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Soybeans:

March soybeans lost 15.00 cents on volume of 215,113 contracts. Total open interest declined by 4,607 contracts, which relative the volume is approximately 15% below average. The March contract accounted for loss of 12,457 of open interest. As this report is being compiled on February 5, March soybeans are trading 8.25 cents higher and have not taken out yesterday’s low of 9.67 1/2. On January 2, March soybeans generated a short-term sell signal and has been on an intermediate term sell signal. In our view, rallies should be sold, and we recommend using the penetration of the February 3 high of 9.99 as an exit point for bearish positions. We think a test of the October 1 contract low of 9.20 3/4 is in the offing.

Soybean Meal:

March soybean meal lost $7.90 on volume of 86,445 contracts. Total open interest declined by 7,742 contracts, which relative the volume is approximately 250% above average meaning that liquidation was extremely heavy on the decline. The March contract accounted for loss of 10,799 of open interest. As we have pointed out before, managed money is substantially net long soybean meal, which means there is plenty of fuel to fund a continued downside move.

On January 2, March soybean meal generated a short term sell signal and on January 16 generated an intermediate term sell signal. In the January 5 report, we recommended the initiation of bearish positions and these should continue to be held. On February 3, March soybean meal made a high of 344.70, and we would use the penetration of this high as exit point for bearish positions.

Corn:

March corn lost 2.25 cents on volume of 309,256 contracts. Total open interest declined just 678 contracts which is minuscule and dramatically below average. The March contract lost 15,697 of open interest, which means there were sufficient open interest increases in the forward months to bring total open interest down to a minor number. We consider this to be bearish open interest action relative to the price decline.

As this report is being compiled on February 5, March corn is trading 0.25 cents higher on the day. On January 14, March corn generated a short-term sell signal and an intermediate-term sell signal on January 29. In our view, rallies should be sold and we recommend using the penetration of February 3 high of 3.88 1/2 as an exit point for bearish positions. On February 3, March corn rallied 16.00 cents, but total open interest declined by 11,969 contracts on volume of 415,112. The action on February 3 proved to us that market participants have fallen out of love with corn.

WTI crude oil:

March WTI crude oil lost $4.60 on heavy volume of 1,147,288 contracts. Volume fell substantially from February 3 when March WTI advanced 3.48 on volume of 1,348,890 contracts (highest volume of 2014-15) and total open interest increased by 13,271 contracts. On February 4, total open interest increased by 24,044 contracts, which relative to volume is approximately 20% below average. The March contract accounted for loss of 10,308 of open interest, which makes the total open interest increase more impressive (bearish).The sizable increase of open interest indicates that new short-sellers were entering the market in large numbers and aggressively moving the market lower.

Note the open interest increase on February 4 when prices declined was almost twice the open interest increase on February 3 when prices advanced. In short, market participants are much more bearish when prices decline than they are bullish when prices advance. As this report is being compiled on February 5, March WTI is trading 2.92 higher and has made a daily high of 52.10, which is below yesterday’s high of 52.56 and considerably less than the high of February 3 of 54.24.

Although, March Brent crude oil generated a short-term buy signal on February 3, the March WTI contract has been unable to do so. The reason for this is the under performance of the WTI contract. Year-to-date through February 4, March Brent has lost 6.35% while the March WTI contract is down 10.17%. In order for March WTI to generate a short-term buy signal the low of the day must be above OIA’s key pivot point $51.71. If the contract is unable to accomplish this, March WTI will trade sideways to lower. Stand aside.

Brent crude oil:

March Brent crude oil lost $3.75 on volume of 1,063,374 contract. Total open interest increased by 9,487 contracts, which relative to volume is approximately 55% below average.The March contract lost 24,278 of open interest, which makes the total open interest increase more impressive (bearish). Note the total open interest increase in Brent was far smaller than WTI even though the March Brent contract lost 24,278 versus the March WTI contract losing 10,308 of open interest. This confirms the relatively less bearish view of Brent versus WTI.

As this report is being compiled on February 5, March Brent is trading $2.86 higher and has made a daily high of 57.87, which is below yesterday’s high of 58.06 and the February 3 print of 59.00.On February 3, March rent generated a short-term buy signal, but it remains on intermediate-term sell signal. As we pointed out yesterday’s report, 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.The pullback yesterday may have been the extent of the counter trend move. The high of 59.00 made on February 3 is right at the 50 day moving average. A short term sell signal would be generated if the high for the day is below OIA’s key pivot point for February 5 $52.12.We continue to advise a stand beside posture, but we see the path of least resistance as being higher for now.

