Bloomberg access:{OIAR<GO>}

Corn:

March corn advanced 3.25 cents on volume of 268,229 contracts. Volume shrank substantially from January 21 when the March contract lost 1.75 cents on volume of 422,638 contracts and total open interest declined by 12,577. On January 22, total open interest declined again, this time by 2,458 contracts, which relative to volume is approximately 50% below average. The March contract lost 6,105 of open interest and there were insufficient open interest increases in the forward months to offset the decline in March.

Friday’s action was negative and confirms the stats in the most recent COT report which showed that managed money liquidated approximately 33,000 contracts during the reporting period and liquidated long positions as well (see January 24 Weekend Wrap).

As it stands, March corn has been unable to make a daily low above OIA’s pivot point of 3.68 3/4, which would confirm a continued advance. Since generating a buy signal on January 19, the market has rallied slightly, but does not appear to have the buoyancy for sustained move higher at this juncture. We have seen this phenomenon before, and many times this kind of action precedes a reversal of the buy signal. We have no recommendation.

Chicago wheat: March Chicago wheat will generate a short-term buy signal if the daily low is above OIA’s key pivot point for January 25 of 4.78 1/8. The low thus far on January 25 is 4.75 1/2.

Soybeans:

March soybeans lost 2.00 cents on volume of 169,060 contracts. Volume fell substantially from January 21 when the March contract gained 4.50 cents on volume of 263,813 contracts and total open interest increased by a robust 13,826 contracts. On January 22, total open interest increased by 1,526 contracts, which relative to volume is 45% below average. The March contract accounted for loss of 3.846 of open interest and there were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest.

The COT report showed that managed money has been reducing their net short exposure, and this in part explains the advance in prices. On January 19 March soybeans generated a short-term buy signal and has not had the strength to take out the high for the move of 8.88 made on January 19.

Also, the March contract has been unable to make a daily low above OIA’s pivot point of 8.81 1/2, which it must do in order to continue the advance. The March contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for January 25 of 8.67 3/4. We have no recommendation.

Soybean oil:

March soybean oil advanced 56 points on volume of 107,842 contracts. Total open interest increased by 800 contracts, which relative to volume is approximately 55% below average, however a total open interest increase on Friday’s advance is positive. Bolstering the bullishness of the open interest increase was the fact that the July contract lost 2,413, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest.

As this report is being compiled on January 25, the March contract is trading 45 points above Friday’s close and has made a high of 30.59, which is 1 point below Friday’s print of 30.60. In prior reports, we stated for soybeans to resume its advance, it needed to be supported by at least one of the products, and it appears that soybean oil is the most likely candidate to generate a short-term buy signal. This will occur if the daily low is above OIA’s key pivot point for January 25 of 30.42. We have no recommendation.

Live cattle: Although live cattle has rallied, for the April contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for January 25 of 1.34300.

WTI crude oil:

March WTI crude oil advanced by a strong $2.66 on total volume of 1,083,597 contracts. Interestingly, volume declined from January 21 when the March contract gained $1.18 on volume of 1,142,885 contracts and total open interest increased by 29,625. Additionally, volume on January 22 was below that of January 20 when the March contract lost 1.23 on volume of 1,214,226 contracts and total open interest increased by 12,997.On January 20, the March contract made its contract low of 27.56.

In summary, volume on January 22 was the lowest since January 15 when the March contract lost 1.78 on volume of 961,527 contracts and total open interest increased by 3270. We are covering the volume stats of recent days and comparing them to action on January 22 because the strong advance, was NOT accompanied by an increase in volume. This reveals the underlying weakness of crude oil.

On January 22, total open interest increased by 14,168 contracts, which relative to volume is approximately 45% below average, but as mentioned earlier in this report, total open interest increased on January 21 by 29,625 contracts when the March contract gained 1.18.

In summary, new buying has been pushing prices up during the past two sessions, NOT short covering as promulgated by the financial press. As this report is being compiled on January 25, the March contract has made a daily high of $32.74, which takes out Friday’s print of 32.35, but currently is trading $1.32 lower on the day and has made a daily low of 30.37. March WTI remains on short and intermediate term sell signals. We have no recommendation.

Euro:

The March euro lost 87 pips on volume of 180,899 contracts. Total open interest increased by 219 contracts, which relative to volume is substantially below average. As this report is being compiled on January 25, the euro is trading 43 pips higher and has made a daily high of 1.0858, which is fractionally above OIA’s pivot point of 1.0856 for the resumption of the downtrend. The high of the day must be below the pivot point for the downtrend to continue.

Although there are many who are bearish on the euro, we think the March contract is likely to retest the 1.0500 area, but believe there is a reasonable likelihood the euro will reverse course and head higher. The March euro remains on short and intermediate term sell signals. We have no recommendation at this juncture.

Yen:

The March yen lost 91 pips on surprisingly light volume of 194,749 contracts. Volume was the weakest since January 14 when the March contract lost 28 pips on volume of 184,060 contracts and total open interest declined by 1,433. The relatively low volume on January 22 indicates that newly minted longs were not panicked sellers in Friday’s decline.

Additionally, the open interest stats confirmed relatively light liquidation and total open interest declined by 2,346 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on January 25, the March contract is trading 14 pips higher on the day. We continue to recommend a stand aside posture for new positions and think further declines are likely, especially if the equity market continues its rally.

S&P 500 E-mini:

The March S&P 500 E-mini advanced by a strong 38.25 points on volume of 2,109,763 contracts. Volume was the lightest since January 5 when the March contract gained 2.75 points on volume of 1,691,107 contracts and total open interest declined by 7,508. On January 22, total open interest declined by 8,861 contracts, which relative to volume is approximately 80% below average, and the total open interest decline on Friday strong advance is confirming the bearish set up for the E-mini.

Additionally, the abysmally low volume shows that many potential market participants remained on the sidelines. As this report is being compiled on January 25, the March contract is trading 8.00 points lower after making a daily high of 1904.25 in the Sunday evening session.

The March contract has been unable to take out this high during the day session, which again confirms weakness. The Federal Reserve will be meeting this week and on Wednesday will announce the consensus of its members. This may cause equity indices to rally, and we recommend holding off on bearish positions until after the release of the minutes. The March S&P 500 E-mini remain on short and intermediate term sell signals.