Soybeans:

March soybeans lost 5.75 cents on volume of 140,964 contracts. Open interest declined by 4,513 contracts, which in relation to volume is approximately 20% above average. Soybeans made a new low for the move at $13.72 1/2, and as this report is being compiled on January 4, soybeans made another new low at 13.56, which matches the low made on on November 16, which has been the low ever since soybeans topped out in September. The impact of the upcoming Brazilian harvest is weighing heavily on the market. Export sales for the recent week were disappointing at 434,900 tons for the 2012-2013 season and 61,400 tons for the 2013-2014 season. 201,800 tons of previous sales were canceled. Stand aside.

Soybean meal:

March soybean meal lost $1.50 on volume of 72,147 contracts. Open interest increased by 1,367 contracts, which in relation to volume is approximately 10% less than average. On January 3, the market made a new low for the move at 397.70, and as this report is being compiled on January 4, March soybean meal has made another new low of 393.20. The lows of January 3 and 4 took out the November 20 low of 405.50. On July 24,2012, March soybeans made a low of 393.00, but this may not hold back the avalanche of selling. On the continuation chart, there is some support at $386.00. The export sales report was disappointing with meal sales for the 2012 2013 season at 53,800 tons and 68,000 tons were canceled. Stand aside.

Corn:

March corn lost 1.50 cents on volume of 182,356 contracts. Open interest declined by 1,099 contracts, which in relation to volume is approximately 65% less than average. Export sales were disappointing at 49,100 tons for the 2012-2013 season while 92,800 tons were canceled. As this report is being compiled on January 4, corn is trading 8.50 lower at $6.80 1/4, which is a new low for the move. As we said in yesterday’s report, if the gap between the July 2 high and the July 5 low was filled, there was no support for corn until $6.46 1/2. Despite this, we caution clients about getting overly bearish at this juncture, and recommend that any short positions be covered prior to the January 11 report. Stand aside.

Wheat:

March wheat gained 0.25 cents on volume of 85,544 contracts. Open interest increased by 2,311 contracts, which in relation to volume is average. As this report is being compiled on January 4, wheat is trading 12.25 lower and has made a new low for the move at $7.42 1/4. There is absolutely no support on the chart until $6.07. Export sales were disappointing at 400,300 tons for the 2012-2013 season and 2100 tons for the 2013-2014 season. Stand aside.

Crude oil: On January 3, February crude oil generated an intermediate term buy signal.

February crude oil lost 20 cents on volume of 434,724 contracts. Open interest increased by 5,154 contracts, which in relation to volume is approximately 50% below average. During the past 3 days, open interest has increased by 14,084 contracts while February crude has advanced $2.12. The open interest increase is very modest considering the magnitude of the advance. For example, if the open interest increase was average for the past 3 days, it would have increased by approximately 29,300 contracts.  Despite this, crude oil has been acting in an extremely bullish fashion from a price point of view. On January 3, the dollar was sharply higher, grains were sharply lower along with precious metals, yet crude oil was firm, even though product prices were weaker. On December 28, when the S&P 500 E mini was down 24.00 points, crude oil declined by only 7 cents. With crude oil on a short and intermediate term buy signal, it should only be traded from the long side. However, as said in the January 2 report, crude oil is overbought relative to its 50 day moving average of $87.54 on the continuation chart and 88.35 on the February crude oil chart. Crude oil needs to have a correction, and although it may not correct to the 50 day moving average, we could see crude trading in the $$90.00-90.50 area. Stand aside.

Natural gas:

February natural gas lost 3.5 cents on volume of 256,963 contracts. Open interest declined by 3,057 contracts, which in relation to volume is approximately 50% less than average. Stand aside.

Copper: On January 3, March copper generated a short-term buy signal.

March copper lost 1.90 cents on volume of 49,808 contracts. Open interest increased by 1,180 contracts, which in relation to volume is average. After reaching a high of $3.7590 on January 2 and 3, the market is pulling back as well it should. Copper’s 50 day moving average on the continuation chart is 3.57 and the 200 day moving average is 3.57 as well. As clients know, when a short and/or intermediate term buy signal is generated, the market has a pullback for 1 to 2 days and sometimes more in order to relieve the overbought condition that generated the buy signal. Although we do not see copper correcting down to its 50 day and 200 day moving averages, it is quite reasonable to expect a correction to the 3.62 area. As this report is being compiled on January 4, March copper is trading 2.35 lower and has pulled back to $3.6710. Stand aside.

Gold:

February gold lost $14.20 on volume of 174,017 contracts. Open interest increased by 1,868 contracts, which in relation to volume is approximately 50% below average. As this report is being compiled on January 4, gold is trading $22.30 lower and has made a new low for the move at $1626.00, which is the lowest price for gold since since the week of August 20, 2012 when gold made a low of $1611.60. Gold remains on a short and intermediate term sell signal, and it should not be traded from the long side. Stand aside.

Silver:

March silver lost 28.7 cents on volume of 50,900 contracts. Open interest increased by 1,013 contracts, which in relation to volume is approximately 5% below average. As this report is being compiled on January 4, silver is trading 76 cents lower and has made a new low for the move at $29.24. This is the lowest price since the week of August 20, 2012 when silver made a low of 27.875. Do not trade silver from the long side. Stand aside.

British pound:

The British pound lost 1.39 cents on heavy volume of 100,951 contracts. Volume was the highest since December 14 when 143,742 contracts were traded and the pound gained 57 points, while open interest increased by 11,168 contracts. On January 3, open interest declined by a massive 6,123 contracts, which in relation to volume is approximately 145% above average, meaning that liquidation was heavy. It was only the day before on January 2, that the pound rallied up to 1.6314, and large number of new longs rushed into the market at the top. It would appear that some number of these were liquidating on January 3. At the beginning of the evening session on January 3, the pound collapsed to 1.5945, but promptly rebounded, and as this report is being compiled on January 4, the pound is trading 49 points lower at 1.6054. We suspect the 1.5945 low will hold, although there may be a retest of it. We much prefer being long the euro.

Euro:

The March euro lost 1.15 cents on heavy volume of 254,034 contracts. Volume was the highest since December 14 when 337,113 contracts were traded and the euro advanced 83 points to close at 1.3160, while open interest declined by 2,446 contracts. On January 3, open interest declined by 7,016 contracts, which in relation to volume is a proximately 5% above average. In previous reports, we said the euro would most likely correct to at least 1.3100-1.3150 area and that if it broke below this, would likely correct to its 50 day moving average of 1.2983. As this report is being compiled on January 4, the March euro is trading 4 points lower and has made a new low for the move at 1.3005. We suspect that the 130.00 area will be the low, or very close to it.

S&P 500 E mini:

The S&P 500 E mini lost 3.50 on volume of 1,598,708 contracts. Open interest increased by a minuscule 2,912 contracts, which is dramatically below average. As we have said before, we believe the trend of the market is higher, but with the abysmal volume and terrible open interest action, it is difficult to get enthusiastic at current levels. As we said in yesterday’s report, clients are much better off in individual stocks and ETF’s rather than assume broad market risk by being long the E mini or another major index. Stand aside.