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On January 29, the Japanese yen is trading sharply lower after the Japanese central bank initiated negative interest rates, and this is moving the dollar index sharply higher and is negatively affecting all major currencies. Additionally, the negative interest rate move is boosting global equity markets on January 29. The effect of the Japanese move will be to make American products much more expensive, which will ultimately negatively affect equity prices of companies that export.

Corn:

March corn lost 3.75 cents on volume of 296,201 contracts. Total open interest declined by 6,974 contracts, which relative to volume is approximately 10% below average. The March contract lost 14,844 of open interest. Remarkably, as this report is being compiled on January 29, the March contract is trading 4.75 cents higher , and we say remarkably because the dollar index is trading sharply higher on one of the biggest upside moves seen during the past couple of months. The March contract has made a low of 3.65 on January 29, and for the rally to continue, it must make a daily low above OIA’s pivot point of 3.69. March corn remains on a short-term buy signal, which was generated on January 19 and an intermediate term sell signal.

Soybeans:

March soybeans lost 15.25 cents on volume of 254,413 contracts. Volume was the strongest since January 21 when the March contract gained 4.50 cents on volume of 263,813 contracts and total open interest increased by 13,826. On January 28, total open interest increased by 3,832 contracts, which relative to volume is approximately 40% below average, but an open interest increase on yesterday’s price decline is negative. Additionally, the March contract lost 922 of open interest, August 2016 -150, which means there were sufficient open interest increases in the forward months to offset the decline in the two delivery months and increase total open interest.

As this report is being compiled on January 29, the March contract is trading 9.25 cents above yesterday’s close. For the March contract to take another leg higher, the low of the day must be above OIA’s pivot point for January 29 of 8. 81 3/4. March soybeans remain on a short-term buy signal, which was generated on January 19 and an intermediate term sell signal.

WTI crude oil:

March WTI crude oil advanced 92 cents on very heavy volume of 1,392,737 contracts. Volume exceeded that of January 19 when the March contract lost 82 cents on volume of 1,345,570 contracts and total open interest declined by 18,048. On January 28, total open interest increased by 17,735 contracts, which relative to volume is approximately 45% below average, but this is the fourth total open interest increase on a price advance that has occurred since January 21. As we have pointed out in previous reports, new buying is pushing prices higher, NOT short covering.

As this report is being compiled on January 29 the March contract is trading 26 cents above yesterday’s close and has made a daily high of 34.40, which is below yesterday’s spike high of 34.82 made on heavy volume.The March contract will generate a short-term buy signal if the daily low is above OIA’s key pivot point for January 29 of $33.81 and the downtrend will resume if the daily high is below OIA’s pivot point for January 29 of 31.57. We have no recommendation.

Natural gas: March natural gas is getting close to generating a short-term buy signal. This will occur if the daily low is above OIA’s key pivot point for January 29 of $2.270.

Dollar index:

The March dollar index lost 41.5 points on volume of 35,033 contracts. Total open interest increased by 689 contracts, which relative to volume is approximately 20% below average. In yesterday’s report, we wrote that the March contract was getting close to generating a short-term sell signal, but this has changed by the action on January 29 as the March contract is trading 1.111 points above yesterday’s close and has made a high of 99.880, which is the highest print since 99.950 made on January 21. We have no recommendation.

Euro:

The March euro advanced 49 pips on volume of 194,793 contracts. Total open interest exploded higher, up by 9,262 contracts, which relative to volume is approximately 75% above average. For the past three days beginning on January 26, the euro has advanced each day and total open interest has increased on each of those days.

However, on January 29 we are seeing a different story with the March euro trading sharply lower, down 1.21 cents and has made a daily low of 1.0821, which is the lowest print since 1.0802 made on January 25. For the past couple reports, we said it was likely the euro would generate a short-term buy signal. With the steps taken by the Japanese Central Bank into negative interest rate territory, we see a rash of competitive devaluations as countries compete for global market share.

In summary, it is a beggar thy neighbor policy and it appears likely the European Central Bank will take additional steps to further weaken the euro. The March euro remains on short and intermediate term sell signals. We have no recommendation.

10 Year Treasury note: On January 29 the March contract has made a new contract high of 129-22.

The March 10 year treasury note advanced 5.5 points on volume of 1,655,739 contracts. Total open interest increased by 30,625 contracts, which relative to volume is approximately 25% below average. Ever since the 10 year note generated a short-term buy signal on January 6 and an intermediate term buy signal on January 14, we have seen a series of open interest increases whenever prices advance. As this report is being compiled on January 29, the 10 year note is trading 13 points above yesterday’s close. We have no recommendation.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 5.75 points on volume of 2,268,116 contracts. Total open interest declined by 14,622, which relative to volume is approximately 65% below average, however an open interest decline on yesterday’s modest advance is negative. This follows a series of bearish open interest increases and decreases relative to price declines and advances.

As this report is being compiled on January 29, the March contract is rocketing higher, up 38.75 points and has made a new high for the move of 1922.25, which is the highest print since 1927.50 made on January 14. Although we have suggested to clients that they begin to think about bearish positions, we have not made a specific recommendation and continue with a stand aside posture.

The rally on January 29 is primarily to the very easy monetary policies initiated by the Japanese Central Bank, and further easing may continue to boost global equities. However, we do not think that a new bull market is around the corner, rather the current move is the market re-balancing itself after the precipitous declines of the past couple weeks. For the March contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for January 29 of 1954.85. We have no recommendation at this juncture.