Soybeans:

March soybeans lost 6.25 cents on volume of 176,876 contracts. Open interest increased by 3,099 contracts, which in relation to volume is approximately 20% less than average. The March contract, where the bulk of open interest resides lost 750 contracts. Soybeans made a new high for the move at $14.48 in the early going after a blockbuster export sales report. However, the market was unable to hold the high and closed in the minus column. As we have said before, we think the lows are in and that soybeans will trade in a sideways to higher pattern. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Soybean meal:

March soybean meal lost $5.10 on volume of 67,903 contracts. Open interest increased by 2,590 contracts, which in relation to volume is approximately 45% above average. The March contract, which holds the majority of open interest lost 126 contracts. Although open interest increases when soybean meal advances, it also increases on declines. In other words, there isn’t a clear pattern with respect to the open interest action relative to price. Soybean meal made a new high for the move at $423.70, but has been unable to hold the high and as this report is being compiled on January 18, March soybean meal is trading 20 cents higher. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

March soybean oil advanced 18 points on light volume of 82,764 contracts. Open interest declined by 2,091 contracts, which in relation to volume is average. March soybean oil made a new high for the move at 51.66, which is the highest price since December 11, when March soybean oil made a high of 51.74. Soybean oil remains on a short-term buy signal, but has not yet generated in intermediate term buy signal. 

Corn:

March corn lost 6.75 cents on volume of 204,385 contracts. Open interest declined by a hefty 7,413 contracts, which in relation to volume is approximately 40% above average, meaning that liquidation was fairly heavy. On January 11, open interest increased by 17,940 contracts, January 15 +7846, January 16 +2264. It is therefore reasonable that open interest would decline on a price decline. It is possible that March corn will generate a short-term buy signal next week. Stand aside.

Wheat:

March wheat lost 3.75 cents on volume of 80,729 contracts. Open interest declined a minuscule 83 contracts. March wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil:

February crude oil gained $1.25 on heavy volume of 730,459 contracts. Volume increased by approximately 43,000 contracts from January 16 when crude advanced 96 cents and open interest declined by 12,390 contracts. Volume was the highest since January 10 when 732,744 contracts were traded and crude oil advanced 72 cents, while open interest increased by 5,112. On January 17, open interest increased by a hefty 29,965 contracts, which in relation to volume is approximately 55% above average meaning that new buyers were rushing heavily into the market and pushing prices higher. Crude oil made a new high for the move at $96.04, which is the highest price since September 19 when February crude oil made a high of $97.24.

It is interesting to note that between January 8 and January 16, open interest increased by 8,196 contracts and February crude oil advanced $1.05. In one trading session, crude oil advanced by almost the same amount ($1.25) and open interest more than tripled. We have been saying that crude oil is overbought by any standard, but speculators decided on January 17 they better get on board. As readers of OIA know, we called the beginning of the rally on January 2 when crude oil generated a short-term buy signal and on January 3 when that signal  was confirmed by an intermediate term buy signal. In our view, speculators who rushed in on January 17, may find themselves heading for the exits when crude oil finally corrects. The only caveat to this is a major global conflict involving key oil-producing areas. Wait for a correction.

Natural gas:

February natural gas gained 5.9 cents on volume of 451,970 contracts. Open interest increased by 9,545 contracts, which in relation to volume is approximately 5% below average. For the past 2 days, open interest has increased by 11,489 contracts, while natural gas has advanced 7.9 cents. Stand aside.

Copper:

March copper gained 5.55 cents on heavy volume of 63,522 contracts. Volume exceeded the trading on January 14 when 61,895 contracts were traded and March copper declined by 2.00 cents, while open interest increased by 1,064 contracts. On January 17, open interest increased by 2,259 contracts, which in relation to volume is approximately 40% above average. The pattern of open interest action is highly irregular because open interest increases on declines and increases on advances. If there were open interest declines on price declines, we would be more favorably inclined toward copper. As it is, we believe copper is in a trading range and there better opportunities in other markets.

Gold:

February gold advanced $7.60 on heavy volume of 231,037 contracts. Volume was the highest since January 4 when 276,607 contracts were traded and February gold declined by $25.70, while open interest declined by 5,301 contracts. On January 17, open interest advanced by a hefty 9,277 contracts, which in relation to volume is approximately 55% above average. Gold made a new high for the move at $1697.80, which is the highest price since January 2 when gold reached 1695.40. The 50 day moving average is 1696.84, and if the low for the day is above the 50 day moving average, gold may be on its way to a sustainable move higher. Gold remains on a short and intermediate term sell signal.

Silver:

March silver gained 26.8 cents on volume of 58,543 contracts. Volume increased by approximately 24,000 contracts from January 16 when March silver gained 1.3 cents and open interest increased by 590 contracts. Additionally, volume was the highest since January 4 when 73,418 contracts were traded and silver declined by 77.4 cents, while open interest declined by 4,186 contracts. On January 17, open interest declined by 1,290 contracts, which in relation to volume is average. March silver made a new high at $31.93, which is the highest price since December 19 when March silver made a high of $31.87. Silver remains on a short and intermediate term sell signal. Stand aside.

British pound: On January 17, the March British pound generated a short and intermediate term sell signal.

The March British pound gained 3 points on volume of 124,823 contracts. Volume was the highest since January 10 when 130,615 contracts were traded and the March British pound advanced 1.37 cents, while open interest increased by 1,458 contracts. On January 17, open interest increased by a meager 27 contracts. The pound made a low of 1.5951, which was the lowest price since January 4 when it made a low of 1.5945. As this report is being compiled on January 18, the March British pound is trading 1.29 lower and has made a new low for the move at 1.5847. With the pound on a short and intermediate term sell signal, it should only be traded from the short side, but the market is oversold, and a rebound is to be expected. Do not enter short positions at current levels. The pound could correct up to the 1.6060 level before reversing.

Euro:

The March euro gained 96 points on volume of 291,692 contracts. Open interest increased by 6,760 contracts, which in relation to volume is average. Although the open interest increase was average relative to volume, on a numeric basis it was the largest increase of open interest since December 18 when the euro gained 59 points on 181,392 contracts and open interest increased by 8,368 contracts. We recommend placing stops slightly below the January 16 low of 1.3262.

 S&P 500 E mini:

The S&P 500 E mini gained 10.25 points on volume of 1,751,158 contracts. Volume was the highest since January 2 when 1,943,131 contracts were traded and open interest increased by 11,152 contracts, while the S&P gained 37.00 points. On January 17, open interest increased by 47,922 contracts, which in relation to volume is average, but a large number nonetheless. Compare the price advance, open interest increase and volume on January 2 to January 17. Although the market advanced by more than 3 times on January 2 than January 17, the open interest increase was a fraction of the open interest increase on January 17. It appears the late to the party crowd decided to get on board as the S&P 500s E mini broke above its September 14 high. As we have said before, owning good stocks is the way to participate in this market because it is a stock pickers market. We would avoid the E mini and other major indices on the long side.