The USDA will release its planting intentions and grain stocks report on March 31 at 11:00 a.m. CDT.

Soybeans:

May soybeans lost 3.50 cents on light volume of 125,720 contracts. Surprisingly, volume increased from the 120,993 contracts traded on March 26 when May soybeans advanced 12.00 cents and total open interest increased by 2,990 contracts. On March 27, total open interest increased by 702 contracts, which relative to volume is approximately 70% below average. The May contract lost 4,247 of open interest, which makes the total open interest increase somewhat more impressive (bearish). As this report is being compiled on March 28, May soybeans are trading 0.75 cents higher, but not close to taking out yesterday’s high of 14.50 1/2. We strongly encourage clients who are long soybeans to liquidate the position, and at the very least purchase some long put protection if you are planning to hold bullish positions into the report. Although, soybeans may trade higher as we get closer to the end of the crop year, we think a healthy wash out would be good for the market.

Soybean meal:

May soybean meal advanced $1.40 on light volume of 60,057 contracts. Total open interest increased by 1,033 contracts, which relative to volume is approximately 25% less than average. The May contract gained 383 of open interest. As this report is being compiled on March 28, May soybean meal is trading 80 cents lower on the day, and has not gotten close to taking out yesterday’s high of $475.30. Like soybeans, we recommend the liquidation of bullish  positions and if clients are planning to hold these into the report, we recommend the purchase of long puts. 

Corn:

May corn advanced 7.50 cents on heavy volume of 263,715 contracts. Volume was higher than March 12 when 262,332 contracts were traded and May corn advanced 5.25 cents while total open interest increased by 7,915 contracts. On March 11, volume traded was 280,549 contracts as May corn advanced 5.00 cents and total open interest increased by 8,757 contracts. On March 27, total open interest increased by a very healthy 10,021 contracts, which relative to volume is approximately 50% above average meaning that new longs were aggressively entering the market and driving prices higher. May corn made a high of $4.92 3/4, which is its highest price since the 4.93 1/4 print made on March 13.

As this report is being compiled on March 28, May corn is trading 1.25 cents higher and has made a new high for the move at $4.96 1/4, which is the highest print since the high for the rally of $5.02 1/2. In order to keep some perspective on corn, consider that from March 1 through March 27, May corn has advanced only 28.50 cents while May Chicago wheat has gained $1.08 1/4. The most recent COT report shows that managed money is loaded to the gills with long positions and it will be interesting to see whether they have increased this position in the COT report to be released this afternoon. We recommend that bullish positions be liquidated prior to the report and if clients are determined to hold these through the report, we recommend the purchase of long puts.

Chicago wheat:

May Chicago wheat advanced 13.75 cents on volume of 91,014 contracts. Volume shrank from the 98,140 contracts traded on March 26 when May Chicago wheat lost 11.50 cents and total open interest declined by 2,264 contracts. On March 27, total open interest increased by 2,864 contracts, which relative to volume is approximately 30% above average. The May contract saw a gain of 294 of open interest. As this report is being compiled on March 28, May wheat is trading 16.00 cents lower and has made a low of $6.93 1/2, which is above the low of March 27 of 6.92, but below the low of March 26 of 6.94 3/4. May wheat topped on March 20 at $7.23 1/2, and the market has been experiencing quite a bit of chop since then. On March 19, we recommended the initiation of long puts to protect bullish positions recommended on February 6 and these positions can be held into the report.

Kansas City wheat:

May Kansas City wheat advanced 12.50 cents on volume of 18,765 contracts. Volume shrank dramatically from the 29,127 contracts traded on March 26 when May KC wheat lost 20.50 cents and total open interest declined by 1,970 contracts. On March 27, total open interest increased by 842 contracts, which relative to volume is approximately 75% above average meaning that new longs were heavily entering the market and driving prices higher. As this report is being compiled on March 28, May KC wheat is trading 20.00 cents lower. Like Chicago wheat, we had recommended the initiation of long puts on March 19 to protect profits in bullish positions recommended on February 6. These can be held into the March 31 report.

Sugar #11: On March 27, May sugar generated a short-term buy signal, which reversed the short-term sell signal generated on March 21. May sugar remains on an intermediate term buy signal.

May sugar advanced 51 points on relatively heavy volume of 147,858 contracts. Volume was the highest since March 14 when 167,553 contracts were traded and May sugar lost 57 points. On March 27, total open interest increased by only 964 contracts, which relative to volume is approximately 65% below average. The May contract lost a massive 5,803 of open interest, but there was enough open interest increases in the forward months to bring the total down significantly below average.

The sugar market has been something of a whipsaw with the market topping out in early March then declining approximately 2 cents, and rallying again beginning on March 24. Undoubtedly, this has taken a major financial and psychological toll on market participants. The result is from March 24 through March 27, total open interest has increased only 3,405 contracts while May sugar has advanced 1.04 cents. The latest COT report showed that managed money was long sugar by ratio of 2.81:1, which is up from the previous week of 2.44:1 and the ratio of 2 weeks ago of 1.77:1. As a matter of fact, managed money is long sugar by the highest ratio for 2014. Once a buy signal has been generated, the market has a tendency to pullback from 1-3 days, and we expect this to occur in sugar. We have no recommendation at this juncture.

