Soybeans: On January 21, March soybeans generated a short and intermediate term sell signal. This reverses the short and intermediate term buy signal generated on January 16.

March soybeans lost 36.00 cents on volume of 200,692 contracts. Volume was higher than January 16 when soybeans made its high for the move at 13.30 1/2 and closed 3.00 cents lower while open interest increased by 12,396 contracts. Additionally, volume was below that traded on January 14 of 220,963 contracts when March soybeans advanced 12.75 cents and total open interest increased by 702 contracts. On January 21, total open interest declined by 6794 contracts, which relative to volume is approximately 40% above average meaning that both longs and shorts were liquidating as the market moved sharply lower. The March contract accounted for loss of 8564 of open interest. As this report is being compiled on January 22, March soybeans are trading 4.50 lower and have made a low for the move at 12.72. Usually after the generation of sell signals, there is a countertrend rally that lasts from 1-3 days. Wait for a rally before initiating bearish positions.

Soybean meal:

March soybean meal lost $18.00 on volume of 98,084 contracts. Total open interest declined by 4501 contracts, which relative to volume is approximately 75% above average meaning that both longs and shorts were aggressively liquidating as prices moved sharply lower. The March contract lost 7405 of open interest. As this report is being compiled, March soybean meal is trading 60 cents higher and has made a low for the move at $413.80. March soybean meal will not generate a short-or immediate term sell signal on January 22. Stand aside.

Corn:

March corn advanced 1.00 cent on volume of 258,176 contracts. Volume was the highest since January 14 when 270,627 contracts were traded and March corn declined 3.00 cents while open interest increased by 218 contracts. On January 21, total open interest increased by a hefty 8145 contracts, which relative to volume is approximately 25% above average. The March contract lost 6560 of open interest, which makes the total open interest increase more impressive (bearish). In yesterday’s report, we thought it was possible that corn would generate a short-term sell signal, which would reverse the short-term buy signal generated on January 13. This did not occur, and a short-term sell signal will not be generated on January 22. Stand aside.

Chicago wheat:

March Chicago wheat lost 1.25 cents on volume of 70,847 contracts. Total open interest increased by 1943 contracts, which relative to volume is average. The March contract lost 715 of open interest. On January 21 wheat made a low of $5.60 3/4 and this is the low on January 22, this is 0.25 cents above the low of 5.60 1/2 made on January 10. Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle advanced 92.5 points on heavy volume of 71,095 contracts. Total open interest increased by a massive 6574 contracts, which relative to volume is approximately 250% above average meaning that new longs were aggressively initiating positions and driving prices to new highs (1.40650). The February contract lost 5186 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on January 22 April cattle has advanced 1.125 and is made a new contract high of 1.41375.

As we said yesterday, clients should consider taking a bit of money off the table due to the parabolic nature of the move. There is been a massive increase of open interest and knew speculative longs have been initiating positions, which makes cattle vulnerable to a very sharp correction. Perhaps the first indication that prices have topped out, whether this is temporary or longer-term, with the aid massive increase in volume with the new highs made for the move and perhaps a close of unchanged or lower. As stated in yesterday’s report, increasing the prices are going to be fodder for the news media and this undoubtedly will begin to negatively affect the consumption. Do not enter new long positions at current prices. Maintain bullish positions, but be mindful a massive correction is coming.

WTI crude oil:

March WTI crude oil advanced 38 cents on light volume of 464,299 contracts. Total open interest increased by only 2164 contracts, which relative to volume is approximately 75% below average. The February contract lost 17,716 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on January 22, March WTI is trading $1.78 higher and has made a new high for the move at 96.89. Despite the move higher, WTI remains on a short and intermediate term sell signal. Stand aside.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.7 million barrels from the previous week. At 350.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.2 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased last week while blending components inventories increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 3.8 million barrels last week and are well below the lower limit of the average range. Total commercial petroleum inventories decreased by 10.3 million barrels last week.

Natural gas:

February natural gas advanced 10.5 cents on volume of 341,259 contracts. Volume increased approximately 50,000 contracts from November 7 when February natural gas declined 5.6 cents and total open interest declined 3018 contracts. On January 22, total open interest increased by 5451 contracts, which relative to volume is approximately 35 % less than average. As this report is being compiled on January 22 natural gas is trading 23.2 cents higher and is made a new high for the move at $4.669. We have been skeptical of natural gas being able to move significantly above the December 23 high and we have been proven wrong on January 22. It now appears reasonable that natural gas will test the January and June 2011 highs of 4.82 and 4.86 respectively. Like any market that is moving rapidly to the upside at the very high-end of the trading range, we will keep an eye on extremely heavy volume on a new high move with a close of unchanged or lower. We recommend against initiating new positions at current levels. Natural gas remains on a short and intermediate term buy signal.

Euro:

The March euro advanced 30 pips on volume of 248,228 contracts. Surprisingly, volume exceeded the 211,014 contracts traded on January 17 when the March euro declined 85 pips and total open interest increased by 12,312 contracts. As this report is being compiled on January 22, the March euro is trading 11 pips lower and has made a daily low of 1.3533. We think it is inevitable that an intermediate term sell signal will be generated. Consider initiating bearish positions on a rally to the 50 day moving average of 1.3612.

Dollar index:

The March dollar index lost 13.6 points on volume of 25,688 contracts. Volume was the highest since January 10 when 38,856 contracts were traded. On January 21, total open interest increased by 868 contracts, which relative to volume is approximately 25% above average. On January 21, the March dollar index made a new high for the move at 81.525. A move to the 81.725 level would constitute a major breakout, and we expect this to occur shortly. As this report is being compiled, the March dollar index is trading 5.4 points higher. Continue to hold bullish positions and look to buy setbacks.

British pound:

The March British pound advanced 59 pips on heavy volume of 131,515 contracts. Volume was the highest since December 18 when 146,411 contracts are traded and the March pound closed at 1.6421. On January 21, total open interest increased by a massive 7517 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and driving prices higher. As this report is being compiled on January 22 the March pound is trading 97 and is made a new high for the move at 1.6581, which takes out the high of 1.6572 made on December 31. This market has been strong for quite some time and at this juncture we suggest a stand aside posture.

. Gol