Bloomberg Access:{OIAR<GO>}

Soybeans:

March soybeans advanced 12.25 cents on volume of 192,274 contracts. Total open interest increased by 5,645 contracts, which relative to volume is approximately 10% above average. The March contract accounted for a loss of 6,349 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 above average.

As this report is being compiled on February 2, the March contract is trading approximately unchanged on the day and has made a new high for the move of 10.41 3/4, which takes out yesterday’s high of 10.30 7 1/2. For the rally to resume, the low of the day must be above OIA’s pivot point for February 2 of 10.44 3/4.

A short term sell signal will be generated if the daily high is below OIA’s key pivot point for February 2 of 10.28 1/2. We have no recommendation. The March contract remains on short and intermediate term buy signals.

Corn:

March corn advanced 8.50 cents on strong volume of 418,512 contracts. Total open interest increased by 23,899 contracts, which relative to volume is approximately 120% above average, which indicates that new buyers were flooding into the market and driving prices to a high of 3.68 1/2. As this report is being compiled on February 2, the March contract is trading nearly unchanged, but has made another new high for the move of 3.69 3/4, which is the highest print since 3.71, the high for the move during the past three months.

The COT report released last Friday revealed that managed money added 47,682 to their long positions and liquidated 23,846 of their short positions. Commercial interests liquidated 7,851 of their long positions and added 24,306 to their short positions. As a result, for the first time in many months, managed money became net long corn and the ratio in last week’s report was 1.08:1, which is a complete reversal from the previous week when managed money was short by 1.27:1 and the ratio two weeks ago of 1.41:1.

Today, the March contract has made a daily low above our pivot point and therefore we think the rally continues and will move to new highs in the days ahead. We have no recommendation.

Chicago wheat:

March Chicago wheat advanced 13.00 cents on volume of 164,237 contracts. Total open interest declined by 3,798 contracts, which relative to volume is approximately 10% below average. The March contract accounted for a loss of 8,234 of open interest. Short-sellers were powering the market higher  and this is not a surprise considering that the COT report released last Friday showed that managed money was short Chicago wheat by ratio of 2.23:1, up from the previous week of 2.17:1 and the ratio two weeks ago of 2.16:1.

As this report is being compiled on February 2, the March contract is trading 1 cent lower, but has made a new high for the move of 4.37 3/4, which is slightly above the previous high for the move of 4.37 1/2 made on January 17. Though fundamentals for wheat are negative, but due to the heavy short position of speculators, we think the market continues to rally. No recommendation.

WTI crude oil:

March WTI crude oil advanced $1.07 on volume of 1,131,012 contracts. Total open interest increased by 11,063 contracts, which relative to volume is approximately 50% below average.The March contract accounted for a loss of 2,158 of open interest. As this report is being compiled on February 2, the March contract is trading 19 cents lower on the day after making a new high for the move of 54.34, which takes out the previous high for the move of 54.08 made on January 27.

We have been telling clients for the past several days that for crude to resume its advance, it must make a daily low above our pivot point, which for February 2 is 53.57. Until this occurs, the market will trade sideways to lower. A short term sell signal be generated if the daily high is below OIA’s key pivot point for February 2 of 52.24. Stand aside.

Mexican peso:

The March Mexican peso advanced 25 pips on volume of 31,367 contracts. Total open interest declined by 511 contracts, which relative to volume is approximately 35% below average. We are not surprised by yesterday’s total open interest decline on the peso’s advance because leverage funds remain massively short the peso.

As this report is being compiled on February 2, the March contract is trading sharply higher, up 55 pips or +1.15% and has made a daily high of .04853, which is the highest print since .04865 made on December 20. We expect the rally to continue and that an intermediate term buy signal will be generated shortly. For this to occur the low of the day must be above OIA’s key pivot point for February 2 of .04847.

The heavy short position of leverage funds will continue to power the Mexican peso higher. On January 30 when the March contract generated a short term buy signal, we recommended the initiation of bullish positions once the peso had a setback. Continue to hold bullish positions.

From the January 30 research note on the Mexican Peso:

“The COT report revealed that leverage funds are heavily short the peso by a ratio of 3.38:1, which means there are substantial numbers of speculative short-sellers who continue to be bearish near the all-time bottom.”

“We think the short side of the peso has been played out for now and that the trend will be irregularly higher from here. All the bad news is already in the market and there could be some positive surprises to send the peso sharply higher.”

“Now that the Mexican peso is on a short term buy signal, it should pullback for the next 1-3 days and this will be the opportunity to enter bullish positions. As this report is being compiled on January 31, the March contract is down 16 pips on the day. Wait for another day or two before initiating bullish positions. We recommend using options for this trade.”

Silver: On February 1, March and May 2017 New York silver generated intermediate term buy signals after generating short term buy signals on January 10.

March silver lost 9.3 cents on volume of 77,006 contracts. Total open interest increased by 1,358 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on February 2, the March contract is trading 1.5 cents lower on the day after making a new high for the move of $17.745, which is the highest print since $18,950 made on November 11.

As we pointed out in yesterday’s report and in previous research notes, the strength in precious metals has been primarily due to the weakness in the dollar. This may continue for a while, but we expect the dollar to turn around and as a consequence see renewed weakness in the metals. We have no recommendation.