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Soybeans: 

March soybeans will generate a short term buy signal on January 13. This reverses the short term sell signal of December 21, 2016. March soybeans remain on an intermediate term buy signal.

March soybeans advanced 28.75 cents on very heavy volume of 259,937 contracts. Total open interest increased by a massive 12,451 contracts, which relative to volume is approximately 75% above average meaning aggressive new buyers were entering the market in very large numbers and driving prices higher (10.40 1 1/4). The January contract lost 397 of open interest and there were open interest increases in the March 2017 to July 2018 contracts.

As this report is being compiled on January 13, the March contract continues is advance up 11.75 cents and has made a daily high of 10.52 3/4, which is the highest print since 10.53 made on December 7. Now that March soybeans have generated short term buy signal, the market should experience a pullback lasting 1-3 days and this would be the opportunity to initiate bullish positions.

Soybean meal: March soybean meal will generate a short term buy signal on January 13. This reverses the short term sell signal of December 20, 2016. March soybean meal remains on an intermediate term buy signal.

March soybean meal advanced $13.00 on strong volume of 124,552 contracts. However, the total open interest increase, but was a major disappointment at +880, which is approximately 70% below average. The January contract accounted for a loss of 266 of open interest. The COT report released last Friday revealed that managed money is long soybean meal by ratio of 1.56:1 and this contrasts with the ratio in soybeans where managed money is long by a ratio of 4.54:1. In summary, there is a relatively large short position in soybean meal compared to soybeans.

As this report is being compiled on January 13, the March contract is rocketing higher, up $8.60 or +2.62% compared to soybeans +1.03%. Additionally the March contract has made a new high for the move of 336.80, which is the highest print since 335.70 made on July 29, 2016. Like soybeans, wait for a pullback, which should last 1-3 days before considering bullish positions.

Soybean oil: On January 13, March soybean oil remains on short and intermediate term sell signals.

March soybean oil advanced 70 points on volume of 96,481 contracts. Total open interest increased by a massive 10,080 contracts, which relative to volume is approximately 320% above average, meaning that huge numbers of new buyers were entering the market and were moving prices higher (36.96). As this report is being compiled on January 13 the March contract is trading 54 points lower or -1.50% while meal and soybeans are trading higher on the day. Stand aside.

Natural gas:

February natural gas gained 15.00 cents heavy volume of 568,407 contracts. Total open interest declined by 3,715 contracts, which relative to volume is approximately 65% below average. The February contract accounted for a loss of 18,456 of open interest. Yesterday’s open interest declined comes on the heels of a major open interest decline on January 10 when the February contract gained 17.5 on volume of 549,502 and total open interest declined by 21,767 contracts.

We warned clients in the January 9 research note on natural gas that rallies would be met by speculative longs looking to trim losses and this is what has occurred during two recent rally days. As this report is being compiled on January 13, February natural gas is trading 2.9 cents higher on the day. Stand aside.

From the January 9 research note on natural gas:

“On January 4, OIA announced that February and March natural gas generated short and intermediate term sell signals. Based on the massive net long position of managed money, rallies will be stymied by longs holding losses looking to trim those losses as prices rise. Stand aside.”

Dollar index: On January 12, the March dollar index generated a short term sell signal and remains on an intermediate term buy signal.

The March dollar index lost 37 points on volume of 54,544 contracts. Total open interest declined by 1,312 contracts, which relative to volume is average. As this report is being compiled on January 13, the March contract is trading 10.2 points lower, but has not taken out yesterday’s low of 100.700.

Though we think the dollar index will continue its corrective activity, we think there will be a terrific opportunity on the long side once speculative longs have been washed out of the market. According to the COT report released last Friday, leverage funds were long the dollar index by ratio of 2.24:1 and this was above the ratios of 1.46:1 made the previous week and 1.65:1 made two weeks ago. Stand aside.

On January 12, the March euro generated a short term buy signal and remains on an intermediate term sell signal.

March euro advanced 47 pips on volume of 251,933 contracts. Total open interest declined by 2,416 contracts, which relative to volume is approximately 50% below average, but yesterday’s open interest decline indicates that short-sellers were powering the market higher as they were liquidating positions. Yesterday the March contract made a high of 1.0710 and as this report is being compiled on January 13, the March contract is trading slightly above yesterday’s close, and has not taken out yesterday’s high. Stand aside.

Yen: On January 12, the March Japanese yen generated a short term buy signal and remains on an intermediate term sell signal.

The March Japanese yen advanced 54 pips on volume of 233,327 contracts. Total open interest increased by 1,071 contracts, which relative to volume is approximately 75% below average, however, a total open interest increase on yesterday’s advance indicates that new buyers were flooding into the yen and driving prices higher (.8808). As this report is being compiled on January 13, the March contract is trading nearly unchanged on the day. Stand aside.