On March 28, the USDA will release its planting intentions report. 

Soybeans:

May soybeans lost 3.25 cents on very light volume of 111,076 contracts. Volume was the lowest since December 31, 2012 when 90,394 contracts were traded and May soybeans closed at $13.99 1/4. On March 25, open interest declined by 1,271 contracts, which in relation to volume is approximately 50% below average. The May contract accounted for loss of 1,809 contracts. Soybeans remain on a short and intermediate term sell signal. Stand aside.

Soybean meal:

May soybean meal lost $1.50. Open interest increased by 671 contracts, which in relation to volume is approximately 45% below average. The May contract accounted for loss of 1,148 of open interest. Soybean meal remains on a short and intermediate term sell signal. Stand aside.

Soybean oil:

May soybean oil gained 1 point on volume of 57,034 contracts. Open interest declined by 505 contracts, which in relation to volume is approximately 50% less than average. The May contract accounted for a loss of 1,625 of open interest. Soybean oil remains on a short and intermediate term sell signal. Stand aside.

Corn:

May corn gained 7 cents on volume of 195,228 contracts. Volume declined approximately 48,000 contracts from March 22 when May corn lost 6.75 cents and open interest increased by 9,666 contracts. Additionally, volume was the lightest since March 18 when 167,464 contracts were traded and open interest increased by 8,801 contracts while May corn advanced 3 cents. On March 25, open interest increased by 1,505 contracts, which in relation to volume is approximately 65% less than average. However, the May contract accounted for loss of 3,104 of open interest, but there were enough new participants to overcome the loss.

During the past 8 days beginning on March 14, May corn has advanced 23.25 cents while open interest has increased a total of 98,154 contracts. The massive increase in open interest relative to the rather minor advance during the past 8 days is troubling. Like natural gas, when a series of huge increases in open interest occurs and the price advance is relatively tepid, a correction, or perhaps a reversal in trend may be on the horizon.

Additionally, there has been a lack of follow-through after corn closes higher. For example on March 26, corn is trading 3.50 cents lower and has made a low of $7.25 1/2, despite closing at 7.33 1/4, which is May corn’s highest close since March 21 (7.33). We attribute this to heavy trade selling, which is occurring at the high-end of the trading range going back to early February. Clients that have profitable long positions in futures or options might consider writing out of the money calls, to provide a measure of protection in the event that corn prices begin to slide.

Wheat:

May wheat lost 2.50 cents on light volume of 67,742 contracts. Total open interest increased by 781 contracts, which in relation to volume is approximately 45% less than average. The May contract accounted for loss of 2,370 of open interest. Wheat remains on a short and intermediate term sell signal. Stand aside.

Crude oil: On March 25, May crude oil (WTI) generated an intermediate term buy signal.

May crude oil gained $1.10 on heavier than normal volume of 644,014 contracts. Volume increased approximately 212,000 contracts from March 22 when May crude oil advanced $1.26 and open interest increased by 2,996 contracts. Additionally volume was the highest since March 19 when 680,198 contracts were traded and May crude oil lost $1.59 while open interest declined 30,003 contracts. On March 25, open interest increased by a whopping 21,630 contracts, which in relation to volume is nearly 40% above average. To put this number in perspective, consider March 7. On that day, crude oil advanced $1.13 on volume of 681,799 contracts and open interest increased by 8496 contracts, which was 45% less than average. On February 11 when crude advanced $1.31 on volume of 831,563 contracts, open interest increased by 14,354, which was 25% less than average.

In short, the advance on March 25 was characterized by the highest open interest increase relative to volume going back to February 1. We have been skeptical of the rise in WTI prices because Brent crude oil remains on a short and intermediate term sell signal, heating oil remains on a short and intermediate term sell signal, and gasoline remains on a short-term sell signal, but an intermediate term buy signal. As it stands, only WTI and gasoline are on an intermediate term buy signal. It is difficult to get bullish on WTI when the products and Brent remain on a short-term sell signals. We attribute the strength in WTI to the unwinding of the long Brent crude short WTI crude arbitrage, and the likelihood that new participants are buying WTI and selling Brent. As we stated in the report of March 22, we recommended that any bearish positions be liquidated in the event that WTI breaks above the $95.65 high made on March 25. As this report is being compiled, May WTI is trading $1.41 higher and has made a new high for the move at $96.45. Therefore, all long positions in futures and options should be liquidated on March 26. Until such time that short-term buy signals are generated for gasoline and Brent crude, we recommend that clients stand aside.

