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Soybeans:

March soybeans lost 0.75 cents on volume of 154,992 contracts. Total open interest increased by 7,053 contracts, which relative to volume is approximately 75% above average. The March 2015 through November 2015 contracts all gained open interest. On January 16 there was a battle between buyers and sellers and sellers had the edge on Friday.

As this report is being compiled on January 20, March soybeans are trading 18.75 cents lower and have made a new low for the move at 9.72 1/4, which is the lowest print since 9.70 1/2 made on October 23. The contract low for the March contract is 9.20 3/4 and this was made on October 1, 2014. On January 2, March soybeans generated a short-term sell signal and remains on an intermediate term sell signal. We have no recommendation.

Soybean meal: On January 16, March soybean meal generated an intermediate term sell signal after generating a short-term sell signal on January 2.

March soybean meal lost $1.70 on volume of 77,299 contracts. Total open interest increased by 2,523 contracts, which relative to volume is approximately 25% above average. The March contract accounted for loss of 983 of open interest.

As this report is being compiled on January 20, March soybean meal is trading $4.10 lower and has made a new low for the move at 321.00, which is the lowest print since 319.15 made on October 23. The contract low of $292.10 was made on October 1, 2014. In the report of January 5, OIA recommended the initiation of bearish positions and this trade has proven to be highly lucrative. It appears likely that a test of the contract low is in the offing. However, the market is significantly oversold and is due for a counter trend rally at any time. Clients should protect profits with actual or mental stop losses.

Soybean oil:

March soybean oil advanced 40 points on volume of 82,817 contracts. Total open interest increased by 2,608 contracts, which relative to volume is approximately 20% above average. The March contract accounted for loss of 110 of open interest. As this report is being compiled on January 20, March soybean oil is trading 52 points lower and has made a daily low of 32.70, which is below OIA’s key pivot point for January 20 of 32.86. In order for March soybean oil to continue its rally, the low the day must be above the pivot point. We continue to be concerned about the massive long position of managed money, and the best explanation for it is index fund re-balancing when they buy the previous years losers and sell the previous years winners. March soybean oil remains on a short and intermediate term buy signal.

WTI crude oil:

March WTI crude oil advanced $2.40 on volume of 846,312 contracts. Total open interest declined by 15,691 contracts, which relative to volume is approximately 20% below average. However, the February contract accounted for loss of 40,941 of open interest. Despite this, the picture on Friday was one of liquidation as WTI prices had one of their better rallies. As this report is being compiled on January 20, March WTI is trading $1.78 lower and is made a daily low of 46.62, which is above the contract low of 44.20 made on January 13. We expect this to be taken out shortly. Stand aside.

Natural gas:

February natural gas lost 3.1 cents on volume of 411,012 contracts. Total open interest increased by 4,513 contracts, which relative to volume is approximately 50% below average. The February contract accounted for loss of 6,858 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on January 20, natural gas prices have crashed 9.5%, or -29.8 cents. February natural gas has made a low of 2.823, which is above the contract low of 2.783 made on January 12.

From the January 15 report:

“During the time natural gas was rallying, we cautioned clients to remain on the sidelines because natural gas had not generated a short-term buy signal.Unless there is a massive cold snap in the week ahead, we expect natural gas prices to drift lower and test the low print of 2.783 made on January 12. Stand aside.”

Gold:

February gold advanced $12.10 on heavy volume of 252,187 contracts. Total open interest increased by 2,475 contracts, which relative to volume is approximately 50% below average. However, the February contract accounted for loss of 5,058 of open interest, which makes the total open interest increase more impressive (bullish). On Friday, February gold made a new high for the move at 1282.40, and as this report is being compiled on January 20, February gold is trading $18.90 higher and has made another new high for the move at 1297.20.

This is the highest print since August 28, 2014 when February gold made a high of 1298.40. The market is massively overbought and due for correction, which could occur at any time. On December 11, OIA announced that February gold generated a short-term buy signal and that it generated an intermediate term buy signal on January 13. We advise against chasing the market at current levels.

Platinum: On January 16, April platinum generated an intermediate term buy signal after generating a short-term buy signal on January 12.

