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Soybeans:

March soybeans advanced 10.50 cents on volume of 160,260 contracts. Volume fell from January 5 when March soybeans advanced 37.75 cents on volume of 176,917 contracts and total open interest increased by 2,448 contracts. On January 6, total open interest increased by 875 contracts, which relative to volume is approximately 75% below average. However, the January contract lost 1,433 of open interest, March 2015 -1201, which makes the total open interest increase more impressive (bullish).

When one looks at the past 2 days action, the fact remains that soybeans advanced 48.25 cents, or somewhat more than 4 1/2%, while total open interest increased only 3,323 contracts. This is unimpressive open interest increase considering the magnitude of the two-day advance.As this report is being compiled on January 7, March soybeans are trading 0.75 cents lower and have made a daily low of 10.48 1/4, which is below OIA’s key pivot point for January 7 of 10.49 3/4. In order for the sell signal of January 2 to be reversed, March soybeans must make a low above the pivot point.March soybeans remain on a short and intermediate term sell signal.

Soybean meal:

March soybean meal advanced $1.10 on volume of 50,548 contracts. Total open interest declined by 2465 contracts, which relative to volume is approximately 75% above average meaning that liquidation was extremely heavy on the modest advance. The January contract accounted for loss of 1,208 of open interest, March 2015 – 929, May 2015 -531.

In short liquidation was in evidence in the front months as prices traded positively for most of the session.This is bearish open interest action relative to the price advance. As we said in yesterday’s report, we much prefer the bearish side of soybean meal than soybeans. In the report of January 5, we recommended the initiation of bearish positions, which can take the form of options and/or futures.

For futures traders we recommended exiting the short futures position in March soybean meal upon penetration of the January 6 daily high of $358.00. March soybean meal generated a short-term sell signal on January 2 and remains on an intermediate term buy signal.

Soybean oil: On January 6, March soybean oil generated a short-term buy signal, but remains on an intermediate term sell signal.

March soybean oil closed unchanged on volume of 51,124 contracts. Total open interest declined by 1,811 contracts, which relative to volume is approximately 40% above average meaning that liquidation was heavy despite the fact that soybean oil traded on the positive side for most of the session.The January contract lost 7 of open interest, March 2015 -2494, May 2015-121.

As this report is being compiled on January 7, March soybean oil is trading 48 points higher and has made a daily high of 33.50, which is the highest print since 33.62 made on December 29. On December 29, March soybean oil closed at 32.93. In other words, March soybean oil was unable close near the highs of the day.In order for March soybean oil to generate an intermediate term buy signal, the low the day must be above OIA’s key pivot point for January 7 of 33.43. The problem with soybean oil is that the fundamentals are terrible, however the palm oil market has been strong of late.We have no recommendation.

Corn:

March corn lost 1.00 cent on volume of 208,680 contracts. Total open interest increased by 4,816 contracts, which relative to volume is approximately 10% below average. The March contract accounted for loss of 3,610 of open interest, May 2015-1,246. As this report is being compiled on January 7, March corn is trading 5.50 cents lower and has made a daily low of 3.96, which is the lowest print since 3.94 1/2 made on January 5.

In yesterday’s trading, March corn made a low of 4.02 1/4, which was 1/8 of a cent above OIA’s key pivot point for January 6. As a result, we stated corn would likely attempt to test the 4.17 high made on December 29. We find it troubling that the market is unable to muster sufficient strength to continue its rally.Although wheat is trading lower, corn has been outperforming wheat.

The massive build of open interest tells us one thing: there is going to be a major move up or down and the catalyst for this will likely be the January 12 USDA report. Remember: open interest increases when buyers and sellers disagree upon the direction of the commodity. March corn remains on a short and intermediate term buy signal. March corn will generate a short-term sell signal if the high of the day is below OIA’s key pivot point for January 7 of 3.93 3/4.

Chicago wheat:

March Chicago wheat advanced 2.75 cents on volume of 76,501 contracts. Total open interest increased by 1771 contracts, which relative to volume is approximately 10% below average. The March contract accounted for loss of 704 of open interest. As this report is being compiled on January 7, March Chicago wheat is trading 7.50 cents lower and has made a daily low of 5.79 1/4, which is the lowest print since 5.79 made on January 5.

After generating a short-term sell signal on January 2, March Chicago wheat has had 2 days of a counter trend rally (perfectly normal), and is now resuming its downtrend.The downtrend will be further confirmed when the March contract makes a high below OIA’s key pivot point for January 7 of 5.78 3/4. Clients should trade Chicago wheat from the bearish side only.

Live cattle:

February live cattle lost 20 points on volume of 60,230 contracts. Total open interest declined by 1,047 contracts, which relative to volume is approximately 25% below average. The February contract accounted for loss of 4,589 of open interest and there were sufficient open interest increases in the forward months to offset a good portion of the decline in the February contract.

