Soybeans:

March soybeans gained 45.75 cents on heavier than normal volume of 313,764 contracts. Volume was the highest since February 8 when 319,712 contracts were traded and March soybeans declined by 34.25 cents and open interest increased 2308 contracts. On February 19, open interest increased by 5297 contracts, which in relation to volume is approximately 35% less than average. The March contract lost 6609 of open interest, but this was offset by open interest increases in the May 2013 through July 2014 contracts, but the July 2013 contract lost open interest. There is the possibility of an impending dock strike in Brazil, which would create additional problems in moving the crop to its customers. Additionally, the lack of rainfall in Argentina and strong demand for U.S. soybeans is supporting the complex. As this report is being compiled, on February 20 March soybeans are trading 13.25 higher and has made a new high for the move at $14.92, which is the highest since February 8 when March soybeans reached $14.94 3/4. Although, soybeans are on a short-term buy signal, they have not generated an intermediate term buy signal,. However, if the market continues its strength for the next day or two, it is likely, an intermediate term buy signal will be generated.

Soybean meal:

March soybean meal gained $15.90 on heavy volume of 127,471 contracts. Volume was the highest since February 8 when 127,547 contracts were traded and soybean meal lost $15.20 while open interest declined 5852 contracts. On February 19, open interest went up a disappointing 885 contracts, which in relation to volume is approximately 65% below average. The March contract lost 10,742 of open interest, however the May 2013 through March 2014 contracts gained open interest, while the August 2013 contract lost it. Soybean meal has been the underperformer of the complex, therefore it is likely that market participants are skeptical of the move in soybean meal. As of the latest COT report, managed money is long soybean meal by a ratio of 3.30:1 versus soybeans where they are long by a ratio of 6.98:1 It appears likely that March soybean meal will generate a short-term buy signal on February 21. It remains on a intermediate term sell signal.

Soybean oil:

March soybean oil gained 91 points on very heavy volume of 184,281 contracts. Volume was the highest in at least one year. We went into our records and couldn’t find a day where soybean oil volume exceeded that of February 19. Interestingly, open interest declines by 6827 contracts, which in relation to volume is approximately 45% above average. Apparently, both longs and shorts were liquidating on the rally, and the recent short position by managed money undoubtedly contributed to the strong rally in soybean oil. As of the latest COT report, managed money got short by a ratio of 1.23:1, which was a reversal of the previous week when they were long by a ratio of 1.08:1. Managed money has been whipsawed by the moves in soybean oil. They invariably buy at the top of the range and get short at the bottom of the range. Soybean oil remains on a short and intermediate term buy signal. For clients who have entered into long positions at lower levels, stops should be raised to 51.13, which was the low on February 14.

Corn:

March corn lost 3.50 cents on volume of 274,771 contracts. Total open interest increased by 5969 contracts, which in relation to volume is approximately 15% less than average the March contract lost 9091 of open interest, which was offset by open interest increases in the May 2013 through March 2014 contracts. From February 4, through February 19, open interest has increased by 44,587 contracts while March corn has declined 40.75 cents. This is bearish open interest action relative to the price decline.

Although open interest has been acting in a bearish fashion relative to the price decline, we caution clients against implementing short positions even though corn is on a short and intermediate term sell signal. The reason for this is that the March 2013-May 2013 spread continues to widen with the premium increase to the March contract. As of February 19, the spread closed at 3.25 cents premium to March, which is the highest for the spread since November 21, 2012. On that day, March corn closed at $7.45 1/4. Because corn is on a short and intermediate term sell signal, we are not advocating bullish positions, rather we suggest that clients stand aside.

Wheat:

March wheat lost 10.00 cents on volume of 125,712 contracts. Open interest declined by 1612 contracts, which in relation to volume is approximately 45% less than average. Until we see a pickup in exports, wheat will continue to trade sideways to lower.

Crude oil:

April crude oil gained 69 cents on volume of 575,423 contracts. Volume was the lightest since February 14 when 502,501 contracts were traded and crude oil advanced 30 cents while open interest declined by 219 contracts. Additionally, the advance on February 19 was the largest since February 11 when crude advanced $1.31 on volume of 831,563 contracts while open interest increased by 14,354 contracts. On February 19, open interest declined by 13,344 contracts, which in relation to volume is average. The low volume on a larger than normal advance combined with the decline of open interest on the move has set up the crude oil trading for February 20. As this report is being compiled, April crude oil is trading $2.48 lower and is made a new low for the move at $94.21. For the past couple of weeks while crude oil was trading in a consolidation pattern, we cautioned our readers that open interest was telling us the upside move was essentially over.

