Soybeans:
March soybeans gained 5.75 cents on volume of 179,401 contracts. Open interest increased by 5,182 contracts, which in relation to volume is average. The March contract lost 867 contracts of open interest. From January 18 through February 1, open interest has increased by 62,652 contracts while March soybeans have advanced 44.00 cents. This is bullish, although this is a massive open interest increase relative to the 44 cent advance. On January 29, March soybeans generated a short-term buy signal, and as this report is being compiled on February 4, soybeans have made a new high at $14.98. The entire bean complex is on a short-term buy signal after March soybean meal generated a short-term buy signal on February 1. The market’s direction is higher from here. Setbacks should be bought, and stops should be at or slightly below $14.55, which was the low made on January 31.
Soybean meal: On February 1, March soybean meal generated a short-term buy signal.
March soybean meal gained $1.80 on volume of 60,786 contracts. Open interest increased by 1,291 contracts, which in relation to volume is approximately 5% below average. The March contract lost 1,393 of open interest. From January 14 through February 1, open interest has increased by 44,311 contracts, while March soybean meal has advanced $23.90. Like soybeans, this is a massive increase of open interest considering that March soybean meal has advanced only $23.90. The soybean complex should only be traded from the long side. Until we see the relative strength of soybean meal improve significantly over soybeans and soybean oil, our preference is to be long beans and oil.
Soybean oil: On February 1, March soybean oil generated an intermediate term buy signal.
March soybean oil gained 13 points on heavy volume of 130,420 contracts. Volume was the highest since January 16 when 135,428 contracts were traded and March soybean oil closed at 51.31. On February 1, open interest increased by a massive 5,195 contracts, which in relation to volume is approximately 50% above average. March lost 1,568 contracts of open interest. Note the difference between the open interest increase in soybeans versus soybean oil relative to volume. Soybean oil made a new high for the move of 53.57, which is the highest price for March soybean oil since September 28 when it made a high of 53.81. On January 15, March soybean oil generated a short-term buy signal, and the intermediate term buy signal generated on February 1 confirms the uptrend.
Corn:
March corn lost 4.50 cents on volume of 292,207 contracts. Total open interest declined by 4,354 contracts, which in relation to volume is approximately 40% less than average. The open interest decline for all corn contracts can be attributed to the massive decline in the March contract of 22,421 contracts. On January 22, March corn generated a short-term buy signal, but the performance since that time has been less than impressive. For example, since January 22 through February 1, corn has advanced only 8.50 cents, or +1.17%. Another negative is that March corn is selling at a 2 cent discount to the May contract.
Wheat:
March wheat lost 14.50 cents on volume of 140,992 contracts. Volume was the highest since January 11 when 190,768 contracts were traded and open interest declined by 7,620 contracts while March wheat advanced 10.25 cents. On February 1, open interest declined by 1,171 contracts, which in relation to volume is 60% less than average. The long wheat-short corn spread has collapsed after reaching a high of 84.75 cents premium to wheat on December 28 to a low of 29.00 cents on February 1. The result of this will likely be higher consumption of feed wheat. Stand aside.
Crude oil:
March crude oil gained 28 cents on very heavy volume of 798,288 contracts. Volume was the highest since January 23 when 950,824 contracts were traded and open interest increased by 15,463 while March crude declined by $1.45. On February 1, open interest increased by 10,338 contracts, which in relation to volume is approximately 50% less than average. On February 4, crude oil has pulled back $1.48 and the long to short ratio of crude oil is at an extremely high level. This makes crude vulnerable to a good-sized setback, especially since the 50 day moving average is $91.14 on the continuation chart and $91.81 on the March chart. Crude oil remains on a short and intermediate term buy signal. Stand aside.
Copper:
March copper gained 5.25 cents on volume of 69,254 contracts. Volume declined by approximately 20,000 contracts from January 31 when copper lost 1.80 cents and open interest increased by 4,914 contracts. On February 1, open interest increased by 4,177 contracts, which in relation to volume is approximately 135% above average, meaning that new longs were heavily entering the market and pushing prices higher. As we’ve said before, we think that copper has been in a trading range, and the real test will be if copper can break above the $3.84 level. Copper remains on a short and intermediate term buy signal.