As this report is being compiled on January 7, February live cattle is trading 47.5 points higher and has made a daily high of 1.66750, which is slightly above yesterday’s high, but below the high for the move of 1.66875 made on January 5.In order for February live cattle to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for January 7 of 1.66145. As we have said before, live cattle tends to top in the month of February, and it appears that live cattle prices are well supported. Stand aside until a short-term buy signal is generated.

WTI crude oil:

February WTI crude oil lost $2.11 on huge volume of 971,334 contracts.Volume was the strongest since December 17 when 1,013,407 contracts were traded and February WTI closed at 56.79. On January 6, total open interest increased by 19,412 contracts, which relative to volume is approximately 20% below average. However, the February contract lost 15,144 of open interest, which makes the total open interest increase more impressive (bearish).

As this report is being compiled on January 7, February WTI is having one of its rare rally days and is currently trading up 50 cents after making a new contract low of 46.83, which takes out yesterday’s contract low of 47.55. Both gasoline and heating oil are trading sharply lower and making new contract lows due to the unfavorable EIA stats. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.1 million barrels from the previous week. At 382.4 million barrels, U.S. crude oil inventories are well above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 8.1 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 11.2 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories fell 1.6 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 9.9 million barrels last week.

Natural gas:

February natural gas advanced 5.6 cents on volume of 274,265 contracts. Total open interest increased by 8783 contracts, which relative to volume is approximately 30% above average. The February contract accounted for loss of 6,615 of open interest. As this report is being compiled on January 7, February natural gas is trading 7.7 cents lower and has made a daily low of 2.825, which is above the contract low of 2.805 made on January 2. On December 1, OIA announced that natural gas generated a short and intermediate term sell signal, and since then the market has fallen well over $1.00. Although there is a cold snap in the Midwest and East, this is not doing much for natural gas prices. Stand aside unless short from higher levels.

Gold:

February gold advanced $15.40 on heavy volume of 220,207 contracts.Volume was the strongest since December 16 when 251,474 contracts were traded and February gold made a high of 1223.90, but closed at 1194.30. On January 6, total open interest increased by a massive 15,536 contracts, which relative to volume is approximately 185% above average meaning that aggressive new buyers were entering the gold market in heavy numbers and driving prices to a new high for the move ($1223.30).Additionally, February gold closed (1219.40) at its highest level since December 12 (1222.50).

As this report is being compiled on January 7, February gold has closed at 1210.70, down $8.70. Although the session is far from over, it appears that February gold is going to make a low above one of OIA’s key pivot points for January 7 of 1204.60.However, February gold has additional challenges and must make a daily lows above OIA’s other key pivot points for January 7 of 1212.10 and 1218.30. We are impressed with gold’s firm performance despite the massive rally in the dollar index, but gold has to continue to show stability in the face of declining petroleum prices and a strong dollar.

Silver:

March silver advanced 42.4 cents on volume of 46,476 contracts. Total open interest increased by a strong 1,597 contracts, which relative to volume is approximately 40% above average meaning that aggressive new buyers were entering silver in large numbers and driving prices to a new high for the move (16.740). January 6 was the first positive day of price and open interest increases.

From December 16 through January 2, March silver has found support at the $15.50 level, however March silver must make a daily low above OIA’s key pivot point for January 7 of $16.530 to generate a short term-buy signal. Year to date through January 6, silver is outpacing gold having advanced 5.88% versus gold of 3.06%.As we have said before, we think that gold, silver and platinum to a lesser degree are in the process of turning from bear to bull.

Cocoa:

March cocoa lost $42.00 on volume of 20,048 contracts. Total open interest declined by large 1,542 contracts, which relative to volume is approximately 210% above average meaning that liquidation was massive on the decline. This is the first decline in total open interest since December 26 when March cocoa lost 23.00 on light holiday volume of 3,785 contracts and total open interest declined by 246 contracts.. In order for March cocoa to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for January 7 of 2910.

Coffee:

March coffee advanced 6.80 cents on very heavy volume of 26,767 contracts.Volume was the strongest since November 18 when 40,025 contracts were traded and March coffee closed at 1.9290. On January 6, total open interest increased by 361 contracts, which relative to volume is approximately 45% below average. The action on January 6 tells us that there is a reluctance to commit to higher prices after the very large advance of the past couple of sessions.

Although the market is overstretched, it is not overbought relative to its 20 day moving average of 1.7220 or the 50 day moving average of 1.8290.As this report is being compiled on January 7, March coffee has closed at 1.7505, up 15 ticks and has made a new high for the move at 1.8285, which is the highest print since 1.8335 made on December 5.

For March coffee to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for January 7 of 1.7670. Stand aside until a buy signal is generated.

S&P 500 E mini: On January 6, the March S&P 500 E mini generated a short-term sell signal, but remains on an intermediate term buy signal.

After the generation of a sell signal, there usually is a counter trend rally that lasts from 1-3 days. As this report is being compiled on January 7, the March E mini is rallying, which is the first day of the counter trend rally. We have no recommendation.