From the report of February 15

From January 30 when crude oil made a high of $98.24 and closed at $97.94 through February 15 when it closed at $96.41, open interest increased by 95,494 contracts, a loss of $1.53. In short, since crude made its high, open interest action relative to price has been bearish. We envision crude oil dipping to its 50 day moving average of $93.08. This may be somewhat conservative because we believe the major equity indices are about to undergo a correction. With the high long to short ratio, there are a large number of speculative longs  who will run for the exit once it becomes apparent that crude oil is headed lower.

Additionally, even though the S&P 500 E mini is trading 8.50 points higher and has made a new high for the move at 1528.25, crude oil remains unchanged, and is trading at the lower end of its recent trading range going back to January 18. We have advised clients to stand aside and think more downside is in store for crude.

Copper:

March copper lost 8.75 cents on heavy volume of 117,069 contracts. Volume was the highest since June 7, 2012 when 118,978 contracts were traded and March copper closed at $3.3995. On February 19, open interest declined by 1557 contracts, which in relation to volume is approximately 45% less than average. For the first time since late December, March copper closed below its 50 day moving average on the continuation chart of $3.68. Although copper has been on a short and intermediate term buy signal, we have cautioned clients that it is in a trading range. For that reason, our view has been that copper is a sub-optimal trade.

Gold:

April gold lost $5.30 on heavy volume of 242,337 contracts. Volume declined approximately 41,000 contracts from February 15 when gold lost $26.00 and open interest increased by 854 contracts. On February 19, open interest increased by 1877 contracts, which in relation to volume is approximately 65% below average.

During the past 7 sessions, open interest has increased by 26,524 contracts while April gold has declined by $67.10. This is bearish open interest action relative to the price decline.  As this report is being compiled, April gold is trading 35.10 lower and has made a new low for the move at $1565.00.

Platinum:

April platinum gained $19.80 on volume of 16,407 contracts. Open interest increased by 448 contracts, which in relation to volume is average. During the past 5 days platinum advanced $1.40 while open interest declined 1319 contracts. This is bearish open interest action relative to the price advance. As this report is being compiled, April platinum is trading $49.50 lower and has made a low for the day of 1636.10. A we have been saying for the past week, platinum has been massively overbought and should correct down to its 50 day moving average of $1640.55. Clients should stand aside until the carnage is over.

 Silver:

March silver lost 42.$.07 on heavy volume of 97,680 contracts. Volume traded on the 19th was approximately 550 contract above February 15 when silver declined 50.4 cents and open interest increased by 840 contracts. On February 19, open interest increased by a minuscule 149 contracts which is dramatically below average. In the report of February 15, we noted that open interest increases were moderate for gold and silver on fairly heavy declines. We said this may be indicative of market participants that are reluctant to enter new short and long positions at the very low end of the trading range. We saw this pattern repeat on February 19. On February 12, March silver generated a short-term sell signal and prior to that was on an intermediate term sell signal.

Euro:

The March euro gained 33 points on heavier than normal volume of 304,843 contracts. Volume was the highest since February 7 when 452,064 contracts were traded and open interest declined by 4615 contracts while the March euro declined 1.22 cents. On February 19 open interest declined by 880 contracts, which in relation to volume is approximately 85% below average. During the past 9 days, open interest has declined 23,313 contracts while the March euro lost approximately 2.18 cents. This is bullish open interest action relative to the price decline. As this report is being compiled, the March euro is trading 1.09 cents lower and has made a new low for the move at 1.3275. As we said before, we felt the euro would decline to its 50 day moving average, which is 1.3277. It is healthy to see the open interest decline when prices are declining, and this is the kind of action we want to see before recommending long positions. We think it is premature to get long at this juncture.

S&P 500 E mini:

The S&P 500 E mini gained 11.00 points on fairly light volume of 1,502,332 contracts. Open interest declined by 40,120 contracts, which in relation to volume is average, but this is a high number nonetheless. We been commenting on the fact that  NYSE stocks above their 50 day moving average have been declining ever since the rally began on January 2. On February 19, the percentage of stocks on the New York Stock Exchange above their 50 day moving average rose to 1854 from 1818 on February 15. On January 2, the percentage of stocks on the New York Stock Exchange above their 50 day moving average was 1960. In short, even though the market rallied to a new high on February 19 the number of stocks that closed above their 50 day moving average increased by only 36 stocks. We have been saying this is a danger sign, because it indicates the foundation underneath the market is weakening. Another indication of the weakening market is that 52-week highs for stocks on all exchanges made their high on January 2 at 1102. On February 19, when the market made its high for the move that began March 2009, the number of stocks making 52-week highs was 924. This, despite the fact that the S&P 500 cash index had advanced 104.75 points and the DJIA rallied 931.53 from January 2, 2013.