Soybeans:

March soybeans lost 4.50 cents on volume of 179,191 contracts. Open interest declined by 5,745 contracts, which in relation to volume is approximately 20% above average, meaning that liquidation was fairly heavy. Soybeans made a new high for the move at $14.36 1/4, which is the highest price since December 26 when March soybeans made a high of $14.43. As this report is being compiled on January 16, soybeans have made a new high of 14.39 and is trading  25.50 cents higher. Soybeans will likely trade in a sideways to higher pattern and it looks like it is building a base from which a sustained move can occur. Stand aside.

Soybean meal:

March soybean meal lost $5.60 on volume of 70,144 contracts. Open interest increased by 1,176 contracts, which in relation to volume is approximately 30% less than average. Unlike soybeans, which made a new high for the move on January 15, March soybean meal was unable to take out the high it made on January 14 of 417.90. As indicated in yesterday’s report, soybean meal has weakened considerably against soybeans and soybean oil. The market remains on a short and intermediate term sell signal. Stand aside.

Soybean oil: On January 15, March soybean oil generated a short-term buy signal.

March soybean oil gained 42 points on volume of 130,522 contracts. Open interest increased by 673 contracts, which in relation to volume is approximately 75% below average. As is generally the case after a buy signal is generated, soybean oil should have a pull back. The 50 day moving average on the March soybean oil chart is 49.75, and a pullback to this level would be expected. As this report is being compiled, soybean oil is trading 46 points higher and has made a new high for the move at 51.50, which is the highest price for March soybean oil since December 11, when it made a high of 51.74. Soybean oil has not yet generated in intermediate term buy signal.

Corn:

March corn gained 6.50 cents on volume of 321,861 contracts. Volume increased by approximately 10,000 contracts from January 14 when corn gained 15 .25 cents and open interest declined by 1,637 contracts. On January 15, open interest increased by 7,846 contracts, which in relation to volume is average. As this report is being compiled, corn is trading 3.75 cents lower, but made a fractionally higher move to 7.35, which is one half cent above the high on January 14. Corn needs to do some backing and filling before it can move sustainably higher. Stand aside.

Wheat:

March wheat gained 15.75 cents on volume of 137,655 contracts. Volume increased by approximately 4,000 contracts from January 14 when March wheat closed 12.25 higher and open interest increased by 100 contracts. On January 15, open interest declined by 2,642 contracts, which in relation to volume is approximately 10% less than average. March wheat made a new high for the move at 7.89 3/4, which is the highest price since December 26, when March wheat made a high of 7.94. As this report is being compiled, wheat has made a new high at 7.91 and is trading 1.50 cents lower. Stand aside.

Crude oil:

February crude oil lost 86 cents on volume of 604,961 contracts volume increased by approximately 24,000 contracts from January 14 when crude gained 58 cents and open interest increased by 4,533 contracts. On January 15, open interest declined by 9,192 contracts, which in relation to volume is approximately 35% less than average. Despite the occasional pullback, crude oil is firm, even though it is significantly overbought relative to its 50 day moving average of $89.15. We continue to suggest that clients stand aside and wait for correction. Crude oil remains on a short and intermediate term buy signal.

Natural gas:

February natural gas gained 8.2 cents on volume of 469,193 contracts. Volume was the highest since December 13 when 548,515 contracts were traded and February natural gas closed at $3.389. Open interest increased by 485 contracts, which is dramatically below average. Stand aside.

Copper:

March copper gained .0035 cents on relatively heavy volume of 56,882 contracts. Volume declined approximately 5,000 contracts from January 14 when March copper lost 2.00 cents and open interest increased by 1,064 contracts. On January 15, open interest declined by 1,837 contracts, which in relation to volume is approximately 20% above average, meaning that liquidation heavier than usual. March copper made a new low for the move at 3.6060, which is the lowest price since December 31 when March copper made a low of 3.5815. As this report is being compiled, March copper has made another new low at 3.5995. As we have said before, there is no reason to be involved in copper, despite it being on a short and intermediate term buy signal. Although copper will not generate a short-term sell signal today, it is getting close. An immediate term sell signal is a little farther off.

Gold:

February gold gained $14.50 on volume of 173,640 contracts. Open interest increased by 6,935 contracts, which in relation to volume is  approximately 20% above average, meaning that new buyers were entering the market at a higher than normal rate and were moving prices higher. Gold made a new high for the move at $1684.90, which is the highest price since January 3, when February gold made a high of 1690.50. Gold remains on a short and intermediate term sell signal. Stand aside.

Platinum:

April platinum gained $31.70 on volume of 21,434 contracts. Volume was the highest since December 27 when 23,840 contracts were traded and April platinum closed at 1536.00. On January 15, open interest increased by 534 contracts, which in relation to volume is  average. The catalyst for the move on January 15 was the shutdown of  a major mine in South Africa and the realization that platinum production may decline precipitously. With the automobile industry in the greatest boom since before the financial crisis, it appears that supply reduction is being met with increasing demand. The fact that volume did not expand dramatically on the biggest move in platinum since November 23 and that open interest increased by an average amount confirms that the market is becoming massively overstretched. As we have said before, platinum needs to have a correction before it is safe to enter on the long side.

Silver:

March silver gained 41.9 cents on volume of 52,059 contracts. Volume increased by approximately 5,000 contracts from January 14 when silver gained 70.2 cents and open interest increased by 619 contracts. On January 15, open interest increased by 178 contracts, which in relation to volume is minuscule and dramatically below average. Silver made a new high for the move at $31.615, which is the highest price since December 19 when March silver made a high of 31.87. We need to see how silver trades when the equity markets are sharply lower. This will give us an indication of the underlying strength/weakness of silver. Although silver is on a short-term and intermediate term sell signal, the 50 day moving average remains above the 200 day moving average on the continuation and March silver charts. Stand aside.

British Pound:

The March British pound lost 30 points on volume of 109,949 contracts. Open interest declined by 1,720 contracts, which in relation to volume is approximately 35% less than average. It appears likely that a short and intermediate sell signal could occur this week. Stand aside.

Euro:

The March euro lost 81 points on volume of 305,539 contracts. Open interest increased by 1,298 contracts, which in relation to volume is approximately 75% less than average. The euro made a new low for the move at 1.3270 and as this report is being compiled on January 16, the euro has made a low just 8 points below yesterdays low. The apparent reason for the decline was a statement from euro zone chief Jean Claude Juncker who warned that the euro was at a dangerously high level. Obviously he has every incentive to talk the euro down because a strong euro will dramatically affect the euro zone in general and the German export machine in particular. Despite this, we continue to think the euro is headed higher, but it will probably be a slow grind. On January 15, the Swiss franc lost 1.19  cents. 

S&P 500 E mini:

The S&P 500 E mini gained 1.00 points on volume of 1,324,899 contracts. Open interest increased by 32,668 contracts, which in relation to volume is average, but a large number nonetheless. During the past 3 days, open interest has increased by 57,004 contracts, while the E mini has declined by 1.75 points. It appears that more and more people are getting increasingly bullish, and in today’s Zerohedge, there is a piece titled “NYSE Short Interest Plunges To March 2012 Levels.” We encourage clients to review it. The decline of short interest is further evidence that more participants are getting on the bandwagon as the market is getting closer to new highs. The Dow Jones Transportation Index has made a new high on January 16 of 5647.66 which takes out the previous all time high of 5627.85 made on July 7, 2011. Clients should exercise great caution on the long side of this market and we advise against entering long positions at current levels. Stand aside.