Natural gas:

May natural gas lost 6.2 cents on light volume of 333,959 contracts. Volume was the lowest since March 13 when 299,879 contracts were traded and May natural gas advanced 3.5 cents while open interest increased by 5,606 contracts. On March 25, open interest increased by 1,826 contracts, which in relation to volume is approximately 75% less than average. The explanation for the tepid increase in open interest can be explained by the heavy liquidation of 18,947 in the April contract, which will go off the board shortly. We suggested that clients liquidate their positions if the market penetrated $3.89, or write out of the money calls to protect profits in long futures and options positions. As this report is being compiled, May natural gas is trading 8.3 cents higher. We continue to advise a cautious approach with respect to the long side of natural gas. The speculative community is piling in at the upper end of the trading range going back to mid December 2011. We consider this to be a red flag.

Copper:

May copper lost 2.10 cents on volume of 58,116 contracts. Open interest increased by 2,306 contracts, which in relation to volume is approximately 50% above average. Copper continues to look abysmal, but it may have some support in the low $3.40 level. Stand aside.

Gold:

April gold lost $1.60 on huge volume of 352,189 contracts. The heavy volume is due to participants switching out of April into the June contract. On March 25, open interest declined 1,204 contracts. As this report is being compiled, June gold is trading $8.50 lower. Gold remains on a short and intermediate term sell signal. Stand aside.

Platinum:

April platinum gained $1.20 on volume of 32,632 contracts. The massive increase in volume can be attributed to the switching out of the April contract into July. New participants entered the July contract at a rate significantly higher than the liquidation in the April contract, which explains the massive increase of open interest, which in relation to volume is approximately 60% above average. As this report is being compiled, platinum is trading $4.70 lower.

Silver:

May silver gained 11.7 cents on volume of 41,297 contracts. Open interest declined 1,337 contracts, which in relation to volume is approximately 20% above average. As this report is being compiled, silver is trading 9.5 cents lower. Silver remains on a short and intermediate term sell signal. Stand aside.

Australian dollar:

The June Australian dollar gained 16 points on volume of 78,356 contracts. Open interest increased by a massive 6,085 contracts, which in relation to volume is approximately 210% above average. For the past 3 days beginning on March 21, open interest has increased 27,183 contracts while the Australian dollar has advanced 87 points. Relative to volume for the past 3 days, the three-day open interest increase is approximately 300% above average. This is a huge number, and it obviously will not continue. Expect sharp setbacks. The Australian dollar remains on a short and intermediate term buy signal. Our strategy of writing out of the money puts has been working well.

Euro:

The June euro lost 1.19 cents on heavy volume of 400,435 contracts. Volume was the highest since March 19 when 411,189 contracts were traded and the euro lost 72 points while open interest increased 6,665 contracts. On March 25, open interest increased by 9,210 contracts, which in relation to volume is approximately 5% below average. On March 25, the trading range for the euro was 257 points, which is the highest since February 25 when it reached 263 points. Volume traded on February 25 was 462,565 contracts and the euro declined 59 points while open interest increased by 2,295 contracts. The June euro closed at 1.2872, which is the lowest close since the slide began on February 1. The market looks terrible and lower prices appear to be inevitable. This will be punctuated by occasional rallies.

S&P 500 E mini:

The S&P 500 E mini lost 5.00 points on volume of 2,256,548 contracts. Open interest increased by 3,167 contracts which is minuscule and dramatically below average. Stocks trading above their 50 day moving average on the NYSE fell to 1,513 from 1,556 on March 22. Since closing at 1556.00, on March 14, the E mini has been moving in a sideways pattern. If the E mini breaks decisively above 1560 and closes above this level, it is likely the E mini will mount an assault on the October 11, 2007 high of 1586.75. It is difficult to ascertain whether this is possible because it will depend upon the results of upcoming earnings season. We have advocated writing calls that are significantly out of the money, and we continue to think this is a reasonable approach considering the lofty level of the E mini. If the E mini closes above 1560, we would reconsider this strategy.