Soybeans:

March soybeans lost 2 cents on volume of 156,303 contracts. Open interest declined by 1,604 contracts, which in relation to volume is approximately 50% below average. The trading in beans has been lackluster with no major news until export sales reports on Thursday and the USDA Supply Demand report on January 11. The average estimate for the 2012-2013 crop is 2.999 billion bushels and guesstimates range from a low of 2.922 to a high of 3.104. The December report estimated the crop at 2.971 billion bushels. The average estimate of yield is 39.6 bushels per acre and the range is from 38.6 on the low side to a high of 41. The December USDA report indicated a yield of 39.3 bushels. The soybean carryout is estimated to be 135 million bushels and the range is from a low of 107 to a high of 178. The December report showed carryout at 130 million bushels and the carryout for the 2011-2012 season was 169 million. We recommend that clients liquidate any position prior to the January 11 report. Stand aside.

Soybean meal:

March soybean meal gained $2.00 on volume of 90,669 contracts. Volume increased by approximately 24,000 contracts from January 7 when March soybean meal gained $9.90 on volume of 66,908 contracts, while open interest increased by 4,697 contracts. On January 8, open interest increased by a massive 9,626 contracts, which in relation to volume is approximately a staggering 325% above average meaning that masses of new longs and shorts were entering the market and the longs were moving the market higher. For the past 4 trading sessions (January 3-January 8), open interest has increased by 19,160 contracts while March soybean meal has advanced by $5.20. The tremendous build in open interest during the past 4 days has not been able to move the market significantly higher, which indicates that sellers have been effective in keeping a lid on soybean meal prices. We will know who was on the buy and sell side once the COT report is released on January 11. Any position should be liquidated prior to the January 11 report. Stand aside.

Corn:

March corn gained 3.50 cents on volume of 212,178 contracts. Open interest increased by 2,910 contracts, which in relation to volume is approximately 45% below average. On Tuesday, the March-May spread closed at even money losing 0.50 cents from the previous close. The average estimate for the 2012-2013 corn crop is 10.6 billion bushels and the range is from a low of 10.1 to a high of-10.8. The December report indicated a crop of 10.725 and the crop for the 2011-2012 season was 12.358 billion bushels. The average estimate for yield is 122.4 bpa and the range is from a low of 121 to a high of 123.4. The average estimate for carryout is 667 million bushels and the range is from a low of 489 to a high of 764. The December report indicated carryout at 647 and the 2011-2012 crop had a carryout of 988 million bushels. We think that corn has the greatest chance of having a major surprise in the carryout and that possibly it will be lower than most anticipate. Regardless, any position should be liquidated prior to the January 11 report. Stand aside.

Wheat:

March wheat lost 0.75 cents on volume of 84,804 contracts. Open interest declined by 3,194 contracts, which in relation to volume is approximately 40% above average. The average estimated carryout is 743 million bushels and the range is from a low of 637 to a high of 792. In the December USDA report, carryout was estimated at 754. For the 2011-2012 season carryout was 743 million bushels. Any position should be liquidated prior to the January 11 report. Stand aside.

Crude oil:

February crude oil lost 4 cents on volume of 454,577 contracts. Open interest increased by a minuscule 3,132 contracts, which in relation to volume is approximately 75% below average. Crude oil continues to trade in a narrow range and the average true range on January 8 was $1.13, which is been the average true range for the prior 3 days. As we said in yesterday’s report, range contraction is followed by range expansion and since crude oil is massively overbought using our methodology and the 50 day moving average of $88.52, we are recommending that clients stand aside. Crude remains on a short and intermediate term buy signal.

Natural gas:

February natural gas lost 4.8 cents on volume of 283,508 contracts. Open interest increased by a minuscule 476 contracts, which is dramatically below average. As this report is being compiled on January 9, natural gas is trading 11.4 cents lower, but has not broken the low of $3.05 made on January 2. Stand aside.

