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Soybeans:

March soybeans advanced 27.50 cents on very heavy volume of 325,985 contracts. Volume was the strongest since December 10 when 329,583 contracts were traded and March soybeans closed at 10.38 1/2. On February 3, total open interest increased by 5,261 contracts, which relative the volume is approximately 35% below average. The March contract lost 2,492 of open interest, which makes the total open interest increase more impressive (bullish). March soybeans made a high of 9.99, which is the highest print since 9.96 made on January 16.

As this report is being compiled on February 4, March soybeans are trading 14.50 lower, which is currently on the low of the day. Yesterday, the dollar was sharply lower and this was the catalyst for rallies in commodities across the board. However, the rally did not change the fact that March soybeans remain on a short and intermediate term sell signal. We expect soybeans to test the contract low of 9.20 3/4 made on October 1. Rallies should be sold, and we recommend using yesterday’s high of 9.99 as an exit point for bearish positions.

Soybean Meal:

March soybean meal advanced $12.70 on volume of 113,348 contracts. Total open interest increased by a massive 5,054 contracts, which relative to volume is approximately 75% above average. The March contract accounted for a gain of 1,527 of open interest. Note the increase of total open interest for soybeans and soybean meal were nearly the same, however soybeans traded nearly 3 times the volume of soybean meal. The large open interest increase in soybean meal relative to volume versus soybeans is consistent with the COT report released last Friday which showed that managed money was short soybeans by ratio of 1.06:1, whereas they were long soybean meal by ratio of 2.22:1. As this report is being compiled on February 4, March soybean meal is trading $8.70 lower. In the January 5 report, OIA recommended bearish positions and these should continue to be held with stops in place to protect profits.

Corn:

March corn advanced 16.00 cents on heavy volume of 415,112 contracts. Volume was the strongest since January 14 when 437,227 contracts were traded and March corn lost 4.75 cents while total open interest increased by 8,621 contracts.On February 3, total open interest declined by 11,969 contracts, which relative to volume is average. The March contract lost 13,987 of open interest. The total open interest decline is negative for corn and confirms that the bullish sentiment of corn has most definitely faded. As this report is being compiled on February 4, March corn is trading 3.50 lower on the day. Rallies should be sold and we recommend using yesterday’s high of  3.88 1/2 as the exit point for bearish positions.

WTI crude oil:

March WTI crude oil advanced $3.48 on extremely heavy volume of 1,348,890 contracts. Volume exceeded that of January 15 (which was the previous high volume for 2014 and 2015) of 1,321,981 contracts when March WTI lost $2.23 and total open interest declined by 16,795 contracts. On February 3, total open interest increased only 13,271 contracts, which relative to volume is approximately 50% below average. The March contract accounted for loss of 9,668 of open interest. During the past three days, March WTI has advanced $8.52 while total open interest has increased only 20,648 contracts. This indicates a distinct lack of enthusiasm on the part of market participants even though there was a huge amount of trading activity on February 3.

As we said in yesterday’s report, in order for March WTI to generate a short-term buy signal, the low the day must be above OIA’s key pivot point, which for February 4 is 51.83, the same as yesterday. As this report is being compiled on February 4 after the release of the EIA report, March WTI is trading $4.74 lower on the day. It appears likely that a test of the contract low of 43.58 is in the offing.

From the February 2 report:

“During the past two days,March WTI has advanced $5.04, but total open interest has increased only 7,507 contracts. This is a an abysmal increase, and indicates that much of the trading activity is intra-day and market participants are unwilling to make commitments and hold them overnight.”

“In order for March WTI to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for February 3 of 51.83. If March WTI is unable to generate a short-term buy signal, the market will likely trade sideways to lower. We recommend a stand aside posture and will be evaluating the market for a spot to initiate new bearish positions.”

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.3 million barrels from the previous week. At 413.1 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 2.3 million barrels last week, and are well above the upper limit of the average range. Both Finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 1.8 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories fell 2.1 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 12.1 million barrels last week.

Brent crude oil: On February 3, March Brent crude oil generated a short-term buy signal, but remains on an intermediate-term sell signal.