April platinum advanced $6.60 on volume of 16,014 contracts. Total open interest increased by a massive 1,289 contracts, which relative to volume is approximately 230% above average meaning aggressive new longs were entering the market in heavy numbers and driving prices to a new high for the move (1272.30). As this report is being compiled on January 20, April platinum has made another new high at 1289.00, which is the highest print since 1296.20 made on October 9, 2014.We have no recommendation.

Silver: March silver will generate an intermediate term buy signal on January 20 if the low of the day is above OIA’s key pivot point for January 20 $17.144. On January 13, March silver generated a short-term buy signal.

March silver advanced 64.8 cents on strong volume of 70,300 contracts. Total open interest increased by a sizable 3,905 contracts, which relative to volume is approximately 120% above average meaning that aggressive new longs were entering the market in large numbers and driving prices to a new high for the move of 17.865. As this report is being compiled on January 20, March silver is trading 16.5 cents higher and is made a new high for the move at $18.045, which takes out the previous high print of 17.990 made on September 23, 2014.

From the January 13 report:

“On January 13, total open interest increased by a positive 1,299 contracts, which relative to volume is approximately 25% less than average, but the total open interest increase accompanied by significantly higher volume is the most positive day in silver for many months.”

“As this report is being compiled on January 14, March silver is trading 17.1 cents lower and has made a daily low of 16.560, which is a fraction below yesterday’s low of 16.570. For anyone looking to initiate bullish positions, we recommend the use of options due to silver’s volatility. We think higher prices are in store.”

Cotton: On January 16, March cotton generated a short-term sell signal and has been on an intermediate term sell signal.

March cotton lost 26 points on volume of 16,200 contracts. Total open interest increased by a massive 1312 contracts, which relative to volume is approximately 230% above average, meaning that new short sellers were aggressively entering the market and driving prices lower. As this report is being compiled on January 20, March cotton is trading 1.24 cents lower and is made a new contract low at 57.97, which takes out the previous contract low of 58.53 made on November 24, 2014.

Cocoa:

March cocoa lost $35.00 on volume of 19,239 contracts. Total open interest declined by a massive 1,940 contracts, which relative to volume is approximately 300% above average. The March contract accounted for loss of 3,155 of open interest. As this report is being compiled on January 20, March cocoa has closed at 2925, down $17.00 after making a low of 2919, which is the lowest print since 2911 made on January 8.

March cocoa remains on a short-term buy signal, but an intermediate term sell signal. In order for a short-term sell signal to occur, the high of the day must be below OIA’s key pivot point for January 20 of 2920. We have been warning clients away from the long side of cocoa due to its inability to generate an intermediate term buy signal. Stand aside. 

Coffee:

March coffee lost 5.65 cents on volume of 20,039 contracts. Total open interest increased by 506 contracts, which relative to volume is average. As this report is being compiled on January 20, March coffee is trading 6.20 cents lower and has made a low of 1.6385, which is above the January 5 low of 1.6010. The key pivot point on January 20 for a short-term sell signal is 1.7220 and the high thus far has been 1.7250, therefore, technically a sell signal has not been generated. However, it appears likely the buy signal of January 9, will be reversed tomorrow. Stand aside.

Sugar: On January 16, March sugar generated a short-term buy signal, but remains on an intermediate term sell signal.

March sugar lost 2 points on volume of 112,979 contracts. Total open interest declined by 7,961 contracts, which relative to volume is approximately 185% above average meaning that liquidation was heavy on the minor decline. March sugar made a high of 15.49 on Friday, and this was the highest print since 15.51 made on December 11, 2014.

As this report is being compiled on January 20, March sugar has closed at the highs of the day (15.83) after making a daily high of 15.85, which is the highest print since 15.99 made on November 28, 2014. Based upon the latest COT report, managed money is short sugar by a ratio of 1.31:1, which is down from the high ratio of the previous week of 1.39:1.

In summary, there is plenty of fuel to fund a continued upside move as speculative shorts cover positions. However, the market is significantly overbought, and after the generation of a short-term buy signal, the market has a tendency to pullback from 1-3 days, and this is the opportunity to initiate bullish positions if you are so inclined. Do not chase this rally. In order for an intermediate term buy signal to be generated, the low the day must be above OIA’s key pivot point for January 20 15.75.