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Lean hogs: On January 5, February lean hogs generated a short-term buy signal, but remains on an intermediate term sell signal.

February lean hogs advanced 1.675 cents on volume of 38,714 contracts. Total open interest declined by a massive 2,550, which relative to volume is approximately 160% above average meaning liquidation was extremely heavy on the advance. The February contract accounted for a loss of 4,804 of open interest and there were insufficient open interest increases in the forward months to offset the decline in February. The February contract will generate an intermediate term buy signal if the low of the day remains above OIA’s key pivot point for January 6 of 60.435. We have no recommendation.

WTI crude oil:

February WTI crude oil lost 79 cents on volume of 720,064 contracts. Total open interest increased by 15,985, which relative to volume is approximately 10% below average. The February contract accounted for a loss of 1,123 of open interest and for the past two days beginning on January 4, the February contract has declined and open interest has increased.  This is bearish. On January 4, the February contract lost 28 cents on volume of 724,704 and total open interest increased by 15,871.

As this report is being compiled after the release of the EIA report, the February contract is trading sharply lower, down $1.61 or -4.45% while the Brent contract is trading -4.89%. The February Brent contract has made a low of $34.26, which breaks through the December 2008 low of 36.20 and is the lowest print since July 2004 ($34.18).

As we said in yesterday’s report, crude oil is in its period of seasonal weakness, which will likely last through February. Remarkably, managed money remains long crude oil (futures only), which means there continues to be distressed longs who can further exert selling pressure on the market. The February heating oil contract has made a new contract low of 1.0720 and the February gasoline contract is trading sharply lower, -6.56% on the EIA’s report of a sharp increase of inventory. We have no recommendation.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.1 million barrels from the previous week. At 482.3 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 10.6 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 6.3 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 1.4 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 7.3 million barrels last week.

Sugar: March sugar will generate a short-term sell signal on January 6 provided the daily high is below OIA’s key pivot point for January 6 of 14.79. The March contract will remain on an intermediate term buy signal.

March sugar lost 40 points on volume of 108,378 contracts. Total open interest declined by a massive 7,059 contracts, which relative to volume is approximately 160% above average. The March contract accounted for loss of 10,418, May -1,544. As this report is being compiled on January 6, the March contract is trading 10 points lower on the day. Managed money is heavily long, and they will add selling pressure to sugar as the market moves lower. We have no recommendation.

Soybean oil: It appears likely that March soybean oil will generate a short-term sell signal on January 6, but will remain on intermediate term buy signal.

Dollar index: On January 5, the March dollar index generated a short-term buy signal, and remains on an intermediate term buy signal.

The March dollar index advanced by a strong 52.8 points on volume of 38,713 contracts. Total open interest increased by a massive 4,630 contracts, which relative to volume is approximately 360% above average meaning huge numbers of new buyers were entering the market in large numbers and driving prices to a new high for the move (99.730). As this report is being compiled on January 6, the dollar index is trading unchanged on the day. We have no recommendation.

Euro: On January 5, the March euro generated a short-term sell signal and remains on an intermediate term sell signal.

The March euro lost 83 pips on volume of 188,488 contracts. Total open interest increased by 882 contracts, which relative to volume is approximately 75% below average, but an open interest increase on yesterday’s decline is bearish. Surprisingly, volume was relatively low as was the open interest increase.

As this report is being compiled on January 6, the March contract is trading 18 pips higher. Usually, after the generation of a short-term sell signal, the market has a tendency to rally from 1-3 days before resuming the downtrend. If the rally occurs, we will be examining the likelihood of initiating bearish positions. For now, stand aside.

Swiss franc: On January 5, the March Swiss franc generated a short-term sell signal, and remains on an intermediate term sell signal.

The March Swiss franc lost 64 pips on volume of 17,689 contracts. Total open interest increased just 40 contracts. As this report is being compiled on January 6, the March contract is trading 13 pips lower. We have no recommendation.

Yen:

The March yen advanced 22 pips on volume of 137,190 contracts. Total open interest increased by a sizable 4,823 contracts, which relative to volume is approximately 20% above average meaning aggressive new buyers were entering the market and driving prices higher (8428), which is substantially below a new high for the move made on January 6 of .8467, which takes out the previous print of .8436 made on January 4.

On December 21, OIA announced that the March contract generated a short-term buy signal and an intermediate term buy signal on December 29. We are waiting for a pullback close to the 50 day moving average before recommending bullish positions.

S&P 500 E-mini: On January 5, the March S&P 500 E-mini generated an intermediate term sell signal after generating a short-term sell signal on December 11.

The March S&P 500 E-mini advanced 2.75 points on volume of 1,691,107 contracts. Total open interest declined by 7,508 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on January 6, the March contract is trading sharply lower, down 27.50 points, or -1.37%.

In the December 30 report, OIA recommended the initiation of short call positions in the January contract, and this trade continues to work well. Hold the position into January 15 expiration unless notified otherwise.