Bloomberg access:

Corn:

March corn advanced 6.50 cents on strong volume of 342,045 contracts. Volume was the heaviest since 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 29, total open interest increased by 10,093 contracts, which relative to volume is approximately 5% above average. The March contract lost 3,435 of open interest, which means there was more than sufficient open interest increases in the forward months to offset the decline in March and increase total open interest slightly above average. Friday’s performance from a price volume and open interest in point was outstanding.

However, as this report is being compiled on February 1, the March contract is trading 2.75 cents lower on the day and has not taken out Friday’s print of 3.72 1/2. As we have said before, the March contract must make a daily low above OIA’s pivot point for February 1 of 3.69 for the uptrend to continue. We are concerned that March corn has unable to overcome resistance in the low 3.70 area. March corn remains on a short-term buy signal, but an intermediate term sell signal. We have no recommendation.

Soybeans:

March soybeans advanced 14.50 cents on surprisingly weak volume of 221,402 contracts. Volume was below that of January 28 when the March contract lost 15.25 cents on volume of 254,413 contracts and total open interest increased by 3,832 contracts. In summary, the volume on the upside on the 29th was lower than the volume on the downside on the 28th, which is negative.

Additionally, volume was only 10% greater than January 27 when the March contract gained 6.50 cents on volume of 202,051 contracts and total open interest increased by 592. The relatively low volume on Friday tells us that potential market participants are on the sidelines.

On January 29, total open interest increased just 653 contracts, which relative to volume is approximately 85% below average, a disappointing number. However, the March contract lost 2,036 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 slightly.

As this report is being compiled on February 1, the March contract is trading 3.00 cents lower and has only slightly taken out Friday’s high of 8.83. Similar to corn, soybeans have been unable to make a daily low above OIA’s pivot point, which for February 1 is 8.81 3/4.. March soybeans remain on a short-term buy signal, but an intermediate term sell signal.

WTI crude oil:

March WTI crude oil advanced 40 cents on heavy volume of 1,182,158 contracts. Total open interest increased by 20,911 contracts, which relative to volume is approximately 30% below average,and the total open interest increase on Friday’s price advance is the fourth one in a row on the price advances that began on January 26. The March contract lost 9,419 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.

Although open interest action has been positive relative to price advances, the March contract has been unable to generate a short-term buy signal. For this to occur, the low of the day must be above OIA’s key pivot point for February 1 of $33.81. As this report is being compiled on February 1, the March contract has reversed course and is now trading $2.05 lower and made a daily low of 31.48, which is the lowest print since 30.14 made on January 27. We have no recommendation.

Dollar index:

The March dollar index advanced by a very strong 1. 113 points on heavy volume of 55,192 contracts. However, total open interest increased just 169, a major disappointment and is approximately 80% below average. OIA was extremely surprised to see such a low number on Friday’s strong advance.

As this report is being compiled on February 1, the March contract is trading lower, down 53.7 points. Remarkably, the March contract has been unable to take out the high for the move made last March. The lack of follow-through from Friday’s advance is a bit surprising and this is due primarily to a very strong pound and euro. The March dollar index remains on short and intermediate term buy signals. We have no recommendation.

Euro:

The March euro lost 1.28 cents on volume of 279,027 contracts. Volume was the strongest since January 21 when the March contract lost 15 pips on volume of 307,957 contracts and total open interest declined by 753. On January 21, the March contract made a low of 1.0780. On January 29, total open interest declined by a substantial 11,052 contracts, which relative to volume is approximately 35% above average meaning liquidation was extremely heavy on the substantial decline.

In prior reports, we wrote about open interest increases on price advances, and it appears that a large number of previous longs were liquidating. As this report is being compiled on February 1, the March contract is trading 65 pips higher and has made a daily high of 1.0924, which is below Friday’s print of 1.0960.

Remarkably, the euro has been unable to make a daily high below OIA’s pivot point of 1.0841, which would confirm the downtrend. For the March euro to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for February 1 of 1.0941.

With Friday’s action, we expected the euro to head lower due to the need for major central banks to continue lowering interest rates to stimulate their economies, but the euro has been remarkably resilient thus far. The euro remains on short and intermediate term sell signals. We have no recommendation.

Canadian dollar: The March Canadian dollar will generate a short-term buy signal on February 1, but will remain on an intermediate term sell signal.

The March Canadian dollar advanced 19 pips on volume of 95,681 contracts. Total open interest declined by 1,789 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on February 1, the March contract is trading 9 pips higher and has made a daily high of 71.58, which is 1 pip below Friday’s print.The high for the move thus far occurred on January 28 when the March contract printed 71.70.

The COT report revealed that leverage funds are massively short the Canadian dollar (6.70:1), and though ultimately we think it will trade lower, with huge numbers of short-sellers feeling some pain, this currency can move much higher than anyone believes. Do not short the Canadian dollar.

Yen: The March yen will generate short and intermediate term sell signals on February 1.

The March yen lost 161 pips on huge volume of 333,659 contracts. Total open interest increased by 6,430 contracts, which relative to volume is approximately 20% below average, but an open interest increase on Friday’s strong decline is bearish. When the yen advanced during the past couple of weeks, total open interest increased and apparently Friday’s massive decline did not shake out many longs.

This is potentially a disaster in the making because there is going to be a large amount of selling pressure coming from distressed longs and new short-sellers. The Japanese Central Bank has initiated negative interest rates, and it appears likely this condition will remain for the foreseeable future. We have no recommendation.

S&P 500 E-mini:

The March S&P 500 E-mini rocketed higher by 49.25 points on volume of 2,413,889 contracts. Surprisingly, volume was only 8% higher than on January 28 when the March contract gained 5.75 points on volume of 2,268,116 contracts. In summary, many potential market participants remained on the sidelines and did not participate in the rally.

On January 29, total open interest increased by a paltry 10,618 contracts, which relative to volume is approximately 80% below average. In summary, total open interest action and volume was disappointing relative to the major advance. The March contract made a high of 1933.00 on January 29 and there has been no follow-through on February 1 with the March contract making a high of 1932.50 and currently trading 6.75 points lower on the day.

We did some interesting research over the weekend and found when there was a major decline in the January and February time-frame, the advance from the low to the high was +10% in 2008; +6.6% in 2010; +7 1/2% in 2014 and +7% in 2015. The advance from the January 20 low of 1804 to the 1933 high made on Friday is a bit more than 8%.

If this year’s pattern conforms to the patterns of the previous four examples, the March contract should not advance more than 10% or a high of 1984, which matches the percentage gain in 2008. If it conforms to the other three years (2010, 2014 of 2015, Friday’s high should be about the extent of the rally.

We are watching the market closely and will apprise clients of any new developments. 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 February 1 of 1954.50. We have no recommendation