On March 8, the USDA will release its world supply and demand report.

Soybeans:

May soybeans advanced 18.50 cents on light volume of 156,163 contracts. Volume increased approximately 4,000 contracts from March 1 when soybeans decline 8.75 cents and open interest declined 3,517 contracts. On March 4, open interest increased 2,729 contracts, which in relation to volume is approximately 25% below average. The March contract lost 3,047 of open interest. For the past 2 days, open interest has been acting in a bullish congruent manner relative to prices. Soybeans are getting close to generating an intermediate term buy signal, but clients should be cautious in advance of the March 8 report. We recommend waiting until after the report to put on new long futures positions. For the past 3 days, May soybeans are finding support at the 50 day moving average of $14.33 3/4. However, the 200 day moving average of 15.07 has been a barrier to further advances. We remain friendly to soybeans and think they will move higher.

Soybean meal:

May soybean meal gained $4.40 on light volume of 60,350 contracts. Volume declined approximately 3,000 contracts from March 1 when soybean meal lost $6.30 and open interest increased by 88 contracts. On March 4, open interest increased 1,225 contracts, which in relation to volume is approximately 20% below average. The March contract lost 1,185 of open interest. Soybean meal made a low of $424.20, which was one tick below $424.30, the low made on February 27.  For the past 3 days, open interest has been acting in a bullish congruent manner relative to  soybean meal prices We remain friendly to soybean meal and those clients with long call positions should stay with them. For clients looking to get long futures, we think it would be wise to wait until after the March 8 USDA report.

Soybean oil:

May soybean oil advanced 59 points on very light volume of 72,914 contracts. Volume was the lightest since January 28 when 65,697 contracts were traded and May soybean oil closed at 52.28. On March 4, open interest increased by a massive 4,400 contracts, which in relation to volume is approximately 140% above average, meaning new longs were entering the market and pushing prices higher. The March contract lost 893 of open interest. Soybean oil remains on a short and intermediate term sell signal, and we recommend waiting for a rally to the 51.00-51.50 area before implementing bearish positions.

Corn:

May corn lost 5.25 cents on light volume of 225,834 contracts. Volume increased approximately 20,000 contracts from March 1 when corn advanced 5 cents and open interest declined 7,851 contracts. On March 4, open interest increased 874 contracts, which in relation to volume is approximately 75% below average. Open interest increased in the July 2013 through December 14 contracts. For the first time since last year, corn closed at a premium to wheat. Additionally, the March-May corn spread continues to widen. On the other hand, for the past 6 sessions, open interest has been acting in a bearish fashion relative to prices. Despite this, we caution clients not to short corn. Stand aside.

Crude oil:

April crude oil lost 56 cents on light volume of 451,853 contracts. Volume was the lowest since February 27 when 451,491 contracts were traded and crude oil advanced 13 cents, while open interest increased 5,482 contracts. Additionally, volume contracted by approximately 72,000 contracts from March 1 when crude declined $1.37 and open interest increased 12,413 contracts. Despite making a new low for the move at $89.33 on March 4, volume did not expand. In our view, this indicates that the downtrend has yet to play out because there remains a hefty number of longs who have yet to liquidate. On March 4, open interest increased 2,603 contracts, which in relation to volume is approximately 70% below average. The market seems to have lost its ability to have even minor rallies, which is another confirmation of crude oil’s weakness. For those clients who purchased puts when we recommended them, stay with the position.

Natural gas:

April natural gas gained 7.3 cents on volume of 291,735 contracts. Open interest increased by a massive 17,294 contracts, which in relation to volume is approximately 140% above average meaning that new longs were heavily entering the market and pushing prices higher. On March 4, April natural gas closed above its 200 day moving average of $3.51, which is the first time this has occurred since January 18. On March 1, April natural gas generated a short-term buy signal, but remains on an intermediate term sell signal. We like natural gas because it is entering a period of seasonal strength, not because of any fundamental change and our data indicates that prices should move higher. For those wanting to participate in the rally, a more conservative way to play it, is to write out of the money puts. Calls are cheap, and this is  much safer than futures.

Copper:

May copper closed unchanged on volume of 63,443 contracts. Volume declined approximately 17,000 contracts from March 1 when May copper lost 4.65 cents and open interest declined 2,907 contracts. On March 4, open interest increased 1,371 contracts, which in relation to volume is approximately 20% less than average. We are waiting for a rally to the $3.62-3.64 area before recommending bearish positions. Until this occurs, stand aside.

Gold:

April gold gained 10 cents on light volume of 140,939 contracts. Volume was the lightest since February 8 when 102,295 contracts were traded and gold closed at $1666.90. On March 4, open interest declined 695 contracts, which in relation to volume is approximately 65% less than average. Based upon the trading of March 1, 4 and 5, there appears to be resistance at the 1586 level. The market looks weak and we see nothing but lower prices ahead. The precious metals in general have a bearish outlook, and it may take a while to turn this around. Stand aside.

Platinum:

April platinum lost $7.30 on volume of 10,462 contracts. Open interest declined by a hefty 559 contracts, which in relation to volume is approximately 110% above average, meaning that liquidation was heavy. Platinum made a new low for the move at $1564.00, which is the lowest price since since it traded at 1553.40 on January 8. Platinum remains on a short and intermediate term sell signal. Stand aside.

Silver:

May silver closed unchanged on very light volume of 31,760 contracts. Volume was slightly below the 31,764 contracts traded on February 6. On March 4, open interest increased by 457 contracts, which in relation to volume is approximately 40% less than average. Stand aside.

Euro: On March 4, the March euro generated an intermediate term sell signal

The March euro gained 10 points on light volume of 215,226 contracts. Open interest declined 632 contracts, which is minuscule and dramatically below average. The intermediate term sell signal confirms the short term sell signal generated on February 26. We recommend that clients wait for a rally to 1.3200-1.3240 before implementing new bearish positions. The euro is massively oversold and is due for a rally.

S&P 500 E mini:

The S&P 500 E mini gained 9.25 points on volume of 2,088,299 contracts. Open interest increased by 49,476 contracts, which in relation to volume is average, but a large number nonetheless. Our belief that a correction was in progress has been nullified to a certain extent by the rally on March 5 with the E mini trading 13.25 points higher after having made a new high for the move at 1542.75. As readers of this report know, our concern about the broad indices has been the dismal performance of NYSE stocks that are trading above their 50 day moving average. Yesterday’s market action did nothing to allay our concern that the market of stocks are not participating in the rally.

For example, on March 1, the total number of NYSE stocks above their 50 day moving average totaled 1541. However, on March 4 when the market rallied 9.25 points, the number of stocks above their 50 day moving average fell to 1513, or 28 stocks fewer than on March 1. It will be interesting to see if the number of stocks trading above their 50 day moving average on March 5 expands, or continues to decline. We would expect that the number of stocks trading above their 50 day moving averages would increase on March 5, but by how much. In past reports, we have suggested that clients write out of the money calls in the E mini. The logic being that if the market continues to move higher, it will be a slow grind, which takes advantage of the decaying time value of the option. Additionally, we think the market will be doing a considerable amount of backing and filling at stratospheric prices, which also benefits the option seller.