Gold:
April gold gained $8.80 on volume of 190,827 contracts. Open interest declined by 537 contracts, which is minuscule and dramatically below average. We want to point out that during the most recent three-day advances: January 29 + $9.80 (open interest -8200), January 30 + $18.90 (open interest +419) and February 1 + $8.80 (open interest -537) total open interest has declined by 8318 contracts. This is bearish and gold’s price action has been disappointing as well. Gold has been trading below its 50 day moving average of $1688.72 and the 150 day moving average of 1686.33. Within a day or two, we expect to see the 50 day moving average cross below the 150 day average. Gold remains on a short and intermediate term sell signal. Stand aside.
Platinum:
April platinum gained $12.30 on volume of 10,592 contracts. Open interest increased by 747 contracts, which in relation to volume is approximately 175% above average. Since generating a short and intermediate term buy signal on January 11, open interest has increased on 13 days with only 2 days of declining open interest (January 22 and January 29). We like platinum, but the market is massively overbought, based upon price and the long to short ratio (see Weekend Wrap Feb 3), which makes it vulnerable to a sharp move to the downside. Since January 15, platinum has been trading in a sideways pattern, and this may be a temporary top. On the other hand, if platinum breaks above this consolidation zone, a new leg higher may be in the offing. We continue to advise clients to stand aside until a correction occurs.
Silver:
March silver gained 60.7 cents on volume of 58,922 contracts. Volume declined approximately 3,200 contracts from January 31 when silver declined 82.6 cents and open interest declined by 1,826 contracts. On February 1, open interest declined by 997 contracts, which in relation to volume is approximately 35% less than average. The bad news is that open interest declined while the market had a substantial rally. Additionally, during the past 3 days the highs in silver have been lower and the lows have been irregularly lower. It seems to us that the precious metals complex, with the exception of platinum is running out of steam. Silver remains on a short-term buy signal, but it is questionable how long this signal will remain in place before it reverses.
Euro:
The March euro gained 87 points on huge volume of 405,819 contracts. Volume exceeded that of January 22 when 401,046 contracts were traded and open interest increased by 3,908 contracts while the March euro declined by 10 points. The last time volume exceeded that of February 1 was on September 14, 2012 at 439,133 contracts. On February 1, open interest increased by 1,506 contracts, which in relation to volume is approximately 85% below average. Open interest has increased for 9 consecutive days beginning on January 22. However the open interest increase on February 1 with the smallest of the other 8 days. Additionally, the euro made a new high for the move at 1.3715, which was the highest price for the euro since the week of November 14, 2011 when the high was 1.3783. As we have mentioned on many occasions, we felt the euro was massively overbought relative to its 50 day moving average. It certainly is not overbought based upon its long to short ratio, which is considerably lower than the March British pound, March Swiss franc, March Australian dollar, and March Canadian dollar. The price, volume and open interest action tell us the euro has put in a temporary top.
S&P 500 E mini:
The March S&P 500 E mini gained 13.50 points on volume of 1,782,659 contracts. Volume was the highest since January 31, when 1,804,402 contracts were traded and the S&P 500 E mini declined by 9.75 points while open interest declined 21,509 contracts. On February 1, open interest declined by a hefty 33,868 contracts, which in relation to volume is approximately 10% below average, but a significant number nonetheless. The move on February 1 may represent a temporary top. The advance was the largest since January 2 (S&P 500 E mini gained 37.00 points on 1,943,131 contracts and open interest increased by 11,152 contracts). Additionally, open interest declined by a fairly significant number on February 1, while the S&P 500 E mini made a new high for the move and reached its highest level since late 2007. These combined factors lead us to think a temporary top is in, though a retest of the high is likely. We have been stressing that the E mini is massively overbought, and there is no reason to be long at current levels.