Heating Oil:

March heating oil lost 7.99 cents on volume of 169,294 contract. Total open interest declined by 2,130, which relative the volume is approximately 45% below average. The March contract accounted for loss of 7,182 of open interest. On February 3, March heating oil generated a short-term buy signal, and is usually the case after this, the market has a tendency to pull back from 1-3 days, before resuming its uptrend. Yesterday, may have been the extent of the pullback.

As this report is being compiled on February 5, March heating oil is trading 5.25 cents higher and has made a daily high of 1.8372, which is below yesterday’s high of 1.8522 and 1.8747 made on February 3. The market has rallied up to its 50 day moving average of 1.8456, and it is likely that higher prices are in the offing temporarily.

It is important to keep in mind that managed money is short heating oil by a ratio of 1.76:1 according to the most recent COT report, which means there is plenty of fuel to fund a continued upside move. A short term sell signal will occur if the high of the day is below OIA key pivot point for February 5 of 1.6924. Stand aside.

Gasoline:

March gasoline lost 11.96 cents on volume of 181,359 contracts. Surprisingly, total open interest declined only 1,286 contracts, which relative to the volume is approximately 65% below average. The March contract accounted for loss of 5,116 of open interest. On February 3, March gasoline generated a short-term buy signal, and is usually the case after a 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 5, March gasoline is trading 5.38 cents higher and has made a daily high of 1.5600, which is below yesterday’s high of 1.5935 and the high print up 1.6260 made on February 3. Gasoline’s performance has been outstanding year to date through February 4.

For example, March gasoline has gained back almost all of its losses through February 4 and is down only 0.61%, while heating oil has lost 1.71%.The products have been the out performers while Brent and WTI have substantially under performed. For the short term buy signal to be reversed, the high of the day must be below OIA’s key pivot point for February 5 of 1.4025. Stand aside.

Gold:

April gold advanced $4.20 on light volume of 149,009 contracts.Total open interest declined by a hefty 5,032 contracts, which relative to volume is approximately 35% above average meaning that liquidation was fairly substantial on the modest advance. Yesterday, April gold made a low of 1256.90 and this has been taken out by a fractional new low of 1256.10 on February 5. For the past couple of days, gold has been consolidating, and we expect a resumption of the rally, especially if there is major fallout from the dismal economic situation in Greece and its massive debt problems. Setbacks are buying opportunities. However, keep in mind that managed money is net long by the highest number for 2014-15. April gold remains on a short and intermediate term buy signal.

Silver:

March silver advanced 7.4 cents on volume of 49,522 contract. Total open interest increased by 102 contracts, which is minuscule and dramatically below average. The March contract accounted for loss of 392 of open interest. As this report is being compiled on February 5, March silver is trading 5.4 cents higher on the day. We think the big story in the precious metals is the significant out performance of silver versus gold and platinum. For example, year to date through February 4, March silver is up 10.82% versus April gold +6.97% and April platinum +2.34%. This is most definitely a change during the past year when silver was a major under performer. Setbacks are buying opportunities. March silver remains on a short and intermediate term buy signal.

Cotton: On February 4, May cotton generated a short-term buy signal, but remains on an intermediate-term sell signal.

May cotton lost 41 points on volume of 48,534 contracts. Total open interest declined by 2,372 contracts, which relative the volume is approximately 75% above average mean that liquidation was extremely heavy on the modest decline.The March contract accounted for loss of 8,132 of open interest. The fundamentals for cotton remain poor, and therefore we cannot get enthusiastic about a significant move from here. Now that May cotton has generated a short-term buy signal, the market should pull back from 1-3 days, before resuming its uptrend, or reverse the buy signal. Stand aside.

Coffee:

March coffee advanced 4.15 cents on volume of 26,886 contracts. Volume was the lowest since January 30 when March coffee advanced 1.90 cents on volume of 21,884 contracts and total open interest declined by 2,396 contracts. As this report is being compiled on February 5, March coffee has closed at 1.6475, nearly unchanged from yesterday’s close. March coffee remains on a short and intermediate term sell signal. Stand aside.