Soybeans:

May soybeans gained 7.75 cents on volume of 200,068 contracts. Open interest increased by 3,239 contracts, which in relation to volume is approximately 40% below average. The March contract lost 11,793 of open interest, but open interest increased in the May 2013 through July 2014 contracts. Export sales for beans totaled 689 thousand tons, which is above the average sales for the season to date, and is dramatically above the USDA sales projection for the crop year. For the past 4 trading sessions beginning on February 22, open interest has been acting in a bullish congruent fashion on price declines or advances. As this report is being compiled, May soybeans are trading 21.75 cents higher. Soybeans are on a short term buy signal, but an intermediate term sell signal.

Soybean meal: On February 27, May soybean meal generated a short term buy signal.

May soybean meal gained $1.80 on volume of 74,555 contracts. Total open interest declined by 3,427 contracts, which in relation to volume is approximately 75% above average, meaning that liquidation was heavy. The March contract accounted for loss of 4,150 of open interest. The USDA reported that sales of soybean meal totaled 250.3 thousand tons, which is above the average sales to date and dramatically above the USDA projections. Last week, the long to short ratio in soybean meal was 2.88:1, which is dramatically less than the long to short ratio in soybeans of 4.61:1.

We expect that managed money positions will reflect increased bearishness in the next COT report.  The irony  of this is soybean meal has been outperforming soybeans. For example, from February 1 through February 27, May soybean meal has gained 1.30% while soybeans have lost 1.39%. It is almost a certainty that May soybean meal will generate an intermediate term buy signal on February 28. We fully expect soybean meal to take out the high of 444.00, which would constitute a major breakout. Usually, when a buy signal is generated, there is a pullback lasting 1- 2 days, and sometimes 3. However, we think this is less likely in the case in soybean meal. Clients should position themselves on the bullish side of soybean meal on any pullback. For futures traders, stops should be placed at $426.60. The 50 day moving average on the continuation  chart is $423.10 and on the May chart is 417.50, therefore soybean meal is overbought relative to the 50 day moving averages.

Soybean oil:

May soybean oil gained 28 points on volume of 110,924 contracts. Open interest increased by 802 contracts, which in relation to volume is approximately 55% less than average. The March contract accounted for loss of 9,143 of open interest. The USDA reported that 4.77 thousand tons of soybean oil was sold, which is dramatically below the average sale to date for the season, and below the USDA export projection for the crop year. May soybean oil is on a short and intermediate term sell signal, which means it should only be traded from the short side. However, clients should wait for a rally to the 50 day moving average of 51.07.

Corn:

May corn gained 0.50 cents on heavy volume of 413,154 contracts. Volume was the highest since February 13 when 438,086 contracts were traded and corn lost 0.75 cents, while open interest increased 6,017 contracts. On February 27, total open interest declined by 19,222 contracts, which in relation to volume is approximately 75% above average, meaning that liquidation was heavy. As we said in yesterday’s report, though corn is on a short and intermediate term sell signal, we discourage clients from taking short positions. From February 1 through February 27 May corn has lost 6.30%. The March-May spread closed at a new high of 14.25 cents premium to March. This indicates that corn has firm domestic demand. What is lacking is decent export activity. The USDA announced sales of 302.6 thousand tons, which is above the average sales for the season year to date. Stand aside.

Wheat: Until we see something compelling in wheat, we will not be reporting on it.

May wheat gained 1 cent on heavy volume of 151,136 contracts. Volume was the highest since February 21 when 186,356 contracts were traded and wheat lost 17.25 cents while open interest declined 7,252 contracts. On February 27, open interest declined 6,421 contracts, which in relation to volume is approximately 65% above average, meaning that liquidation was fairly heavy. The USDA announced that 372.6 thousand tons have been sold which is below the USDA export projection for the season and the average sale to date. Stand aside.

