May soybeans gained 8.50 cents on volume of 124,703 contracts. Open interest increased by 3,617 contracts, which in relation to volume is approximately 15% above average. Soybeans closed at $14.79 1/2, which is the highest price since February 5 when May beans reached 14.85 3/4. During the past 2 trading sessions, May soybeans have been unable to penetrate through the 14.85 level. Additionally, volume on the advance was the lowest since March 7 when 118,990 contracts were traded and May soybeans advanced 7.50 cents while open interest declined 468 contracts. We want to see increasing volume on advances because this will indicate that participants are taking the rally in soybeans seriously. As it stands, soybeans remain on a short and intermediate term buy signal. Setbacks are buying opportunities and longs should use the March 8 low of 14.50 1/4 as an exit point.
May soybean meal gained $2.80 on light volume of 52,536 contracts. Open interest increased 1,504 contracts, which in relation to volume is average. For the past 6 trading sessions, open interest has increased 10,648 contracts while May soybean meal has advanced $8.70. This is bullish congruent open interest and price action. Soybean meal remains on a short and intermediate term buy signal, and longs should use the March 8 low of $428.60 as an exit point.
May soybean oil gained 10 points on light volume of 57,820 contracts. Open interest declined 126 contracts which is minuscule and dramatically below average. Wait for a rally to the 51.50-52.00 area to implement bearish positions.
May corn advanced 7.75 cents on volume of 241,722 contracts. Open interest increased by a massive 14,419 contracts, which in relation to volume is approximately 130% above average, meaning that new longs were very aggressive and moving prices higher. During the past 3 trading sessions, the highs have been higher and the lows have been higher. It appears this pattern is continuing on March 12 as May corn is 6.25 cents higher and has made a new high for the day at $7.17 3/4. Although corn has not generated a short or intermediate term buy signal, as the paragraph below states, we have been advising clients to avoid the short side of the market.
From the March 10 Weekend Wrap:
We have cautioned clients not to short of corn and to stand aside until we have somewhat more clarification on its direction short-term. The corn market has made 3 significant lows and each successive low has been somewhat higher than the previous low. For example, on January 7, 2013, May corn made a low of $6.78 1/2, February 25 6.80 3/4, and the last was made on March 7 at 6.82.The January 7 low, was the lowest price for corn since July 2012. Ethanol margins are expanding and the robust bull spread indicates to us that corn is likely to move higher from here. For prospective longs, who are a bit more adventurous, the March 7 low should be used as an exit point for any new long positions. We think corn has built a base, but we are not advocating long positions because corn has not generated a short or intermediate term buy signal. Rather, we are emphasizing clients should not be short, especially since managed money has the highest net short position in corn for at least several months.
April crude oil gained 11 cents on very light volume of 429,602 contracts. Volume declined approximately 81,000 contracts from March 8 when crude oil gained 39 cents and open interest declined 4010 contracts. On March 11, open interest increased 9,936 contracts, which in relation to volume is approximately 5% below average. As this report is being compiled, April crude oil is trading 84 cents higher and has made a new high for the move at $93.47. Crude oil is getting near the area where bearish positions can be implemented, but we prefer to wait for the open interest stats in tomorrow’s report. The target area for the implementation of short positions would be $93.90-94.51.
April natural gas gained 2 cents on light volume of 279,668 contracts. Open interest increased by a massive 11,492 contracts, which in relation to volume is approximately 60% above average, meaning that new longs were aggressively entering the market and driving prices higher. Natural gas is overdue for a setback, and this would present a buying opportunity for clients who are not yet long.
May copper gained.0080 on volume of 57,093 contracts. Open interest declined 1,631 contracts, which in relation to volume is approximately 5% above average. As this report is being compiled, May copper is trading 3.60 cents higher. As suggested in previous reports, we want to see copper trade to the $3.60 area before implementing bearish positions.
April gold advanced $1.10 on very light volume of 132,280 contracts. Open interest increased 2,335 contracts, which in relation to volume is approximately 25% below average. As this report is being compiled, gold has advanced $14.10 and has made a new high for the move at $1597.60, which has broken through resistance at the 1586.00 level. This market has a lot of work to do before it is a candidate for bullish positions. Stand aside.
April platinum lost $2.70 on volume of 8,528 contracts. Open interest increased 2 contracts. As this report is being compiled, platinum is trading 5.60 lower, and is selling at a $4.00 premium to gold. Platinum has much work to do, before bullish positions can be contemplated.
May silver lost 9.5 cents on very light volume of 25,041 contracts. Open interest increased 1,290 contracts, which in relation to volume is approximately 85% above average, which is a large number but didn’t move prices significantly one way or the other. Like gold, silver has much work to do before long positions can be contemplated. Stand aside.
The May euro gained 39 points on volume of 214,488 contracts. Open interest declined by a massive 10,647 contracts, which in relation to volume is approximately 75% above average. Much of the open interest decline can be attributed to the March contract losing open interest as the contract nears expiration. The euro has been overdue for a rally, and initially we are targeting the area of 1.3200 as a place to contemplate the implementation of short positions.
S&P 500 E mini:
The June S&P 500 E mini advanced 6.00 points on volume of 2,361,481 contracts. Volume declined 691,992 contracts from March 8 when the E mini gained 6.75 points and open interest increased 123,644 contracts. On March 11, open interest increased 150,025 contracts, which in relation to volume is approximately 130% above average. As we have cautioned in earlier reports, volume and open interest expands as the E mini contract nears its expiration. We think it is telling that volume on March 11 fell sharply from the previous day as the E mini made a new high at 1551.75. Volume was the lightest since March 4 when 2,088,299 contracts were traded and the E mini advanced 9.25 points, while open interest increased 49,476 contracts.
The amazing aspect of trading on March 11 was that the number of stocks trading above their 50 day moving average on the NYSE fell to 1700 from 1707 on March 8. Remember, the number of stocks trading above their 50 day moving average on the NYSE hit a record of 2115 on January 22. However, since January 22, the S&P 500 has rallied 70.24 points, and the DJIA rallied 797.59 points, yet the number of stocks trading above their 50 day moving average has fallen 415 from January 22 to March 11 despite the market rallying to new highs. This is bearish.
Another measurement of the internal weakness of the market is the number of stocks making new highs minus stocks making new lows. This reached 778 on March 11, which was down from 908 stocks on March 8. Going back to the beginning of the rally on January 2, the highs have been as follows: 1102 on January 2, 1074 on January 24, 1001 on February 1, 924 on February 15, 915 on February 5, and 908 on March 8. It is quite apparent that while the market has been making new highs, the number of stocks making new highs minus the number making new lows has been declining. It is also interesting that the number of stocks making new highs minus the number of stocks making new lows peaked on the January 2, the first day of the rally. The pattern of lower highs as the market has rallied is bearish.
We continue to advocate the writing of calls that are significantly out of the money to take advantage of decaying time value and the relatively low delta of calls that are out of the money.