Soybeans:

March soybeans lost 5 cents on volume of 191,828 contracts. Total open interest increased by 5,517 contracts, which in relation to volume is average. The March contract lost 6,917 of open interest, but there were open interest increases in the May 2013 through July 2014 contracts. From February 4 through February 14, open interest in soybeans has increased by 24,652 contracts while soybeans have declined by 4.75%. This is bearish open interest action relative to the price decline. As of February 15, March soybeans remain on a short-term buy signal and an intermediate term sell signal. Stand aside. 

Soybean meal:

March soybean meal lost 90 cents on volume of 76,655 contracts. Open interest increased by 2,251 contracts, which in relation to volume is approximately 5% above average. The March contract lost 3,032 of open interest. From February 4 through February 14, open interest has declined by 1,598 contracts, while soybean meal has declined by $25.70 or 6.24%. The open interest decline from February 4 through February 14 is positive relative to the price decline. Although soybean meal has been underperforming soybeans and soybean oil on a year to date basis and from February 4 through February 14, the open interest action relative to the price decline is most positive for soybean meal. It has become abundantly clear there is an unwillingness by market participants to enter heavy new short positions at current levels. We expect to see further strength in soybean meal in the weeks and months ahead. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

March soybean oil gained 4 points on volume of 115,034 contracts. Open interest declined by 741 contracts, which in relation to volume is approximately 65% less than average. The March contract lost 10,590 of open interest and the May 2013 through July 2014 contracts all added open interest. From February 4 through February 14, March soybean oil declined by 2.65% while open interest has increased by 5,460 contracts. Total open interest in soybean oil on February 14 was 333,958 contracts, while total open interest in soybeans was 602,337 contracts. However, open interest in soybeans increased by 24,652 contracts while the increase in soybean oil was only 5,460 contracts, or 78% less than soybeans, even though total open interest in soybean oil is 55% of soybeans. From a price performance and open interest point of view, soybean oil remains the leader of the complex. As we have said for 3 trading days, setbacks in soybean oil should be bought, and clients should use the February 13 low of 50.56 as an exit point for long positions.

Corn:

March corn lost 0.75 cents on volume of 286,790 contracts. Volume declined approximately 152,000 contracts from February 13 when corn lost 0.75 cents and open interest increased by 6,017 contracts. On February 14, open interest increased again by 6,813 contracts, which in relation to volume is approximately 5% below average. The March contract lost 12,452 of open interest. For the first time since October 2011, the 50 day moving average has crossed below the 200 day moving average on the corn continuation chart. From February 4, through February 14, open interest has increased by 35,378 contracts while March corn has declined 41.25 cents. This is bearish open interest action relative to the price decline.

Although March corn generated a short-term sell signal on February 11, which confirmed the intermediate term sell signal, clients should not get bearish at current levels. The March-May spread widened to 2.00 cents premium to March, which is the highest price for the spread since November 28, 2012. Additionally, from February 4, when the spread closed at 2.00 cents premium to May, March corn declined from $7.34 1/4 to 6.87 1/4 on February 13. Yet the spread inverted during the decline in corn prices. This is bullish. Stand aside.

Wheat:

March wheat lost 3.50 cents on heavy volume of 140,583 contracts. Total open interest declined by 2,272 contracts, which in relation to volume is approximately 35% less than average. The March contract lost 10,590 of open interest, and the May 2013 through July 2014 contracts gained open interest. Wheat remains on a short and intermediate term sell signal, but short positions in wheat should not be taken. We are in the process of making lows in the grain complex, and we think the short side has been played out. Stand aside.

Crude oil:

March crude oil gained 30 cents on lighter than normal volume of 502,501 contracts. Volume was the lightest since February 4 when 443,143 contracts were traded and crude oil declined by $1.60, while open interest declined by 2,413 contracts. On February 14, open interest declined by 219 contracts, which is minuscule and dramatically below average. However, February 14 was the first time since since January 22 that crude oil advanced and open interest declined. On January 22, March crude oil advanced 64 cents and open interest declined by 3,116 contracts on volume of 529,234 contracts. We think this is significant because we have been saying for the past week that crude oil is overbought based upon its price, long to short ratio and the massive increase of open interest during this period.

From the February 13 report:

The last COT report was tabulated on February 5. From February 6 through February 12, open interest has increased by 58,616 contracts while crude oil has advanced 87 cents. The open interest increase is disproportionately large to the advance, and it is a warning there is a considerable amount of selling, probably by commercial interests which is keeping a lid on prices.