Crude oil:

April crude oil gained 13 cents on volume of 451,491 contracts. Open interest increased by 5,482 contracts, which in relation to volume is approximately 45% less than average. Crude continues to trade in a lackluster fashion, and we expect lower prices ahead. On February 22, April crude generated a short-term sell signal. In prior reports, we recommended that clients implement long put positions rather than a short futures position due to the potential for volatility caused by a flare up in the Middle East. For those clients without positions, who want to participate, any rally should be used as an opportunity to buy puts. The 50 day moving average on the continuation chart is $93.86, but we don’t think crude will rally to this level. As a further sign of weakness, crude has not been able to rally during the past 2 days, despite the S&P 500 E mini advancing 28.50 points.

Copper:

May copper lost 1.60 cents on volume of 72,305 contracts. Volume declined approximately 40,000 contracts from February 26 when copper gained 2.20 cents and open interest declined 5,552 contracts. On February 27, open interest declined 137 contracts, which is minuscule and dramatically below average. The market continues to trade in a very weak pattern, and we recommend that clients wait for a rally to the $3.62-3.64 level before implementing bearish positions. Copper is on a short and intermediate term sell signal.

Gold:

April gold lost $19.80 on volume of hundred 97,388 contracts. Volume declined approximately 73,000 contracts from February 26 when gold advanced $28.90 and open interest declined 6,132 contracts. On February 27, open interest increased 438 contracts, which is minuscule and dramatically below average. As this report is being compiled, April gold is trading $18.90 lower and has made a low for the day of $1574.30. The low for the move thus far occurred on February 21 at $1554.30, which if broken, will likely head lower to the May 16, 2012 low of 1526.70 and the December 29, 2011 low of 1523.90. The precious metals complex has a distinct bearish zeitgeist, which makes it highly likely that the December 29, 2011 low will be taken out. We advise a stand aside position.

Platinum:

April platinum lost $16.40 on volume of 12,346 contracts. Open interest declined by 169 contracts, which in relation to volume is approximately is 45% less than average. As this report is being compiled, April platinum is trading $16.90 lower, and it is more than likely platinum will generate an intermediate term sell signal on February 28. On February 22, April platinum generated a short-term sell signal. Stand aside.

Silver:

May silver lost 33.5 cents on relatively heavy volume of 82,860 contracts. However, volume declined by 49,000 contracts from February 26 when silver gained 27.3 cents and open interest declined 7,694 contracts. On February 27, open interest declined 287 contracts which is minuscule and dramatically below average. As this report is being compiled, May silver is trading 53.5 cents lower and looks to challenge the temporary low made on February 20 of $28.255. Stand aside.

Euro:

The March euro gained 73 points on volume of 348,935 contracts. Volume declined approximately 104,000 contracts from February 26 when the euro declined 66 points and open interest increased by 161 contracts. On February 27, open interest declined by 7,953 contracts on the rally, which in relation to volume is approximately 10% below average. On February 26, the euro generated a short-term sell signal, but has not yet generated in intermediate term sell signal. We suggest that clients wait for a rally to the 1.32 area before implementing bearish positions in the euro.

S&P 500 E mini:

The S&P 500 E mini gained 23.25 points on heavy volume of 2,485,970 contracts. Volume shrank by 473,205 contracts from February 26 when the E mini rallied 5.25 points and open interest increased 18,137 contracts. On February 27, open interest declined 13,911 contracts, which in relation to volume is approximately 75% less than average. However, open interest should not be declining on a fairly healthy move higher on heavy volume. Additionally, stocks making new 52-week highs on all exchanges was 265 versus 1001 on February 1 when the E mini closed at 1506.75. In short, as the market rallies, fewer stocks are making new highs and stocks trading above their 50 day moving average on the NYSE are considerably below the level of February 1. As this report is being compiled, the E mini is trading 7.75 points higher, but volume will be far short than February 27. As we have said before, and continue to recommend it, the more conservative way of playing this market is to write out of the money calls.