Copper:

March copper lost .0060 cents on volume of 51,503 contracts. Volume was the highest since January 2 when 55,729 contracts were traded and copper advanced 8.35 cents, while open interest increased by 3,806 contracts. On January 8, open interest increased by a massive 4,577 contracts, which in relation to volume is approximately 250% above average, meaning that there was a major battle between longs and shorts and shorts had a slight edge, but not by much. Copper remains on a short and intermediate term buy signal, and should be traded from the long side. The 50 and 200 day moving averages converge at $3.59, which should provide good support.

Gold:

February gold gained $15.90 on fairly heavy volume of 190,840 contracts. Volume increased by approximately 30,000 contracts from January 7 when 160,704 contracts were traded and open interest increased by 5,090 contracts, while gold declined by $2.60. On January 8, open interest increased by 7,467 contracts, which in relation to volume is approximately 50% above average, meaning that longs were unusually aggressive and moving prices higher. The open interest increase on January 8 was higher than January 2 when gold advanced $13.00 and open interest increased by 4189 contracts on volume of 150,490 contracts. On December 31, gold advanced $19.90 on low volume of 96,449 contracts and open interest increased by 2472 contracts. On December 12, gold advanced $8.30 on volume of 172,415 contracts ,while open interest advanced by 5,175 contracts. In short, gold’s performs on January 8 was the most positive with respect to the price advance, volume and increase of open interest. It is apparent there are substantial numbers of potential new longs standing on the sidelines waiting to get on board if gold can mount a sustained rally. With gold trading below the 200 day moving average of $1665.80, much more work has to be done at the lower end of the trading range before a base can be built. Gold remains on a short and intermediate term sell signal. Stand aside.

Silver:

March silver gained 38.3 cents on volume of 48,797 contracts. Open interest declined on the advance by 1,136 contracts, which in relation to volume is average. During the past 4 trading sessions, (January 3-January 8) open interest has declined by 4,006 contracts, while silver has declined by 54.2 cents. This is positive open interest action relative to price. Like gold, silver needs to do some backing and filling at the lower end of its trading range in order to build a base for a move higher. Like gold, silver is trading below its 50 and 200 day day moving averages, however, its 50 day moving average remains significantly above the 200 day moving average ($32.15 and 30.80), which is positive. Silver remains on a short and intermediate term sell signal. Stand aside.

British pound:

The March British pound lost 48 points on volume of 85,886 contracts. Volume declined by approximately 10,500 contracts from January 7, when the pound gained 43 points on volume of 96,245 contracts, while open interest declined by 2,591 contracts. On January 8, open interest increased by 502 contracts, which in relation to volume is approximately 70% below average. We think the pound is building a base for a move higher, however our preference is to be long the euro. During the past 3 trading sessions, the pound has seen a series of higher lows and higher highs. However, this has been broken by the action of January 9, which likely indicates that more work has to be done at the lower end of the range. Stand aside.

Euro:

The March euro lost 29 points on volume of 228,200 contracts. Open interest increased by a minuscule 728 contracts, which is dramatically below average. Like the pound, the euro has had a series of higher lows and higher highs over the past 3 days (January 4-January 8). As is the case with the pound, this pattern has been broken on January 9, which may portend lower prices during the next couple of days. During January 2012 and 2011, the euro bottomed on January 18 and January 17 respectively. The low for the move thus far occurred on January 4 when the euro reached 1.3005. It appears that a retest of this low is more than likely, but we believe the euro will be supported by the 50 day moving average of 1.2988. We have recommended that clients keep stops near the January 7 low of 1.3025.

S&P 500 E mini:

The March S&P 500 E mini lost 3.50 points on volume of 1,367,565 contracts. Open interest increased by 24,802 contracts, which in relation to volume is approximately 5% below average, but a fairly substantial number nonetheless. The E mini made a low of 1446.00, which is the lowest price for the E mini since January 2 when the low was 1438.25. Volume continues to be anemic and trading is lackluster, and there is no reason to be involved in the E mini at this juncture. There are terrific individual stocks and ETF’s that clients should examine, and in coming reports, we will provide a list of stocks and ETF’s that are outperforming their constituent indices and the broad market.