Live cattle:

April live cattle advanced 67.5 points on fairly light volume of 51,938 contracts. Volume increased on the 47,841 contracts traded on March 26 when April cattle advanced 1.425 cents and total open interest increased by 2,957 contracts. On March 27, total open interest increased by 1,079 contracts, which relative to volume is approximately 20% below average. The April contract lost 3,354 of open interest, which makes the total increase much more impressive (bullish). As this report is being compiled on March 28, April cattle is trading 30 points lower, but has made a new contract high of 1.47000. Maintain bullish positions recommended in late December and protect profits with sell stops based upon sound money management.

WTI crude oil: On March 27, May WTI crude oil generated a short-term buy signal, which reversed the short-term sell signal generated on March 12. May WTI crude oil remains on an intermediate term buy signal.

May WTI crude oil advanced $1.02 on volume of 456,638 contracts. Volume increased slightly from the 433,991 contracts traded on March 26 when May WTI advanced $1.07 and total open interest increased by 10,752 contracts. On March 27, total open interest increased again, this time by 11,031 contracts, which relative to volume is average. The May through July 2014 contracts saw increases of open interest. In the evening special bulletin on crude oil of March 26, we warned about the potential of a reversal of the sell signal, and this was confirmed on March 27, at which time we recommended that bearish positions recommended on March 12 and March 19 be liquidated.

As this report is being compiled on March 28, May WTI is trading 52 cents higher and has made a new high for the move the $102.24, which is the highest price since the March 10 print of $102.25. Usually, after the generation of a buy signal, the market has a tendency to pullback from 1-3 days, which is the opportunity to initiate bullish positions. The fundamentals for WTI are abysmal and our concern continues to be that Brent crude oil remains on a short and intermediate term sell signal as does heating oil. Gasoline is on a short-term sell signal, but an intermediate term buy signal. We have no recommendation.

Natural gas:

May natural gas advanced 14.3 cents on relatively heavy volume of 289,639 contracts. Volume was the heaviest since 308,649 contracts were traded on March 13 when natural gas lost 10.7 cents and total open interest declined by 10,171 contracts. On March 27, total open interest declined by 1,213 contracts, which relative to volume is approximately 80% less than average, but a total open interest decline on an advance of 14.3 cents is bearish. The April contract lost 5,909 of open interest. May natural gas made a high of 4.570 , which was the highest price since the 4.570 high made on March 12. As this report is being compiled on March 28, May natural gas is trading 4.1 cents lower and has made a daily low of 4.480. May natural gas remains on a short-term sell signal and an intermediate term buy signal.

Euro:

The June euro lost 43 pips on volume of 178,312 contracts. Total open interest declined by 3,168 contracts, which relative to volume is approximately 25% below average. As this report is being compiled on March 28, the June euro is trading 1 pip higher and has made a new low for the move at 1.3702, which is the lowest price since the February 28 print of 1.3695. The June euro is getting close to generating a short-term sell signal and if the June euro’s daily high is below 1.3744 and 1.3713, a short-term sell signal will be generated. At this juncture, we have no recommendation.

British pound:

The June British pound advanced 41 pips on volume of 92,047 contracts. Total open interest increased by 1,668 contracts, which relative to volume is approximately 25% below average. The June pound made a high of 1.6638, which is the highest print since 1.6644 made on March 19. As this report is being compiled on March 28, the June pound is trading 29 pips higher and has taken out yesterday’s high with a print of 1.6643. The key pivot point to watch is 1.6630, and if the June pound is able to close above this, the chances increase that a short-term buy signal will be generated. This will reverse the short-term sell signal generated on March 19. We have no recommendation.

Australian dollar:

The June Australian dollar advanced 33 pips on volume of 82,337 contracts. Total open interest increased by 1,057 contracts, which relative to volume is approximately 45% less than average. However, March 27 marks the 4th day in a row when prices have advanced along with open interest. While this is unquestionably bullish, the fact remains the Australian dollar is significantly overbought relative to its 5 and 20 day moving averages. Do not chase the market higher.

Gold:

April gold lost $8.70 on extremely heavy volume of 335,523 contracts. Volume was the highest since April 15, 2013 when 751,058 contracts were traded. On March 27, total open interest declined by 13,911 contracts, which relative to volume is approximately 55% above average. The market action on March 27 has all the earmarks of a capitulation decline. Yesterday’s low was $1289.60 and April gold has made another new low on March 28 of 1285.90. The June contract’s low on March 28 is 1286.10. On March 26, gold generated a short-term sell signal, but remains on an intermediate term buy signal. At this juncture, we have no recommendation.

S&P 500 E mini:

The June S&P 500 E mini lost 2.00 points on heavy volume of 2,033,697 contracts. Total open interest declined by 17,698 contracts, which relative to volume is approximately 55% below average. As this report is being compiled on March 28, the June E mini is trading 6.25 points higher and has made a daily high of 1859.50, which takes out yesterday’s high of 1848.50, but falls short of the high of 1868.75 made on March 26. As we said in yesterday’s report, we think that the  skew of bullish to bearish positions should be weighted more to the bearish side for those clients who hold long equity positions. .