March Brent crude oil advanced $3.16 on volume of 1,277,541 contracts. Total open interest increased only 10,152 contracts, which relative to volume is approximately 60% below average. The March contract accounted for loss of 29,875 open interest.During the past three sessions beginning on January 30, March Brent crude has advanced $8.78 while total open interest has increased by 29,569, which is almost  a 50% improvement over the WTI contract during the same period of time.

As is usually the case after the generation of a short-term buy signal, the market has a tendency to pull back from 1-3 days before resuming its uptrend, and this is the opportunity to enter bullish positions. However we discourage clients from being involved in the market. There is a high likelihood the short-term buy signal is going to be reversed. A short-term sell signal will be generated if the high of the day is below OIA’s key pivot point for February 4 $52.12.We recommend a stand aside posture.

Heating Oil: On February 3, March heating oil generated a short term by signal, but remains on an intermediate term sell signal. 

March heating oil advanced 8.90 cents on volume of 165,692 contracts. Total open interest declined by 5,066 contracts, which relative the volume is approximately 20% above average meaning that liquidation was heavier than normal on a very large advance.The March contract lost 4,821 of open interest.This is the second day in a row in which prices advanced strongly and total open interest declined. During the past two days, March heating oil advanced 14.57 cents while total interest has declined 10,120 contracts.

After the generation of a short-term buy signal, the market has a tendency to pull back from 1-3 days, before resuming its uptrend. As this report is being compiled on February 4, March heating oil is trading 8.47 cents lower on the day. For March heating oil to generate a short-term sell signal, which would reverse the short term by signal of February 3, the high of the day must be below OIA’s key pivot point for February 4 of 1.6924. Stand aside.

Gasoline: On February 3, March gasoline generated a short-term buy signal, but remains on an intermediate term sell signal.

March gasoline advanced 5.67 cents on volume of 175,342 contracts. Total open interest increased by 4,457 contracts, which relative to volume is average. The February contract lost 970 of open interest, March 2015 – 1,694.During the past two days, March gasoline has advanced 12.25 cents while total open interest has increased 1,468 contracts.

Usually, after the generation of a short-term buy signal, the market has a tendency to pull back from 1-3 days before resuming its uptrend. As this report is being compiled on February 4, March gasoline is trading sharply lower, down 7.7%, or 12.28 cents. For a short-term sell signal to occur, which would reverse the short-term by signal at February 3, the high the day must be below OIA’s key pivot point for February 4 of 1.4025.

Natural Gas: We are suspending coverage on natural gas until a signal change occurs or we see a trading opportunity. On December 1, natural gas generated a short and intermediate term sell signal. We recommend against new positions.

Gold:

April gold lost $16.60 on volume of 194,199 contracts. Total open interest declined by 2,967 contracts, which relative the volume is approximately 40% below average, meaning that liquidation was very light on the decline. As this report is being compiled on February 4, April gold is trading $3.90 higher on low volume. Setbacks are buying opportunities. April gold remains on a short and intermediate term buy signal.

Silver:

March silver advanced 7.0 cents on healthy volume of 61,567 contracts. Total open interest increased by a sizable 4,106 contracts, which relative to volume is approximately 160% above average meaning that aggressive new buyers were entering the silver market in large numbers and driving prices to a new high for the move (17.750). As this report is being compiled on February 4, March silver is trading 7.4 cents higher on the day. March silver remains on a short and intermediate term by signal. Setbacks are buying opportunities. We recommend the use of call options for both gold and silver.

Coffee:

March coffee lost 1.70 cents on heavier than normal volume of 35,050 contracts. Total open interest increased by 362 contracts, which relative the volume iis approximately 50% below average. The March contract accounted for loss of 2,362 of open interest. As this report is being compiled on February 4, March coffee has closed at 1.6490, up 4.15 cents. Aside from the precious metals, we think coffee is one of the best trades on the board, but clients must be patient until it generates a short-term buy signal. A short-term buy signal will be generated if the low of the day is above OIA’s key pivot point for February 4 of 1.7150.