move of .8592, which is the highest print since .8608 made on August 24 when equities collapsed.

According to the most recent COT report, managed money became net long yen for the first time in over a year and since the report was compiled on January 12, managed money undoubtedly has increased their net long exposure. We recommend a stand aside posture because of the heavy speculative long position, which could exert substantial selling pressure if equities begin to rally. The March contract generated a short-term buy signal on December 21 and an intermediate term buy signal on December 29.

S&P 500 E-mini:

The March S&P 500 E-mini lost 39.50 points on huge volume of 3,448,683 contracts. Volume was the strongest since December 14 when 3,922,791 contracts were traded and the December contract was about to expire. On January 15, total open interest increased by a substantial 75,126 contracts, which relative to volume is approximately 20% below average, however an open interest increase on Friday’s strong decline confirms the bearish set up for the E-mini.

As this report is being compiled on January 19, the March contract is trading 5.25 points above Friday’s close and has made a daily low of 1870.50, which is above Friday’s contract low of 1849.00. Remarkably, though the E-mini has declined strongly during the past couple of weeks, it has been unable to mount a substantial rally.

Generally speaking, the pattern during earnings reports after the end of the quarter is for equity indices to rally. Earnings thus far have been disappointing. Clients should keep in mind that the catalyst for another leg down may come out of China due to a continued meltdown in the Shanghai Composite index and/or a yuan devaluation. We have no recommendation.