Bloomberg access:{OIAR<GO>}

Corn: On January 19, March corn generated a short-term buy signal, but remains on an intermediate term sell signal.

March corn advanced 4.50 cents on strong volume of 377,638 contracts. Volume was the heaviest since January 13 when the March contract gained 1.25 cents on volume of 397,060 contracts and total open interest declined by just 6 contracts. On January 19, total open interest declined by 3,204 contracts, which relative to volume is approximately 55% below average. The March contract accounted for loss of 14,397 of open interest, September -231, and although the open interest totals from the two delivery months was whittled down, the fact remains that short covering was powering corn higher, not new buying. Yesterday, we discussed the heavy short position of managed money and its influence on prices.

As this report is being compiled on January 20, the March contract is trading 1.00 cent lower and has not taken out yesterday’s high of 3.69 1/2. Considering that global equity markets are in a major sell-off on January 20, the performance of corn is impressive. Do not be surprised if the market pulls back because this usually occurs after the generation of a buy signal. For the buy signal to reverse, the high of the day must be below OIA’s key pivot point for January 20 of 3.58. We have no recommendation.

Soybeans: On January 19, March soybeans generated a short-term buy signal, but remains on an intermediate term sell signal.

March soybeans gained 4.50 cents on volume of 194,256 contracts. Total open interest increased by 1,251 contracts, which relative to volume is approximately 60% below average, but a total open interest increase on yesterday’s price advance is positive. The March contract accounted for loss of 4,058 of open interest.

As this report is being compiled on January 20, the March contract is pulling back sharply, down 12.25 cents or -1.39%, which is to be expected after the generation of a buy signal. However, it is important to note that neither soybean meal nor soybean oil are close to generating short term buy signals and therefore it is possible that yesterday’s buy signal was false.

We need to see at least one of the products generate a buy signal for a sustained up-move in beans. The buy signal will be reversed if the high of the day is below OIA’s key pivot point for January 20 of 8.67 1/4. We have no recommendation.

WTI crude oil:

March WTI crude oil lost 82 cents on heavy volume of 1,345,570 contracts. Total open interest declined by 18,048 contracts, which relative to volume is approximately 45% below average. The February contract accounted for loss of 48,814 of open interest.

As this report is being compiled on January 20, the March contract is trading sharply lower, down $1.88 4-6.32% and the February contract, which is near expiration has made a new contract low of $26.30, which is the lowest print since the summer of 2003. The continuation contract low on the weekly chart was made by the June contract during the week of April 28, 2003 when it printed $25.04. This was the lowest price of 2003 and at this juncture the February contract is trading just $1.26 above it.

From the high on January 4, the crude oil contract has fallen more than 30% through today’s trade. It is impossible to determine when and where the market finds a bottom and as we have continually advised during the past couple of weeks, remain on the sidelines.

Euro:

The March euro gained 15 pips on volume of 226,336 contracts. Total open interest declined by 3,441 contracts, which relative to volume is approximately 40% below average. As this report is being compiled on January 20 while global equity markets trade sharply lower, the euro is trading 11 pips above yesterday’s close and has made a daily high of 1.0991, which is the highest print since 1.1000 made on January 15.

We have cautioned clients away from the bearish side of the euro due to our concern that a global equity meltdown would temporarily send the euro sharply higher. At this juncture, it appears that the 1.1000 level may be a point of resistance, but we really will not know the answer to this until after the meltdown. On the other hand, the fact that global economies are slowing, the euro’s advance may be stymied because market participants will project that more quantitative easing is in the cards by the European Central Bank. We have no recommendation.

Yen:

The March yen lost 31 pips on heavy volume of 232,754 contracts. Volume exceeded that of January 15 when the March contract gained 82 pips on volume of 221,196 contracts and total open interest increased by 10,474. On January 19, total open interest declined by 8,144 contracts, which relative to volume is approximately 20% above average, and liquidation on yesterday’s decline is perfectly normal.

Actually, OIA would have preferred to see more liquidation before recommending bullish positions. As this report is being compiled on January 20 as the equity markets trade sharply lower, the March contract is trading 70 pips higher and has made a new high for the move of .8631. We have no recommendation.

S&P 500 E-mini:

The March S&P 500 E-mini lost 2.00 points on volume of 2,801,751 contracts. Total open interest declined by only 7,077 contracts, which relative to volume is substantially below average. As this report is being compiled on January 20, the March contract is trading sharply lower, down 52.50 points or -2.82%. OIA does not think we’ve seen the worst of the washout, and we expect the volatility gauge VIX to trade up in the 50 point range before the decline is over.

Additionally, the threat of continued yuan devaluation and the slowing economy in China will continue to weigh on equities. At this juncture, we have no recommended position. However, we strongly advise against attempting to pick a bottom.