Volume and open interest analysis for January 16, 2013

Soybeans:

March soybeans gained 23 cents on volume of 155,685 contracts. Volume was the lowest since January 10 when 138,805 contracts were traded and March soybeans declined by 5.75 cents while open interest declined by 283 contracts. January 10 was the day prior to the January 11 USDA report. On January 16, open interest increased by a minuscule 1,093 contracts, which in relation to volume is approximately 65% below average. The March contract lost 782 contracts of open interest. On January 16, soybeans made a new high for the move at $14.39, which took out the high of January 15 of 14.36 1/4. The fact that volume declined while the market advanced sharply and made new highs for the move indicates that soybeans are overbought. Export sales were huge at 59.11 million bushels, which is the largest weekly sale for the entire season, which began September 1. As we said in yesterday’s report, the market is likely to trade in a sideways to higher pattern. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Soybean meal:

March soybean meal gained $7.20 on volume of 61,078 contracts. Volume declined by approximately 9,000 contracts from January 15 when meal declined by $5.60 and open interest increased by 1,176 contracts. On January 16, open interest increased by a massive 3,237 contracts, which in relation to volume is approximately 100% above average. Although the hefty open interest increase is very positive on the price advance, the fact that volume shrank from January 15 when the market declined is not. The export sales report showed that 236,000 tons of meal were sold, which is the largest sale in 4 weeks. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

March soybean oil gained 44 points on volume of 135,428 contracts. Open interest increased by 628 contracts, which in relation to volume is approximately 75% below average. The March contract lost 111 contracts of open interest. The weekly export sales report showed that 12,900 tons of soybean meal were sold, which is above the average weekly projected sales by the USDA of 7,590 tons per week. The March-May soybean oil spread has shrank to 36 points premium to May, which is the narrowest the spread has been since October 26, 2012. This is positive spread action. Although, it appears that the March-May soybean and soybean meal spreads have bottomed, they are nowhere near their late October levels. On January 15, March soybean oil generated a short-term buy signal.

Corn:

March corn gained 0.75 cents on volume of 277,523 contracts. Volume shrank approximately 44,000 contracts from January 15 when March corn gained 6.50 and open interest increased by 7,846 contracts. On January 16, open interest increased by 2,264 contracts, which in relation to volume is approximately 55% less than average. The export sales report showed that 15.5 million bushels were sold in the most recent reporting week which is the largest of the past 7 weeks. We are getting friendly to corn and although it has not generated a short-term buy signal as of yet, this could occur next week. Stand aside.

Wheat:

March wheat gained 2.25 cents on volume of 81,984 contracts. Open interest increased by 1,612 contracts, which in relation to volume is approximately 10% below average. Wheat made a new high for the move at $7.91, which is the highest price for wheat since December 26 when March wheat made a high of $7.95 1/4. Export sales for the week came in at 19.7  million bushels, which was the highest for the past 3 weeks. Approximately 15.20 million bushels are needed to reach the USDA export projection. Wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil:

February crude oil gained 96 cents on fairly heavy volume of 687,794 contracts. Volume increased by approximately 83,000 contracts from January 15 when crude oil declined by 86 cents. It is positive to see that volume expanded when crude oil advanced. However, the open interest action was terrible with crude oil losing 12,390 contracts, which in relation to volume is approximately 15% less than average. Crude has been unbelievably firm with nary a setback and as this report is being compiled on January 18, crude is trading $1.45 higher and has made a new high for the move at $96.04. The EIA report released on January 16 showed a draw of slightly under 1 million barrels. However, crude oil stocks are currently 29 million barrels above year ago levels and nearly 36.4 million barrels above the five-year average. On Wednesday January 18, 2012, crude oil closed at $100.59. From January 8 through January 16, open interest has increased by 8,196 contracts while February crude oil has advanced $1.05. This is not the kind of price and open interest action that gives one confidence in the move. Crude oil has been on a short and intermediate term buy signal since January 2 and 3, however, we continue to recommend that clients stand aside.

Natural gas:

February natural gas gained 2 cents on volume of 363,540 contracts. Open interest increased by 1,944 contracts, which in relation to volume is approximately 45% less than average. Stand aside.

Copper:

March copper lost 3.10 cents on volume of 50,595 contracts. Open interest increased by 2,369 contracts, which in relation to volume is approximately 75% above average, meaning that new short sellers were entering the market and driving prices lower. Copper made a new low for the move at 3.5995, which was the lowest price since December 31, when March copper made a low of $3.5815. The 50 and 200 day moving averages have been converging at $3.59, which should be an area of support for March copper. We think there better trades on the board, than copper, which is in a trading range.

Gold:

February gold lost 70 cents on healthy volume of 181,777 contracts. Open interest declined by 4,222 contracts, which in relation to volume is average. From January 4 when gold made its spike low of $1626.00 through January 16, open interest has increased by 14,804 contracts while February gold has advanced by $34.30. While the open interest increase is not a barn burner, it is positive. As this report is being compiled, February gold is trading $6.90 higher and has made a new high for the move at 1697.80 which breaks through the January 2 high of $1695.40. Despite the move higher on January 17, gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

March silver gained 1.3 cents on light volume of 34,381 contracts. Volume was the lowest since December 31 when 20,166 contracts were traded and March silver closed at $30.227. On January 16, open interest increased by 590 contracts, which in relation to volume is approximately 15% below average. From January 4, when March silver made a spike low of $29.24 through January 16 when March silver closed at $31.542, open interest has increased only 2,648 contracts. This is a substantial price move, but the open interest increase leaves a lot to be desired. Silver remains on a short and intermediate term sell signal. Stand aside.

British pound:

The March British pound lost 52 points on volume of 118,692 contracts. Open interest increased by 694 contracts, which in relation to volume is approximately 65% less than average. The pound made a new low for the move at 1.5970 on January 16, and as this report is being compiled, the pound has made another new low at 1.5951. It appears likely the pound will generate a short and intermediate term sell signal on January 17. Stand aside.

Euro:

The March euro lost 8 points on volume of 265,962 contracts. Open interest declined by 780 contracts, which a meager decline and dramatically below average. The euro made a low for the move at 1.3262. When the low was made, it occurred  in the realy morning hours on heavy volume on the 10 minute chart. Two hours later, it attempted to retest it and made a low one tick above at 1.3263. We advise clients who are long the euro to move their sell stops to 1.3262. As this report is being compiled, the March euro is trading 92 points higher.

S&P 500 E mini:

The S&P 500 E mini gained 0.25 points on volume of 1,233,150 contracts. Open interest declined by 18,977 contracts, which in relation to volume is approximately 35% below average. From December 31, when the rally began through January 16, open interest has increased by only 30,167 contracts. During this time the E mini has advanced by 81.50 points. The paltry open interest increase indicates that speculators are not convinced the rally is for real. As this report is being compiled, the E mini has made a new high at 1480.50 and is trading 15.00 points higher. As we have suggested before, there are individual stocks that are desirable to own, but clients should avoid being long the indices.