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Soybeans:

March soybeans lost 20.50 cents on volume of 121,541 contracts. Total open interest declined by 7,286 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy on the major decline. The January contract accounted for loss of 9,201 of open interest, March 2015 -1226.

In the report of December 30, we warned clients that March soybeans were likely to generate a short-term sell signal if it closed below our pivot point of 10.28 5/8. March soybeans did close below the pivot point and as this report is being compiled on January 2, March soybeans are trading 13.25 cents lower, and have made a daily high of 10.22, which is below the pivot point. Unless March soybeans have a major rally on January 2, it will generate a short-term sell signal on January 2. Usually, after the generation of a sell signal, the market has a tendency to undergo a counter trend rally, which can last from 1-3 days. This is the most opportune time to initiate bearish positions.

Soybean meal:

March soybean meal lost $6.10 on volume of 44,054 contracts. Total open interest declined by 1,289 contracts, which relative to volume is approximately 20% above average meaning that liquidation was unusually heavy. The January contract accounted for loss of 1,637 of open interest, March 2015 -1093. As this report is being compiled, March soybean meal is trading $6.70 lower and has made a daily high of 346.80, which is below OIA’s key pivot point for January to of 349.20.

In the report of December 30, we warned that if soybean meal closed below the pivot point, it would likely generate a confirmed short term sell signal. Unless soybean meal has a major rally today, a short-term sell signal will be generated on January 2. Like soybeans, soybean meal is likely to have a counter trend rally that lasts from 1-3 days and this is the most opportune time to initiate bearish positions.

Corn:

March corn lost 9.50 cents on surprisingly heavy holiday volume of 182,357 contracts. Volume was the strongest since December 19 when March corn lost 0.50 cents on volume of 183,583 contracts and total open interest increased by 8,998 contracts. On December 31, total open interest increased by a hefty 6,779 contracts, which relative to volume is approximately 45% above average meaning that aggressive new short sellers were entering the market in large numbers and driving prices lower. Making the total open interest increase more impressive (bearish). was the March contract, which lost 6,116 of open interest.

In other words, there were sufficient open interest increases in the forward months to negate the open interest decline in March. On December 30, March corn lost 6.25 cents and total open interest increased by 2,641 contracts.In short, during the past 2 trading sessions corn has experienced price declines and bearish open interest action. Making corn considerably more vulnerable to downside action is the fact that managed money is massively long corn. In our holiday report published on January 1, which included the latest COT stats, managed money is long corn by ratio of 4.75:1. This is the highest ratio since May 13 2014.

Open interest increases on price declines means there is very little liquidation occurring as prices go lower. This sets corn up for further downside once a short-term sell signal is generated. For this to occur, the high of the day must be below OIA’s key pivot point for January to of 3.93 3/8. As this report is being compiled on January 2, March corn is trading 4.50 cents lower and has made a low of 3.91 1/2, below the  pivot point. A close below the pivot point means that a short-term sell signal is imminent.

Chicago wheat:

March Chicago wheat lost 12.25 cents on volume of 53,499 contracts. Total open interest declined by 628 contracts, which relative to volume is approximately 50% below average. The March contract accounted for loss of 2,653 of open interest. As we pointed out in the December 30 report, if March Chicago wheat closed below OIA’s key pivot point of 5.94, a short-term sell signal was likely.

March Chicago wheat did close below the pivot point and as this report is being compiled on January 2, March Chicago wheat is trading 13.75 cents lower and has made a daily high of 5.91, which is below OIA’s key pivot point for January 2 of 5.94. This means that March Chicago wheat will generate a short-term sell signal on January 2 unless there is a rally above the pivot point. According to the most recent COT report, managed money is long at the highest ratio (1.34:1) since May 27, 2014 (1.44:1). This means there is a considerable amount of fuel to fund further downside action.

Live cattle:

February live cattle lost 1.15 cents on volume of 49,631 contracts. Total open interest declined just 3 contracts. The February contract accounted for loss of 2,396 of open interest, however there were open interest increases in the April 2015 through December 2015 contracts, and this offset most of the decline in the February contract.

We view the action on December 31 as bearish. As this report is being compiled on January 2, February live cattle is trading 1.975 cents higher and has made a daily high of 1.66475 , which is below the high of 1.66525 made on December 30. Although we think it is likely that lower prices are in store, the live cattle has a tendency to make a seasonal high in February, which means that the short-term sell signal could be reversed. At this juncture we recommend a sideline stance.

WTI crude oil:

February WTI crude oil lost 85 cents on volume of 422,676 contracts. Total open interest increased by 10,768 contracts, which relative to volume is average. The February contract lost 3,067 of open interest.On December 31, February WTI made a contract low of $52.44 and as this report is being compiled on January 2, the contract has made another contract low at 52.03 and is trading 54 cents lower on the day after making a high of 55.11, which is the highest print since the 55.74 made on December 29. Stand aside.

Natural gas:

February natural gas lost 20.5 cents on heavy holiday volume of 281,127 contracts. Volume was the strongest since December 22 when natural gas lost 32.0 cents on volume of 460,677 contracts and total open interest declined by 2,887 contracts. On December 31, total open interest increased by 5,668 contracts, which relative to volume is approximately 20% below average. The February contract gained 5 contracts of open interest. As this report is being compiled on January 2, February natural gas is trading 18.5 cents higher on colder temperatures throughout the United States. February natural gas remains on a short and intermediate term sell signal. Stand aside.

Gold:

February gold lost $16.30 on volume of 76,336 contracts. Total open interest declined by 2,336 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than normal. As this report is being compiled on January 2, February gold is trading $2.30 higher after making a daily high of 1194.90, which is below the December 31 high of 1203.90. Remarkably, gold is trading firmly despite a higher sharply dollar index.

February gold made a low of 1167.30 during the evening session, but has bounced back to trade positively on the day. Additionally, silver has been strong throughout the evening and day session session.Both gold and silver have been severely beaten up, however the open interest action in gold is distinctly positive whereas in silver it is negative.February gold remains on a short-term buy signal, but an intermediate term sell signal. March silver remains on a short and intermediate term sell signal.

Cocoa:

March cocoa lost $62.00 on volume of 16,661 contracts. Total open interest increased by a massive 1,649 contracts, which relative to volume is approximately 300% above average. The scenario that we have described in previous reports for cocoa continued on December 31 as new short sellers entered the market and drove prices to a new low for the move (2902).

In summary, there should have been liquidation on a decline of the magnitude seen on December 31, especially since managed money is long cocoa by a ratio of 4.14:1, which is the highest ratio since September 30, 2014. As this report is being compiled on January 2, March cocoa has closed at 2927, up $17.00.On December 8, March cocoa generated a short-term buy signal, and this signal will be reversed if the daily high is below OIA’s key pivot point for January 2 of 2912. The rally will resume if the daily low is above OIA’s key pivot point for January 2 of 2957. If long, we strongly suggest an exit from cocoa.

Coffee:

March coffee advanced 1.80 cents on volume of 15,344 contracts. Total open interest increased by 1,244 contracts, which relative to volume is approximately 230% above average meaning that new longs were entering the market and driving prices to a new high for the move (1.7130). The March contract accounted for loss of 860 of open interest, which makes the total open interest increase more impressive (bullish). However, as this report is being compiled on January 2, March coffee has reversed and closed at 1.6105, down 5.55 cents. March coffee remains on a short and intermediate term sell signal. Stand aside.