However, the price performance of crude oil since it topped out at $98.24 on January 30 is even worse. For example, from January 31 through February 13, open interest has increased by 92,973 contracts, however crude oil has declined by 93 cents from the close on January 30 of $97.94 to February 13 of $97.01. This is distinctly bearish. Additionally with the hefty increase of open interest during the COT reporting period of February 6 through February 12, we have no doubt that the long to short ratio has increased from the most recent report tabulated as of July 5 and released on February 8. This leaves crude oil vulnerable to a heavy selling when market participants realize that crude oil is topping out.

Copper:

March copper lost .0050 cents on volume of 61,662 contracts. Open interest increased by 1,804 contracts, which in relation to volume is approximately 5% above average. Copper remains in a trading range, and in our view is a sub optimal trade. Copper remains on a short and intermediate term buy signal.

Gold:

April gold lost $9.60 on volume of 191,097 contracts. Open interest declined by 1,715 contracts, which in relation to volume is approximately 70% below average. During the past 5 sessions, open interest has increased by 23,793 contracts while April gold has declined by $35.80. This is bearish open interest action relative to the price decline. Additionally, gold closed at $1635.50 on February 14, which was the lowest close since August 28, 2012 when April gold closed at 1627.20. We have been warning clients for quite some time to stay away from the long side of gold.

Platinum:

April platinum lost $18.80 on very light volume of 7768 contracts. Volume was the lowest since December 31, 2012 when 7667 contracts were traded and April platinum closed at $1542.40. On January 11, platinum generated a short and intermediate term buy signal. On February 14, open interest increased by 160 contracts, which in relation to volume is approximately 20% below average. Based upon the very low volume on February 14, and the magnitude of the decline, it appears that longs are in denial about what is happening the platinum market. As this report is being compiled on February 15, platinum is trading $34.40  lower and has made a low for the move at $1671.10. Ever since platinum made its high on February 6, we have been warning clients to stay away from platinum due to its severe overbought condition on a price basis and the stratospheric long to short ratio.

Silver:

March silver lost 51.6 cents on volume of 57,477 contracts. Volume was the highest since February 7 when 67,332 contracts were traded and open interest declined by 1,451 con tracts while March silver declined 47.4 cents. On February 14, open interest increased 1,417 contracts, which in relation to volume is average. On February 12, March silver generated a short-term sell signal, and since then has fallen sharply. Silver has been looking terrible for quite some time, and the stratospheric long to short ratio has been an indication that long liquidation was on the horizon. As this report is being compiled, March silver is trading 64.8 cents lower and has made a new low for the move at $29.660.

Euro:

The March euro declined by 1.01 cents on volume of 261,577 contracts. Open interest declined by 1,901 contracts, which in relation to volume is approximately 65% less than average. During the past 7 days, open interest has declined 20,807 contracts while the March euro lost approximately 2.42 cents. This is bullish open interest action relative to the price decline. We like it that open interest is declining along with the price, and the euro remains on a short and intermediate term buy signal. We think it is premature to enter new long positions at this juncture.

S&P 500 E mini:

The S&P 500 E mini gained 1.25 points on light volume of 1,370,691 contracts. Open interest increased by a staggering 60,423 contracts, which in relation to volume is approximately 75% above average, meaning that new longs and shorts were heavily entering the market but the closing price was only fractionally higher. The significance of the massive open increase cannot be understated. For example, the open interest increase on February 14 was the second-largest since the rally began on January 2. The highest occurred on January 22 when open interest increased by 75,248 contracts on volume of 1,476,463 contracts and the S&P 500 E mini advanced 11.50 points. January 22 was the day that NYSE stocks above their 50 day movoing average made its high at 2115. As a matter of policy we are always on the lookout for large volume spikes, and/or massive increases or decreases of open interest at potential tops and bottoms. We have said before that the market looks tired, and the price and open interest action on February 14 confirms this. We think the market is headed lower from here and the correction has begun.

As we said in yesterday’s report there is a massive divergence between the number of stocks above their 50 day moving averages, which peaked at 2115 on January 22 and have declined to 1873 on February 14. From January 22, through February 14, the S&P 500 cash index has advanced 29.02 points, but the number of stocks above their 50 day moving averages have declined by 242 issues or approximately 11.50%.

As of February 14, the number of stocks above their 50 day moving averages is the lowest since January 2. From January 2 through February 14, the S&P 500 cash index has advanced 95.39 points or 6.62%. In other words, as the market has advanced substantially, the number of stocks above their 50 day moving averages have been declining. We expect this trend to continue. Stand aside.