On Friday, March 8 at 11:00 cst, the USDA will release its world supply and demand report.

Soybeans:

May soybeans lost 0.50 cents on volume of 167,751 contracts. Open interest declined 1,068 contracts, which in relation to volume is approximately 65% below average. The USDA reported that 392.01 thousand tons of soybean meal were sold in the latest reporting period. The sale was significantly above the USDA projections for the 2012-2013 season, but below the average sales to date. Soybeans remain on a short term buy signal, but an intermediate term sell signal. However, if soybeans can hold their low of $14.60 3/4, May soybeans will generate an intermediate term buy signal. Stand aside until after the USDA report. If soybeans respond positively to the report, a new leg higher is in the offing. Do not enter new positions prior to the report

Soybean meal:

May soybean meal declined 60 cents on light volume of 60,899 contracts. Open interest increased by 2,495 contracts, which in relation to volume is approximately 55% above average. During the past 3 trading sessions, open interest has increased 6,252 contracts while May soybean meal has advanced $6.00. This is bullish open interest action relative to the 3 day price advance. The USDA reported that 119.28 thousand tons of soybean meal were sold in the most recent reporting period. This was dramatically above the USDA export projections for the 2012-2013 season, but below average weekly sales since the beginning of the season. As of the latest reporting period, 94% of the USDA projected sales have been committed, and sales need only average 16.53 thousand tons to meet the USDA projection. Soybean meal has a firm undertone, and looks to move higher. Soybean meal remains on a short and intermediate term buy signal. Do not implement new positions prior to the report.

Soybean oil:

May soybean oil advanced 13 points on light volume of 60,952 contracts. Open interest increased 1,752 contracts, which in relation to volume is average. The USDA reported that sales for the recent reporting week declined 19.68 thousand tons. Since making its low of 48.67 on March 1, soybean oil has rallied approximately 2 cents. We recommend that clients wait for a rally to the 51.50-52.00 area before implementing new bearish positions. Ideally, we want to see some short covering because managed money is short soybean oil by a ratio of over 2:1. Soybean oil remains on a short and intermediate term sell signal.

Corn:

May corn lost 20.50 cents on heavier than normal volume of 331,327 contracts. Volume was the highest since February 27 when 413,154 contracts were traded and open interest declined 19,222 contracts while corn advanced 0.50 cents. On March 6, open interest increased by 7,351 contracts, which in relation to volume is approximately 10% less than average. The pattern of open interest action during the past several days has been decidedly bearish relative to price action. The USDA reported that sales declined 49.8 thousand tons. As this report is being compiled, corn has made a new low for the move at $6.82, which is above $6.78 1/2, the low made on January 7. Market action in corn has been abysmal, and although it appears that lower prices are in the offing, we recommend that clients wait for a rally before implementing new short positions. Despite the poor action in corn, on March 6, May corn closed at a 4.75 cent premium to May wheat.

Wheat:

May wheat lost 22.25 cents on heavier than normal volume of 120,879 contracts. Volume was the highest since February 27 when wheat advanced 1 cent on volume of 151,136 contracts and open interest declined 6,421 contracts. On March 6, open interest increased 5,209 contracts, which in relation to volume is approximately 65% above average, meaning that new shorts were heavily entering the market and driving prices lower. Wheat made a new low for the move at $6.81, which is the lowest price for wheat since June 2012. Additionally, there is virtually no support until wheat reaches the $6.00 level. The USDA reported that sales of wheat totaled 618.1 thousand tons which is above the average sale to date and above the USDA projection for the crop year. Wheat is overdue for a rally, and bearish positions should not be contemplated until this occurs.

Crude oil:

April crude oil lost 39 cents on volume of 541,813 contracts. Open interest increased by a mere 577 contracts which is minuscule and dramatically below average. The market attempted to retest the $89.33 low made on March 4, but was able to rally off the low to close slightly lower. This market has been overdue for a rally, and as this report is being compiled, crude has made a new high for the move at $91.73 and is trading 86 cents higher. Wait for a rally to the $93.00-93.50 area before implementing bearish positions.

Natural gas:

April natural gas lost 5.9 cents on light volume of 251,773 contracts. Open interest increased by 4,769 contracts, which in relation to volume is approximately 25% below average. On March 1, April natural gas generated a short-term buy signal, but has not yet generated an intermediate term buy signal. We have recommended the use of call options, or writing out of the money puts as an alternative to trading futures. As this report is being compiled, April natural gas is trading 11.9 cents higher and has made a new high for the move at $3.603. Setbacks are buying opportunities.

Copper:

May copper lost 2.20 cents on volume of 55,101 contracts. Open interest increased by 1,996 contracts, which in relation to volume is approximately 40% above average, meaning that new shorts were entering the market and driving prices lower. Before implementing bearish positions, we want to see a rally up to the $3.60 area. This market is crowded with managed money shorts, and copper is due for a good-sized rally.

Gold:

April gold closed unchanged on volume of 189,884 contracts. Open interest increased 295 contracts, which is minuscule and dramatically below average. For the past 5 sessions, which include the action on March 7, gold has been unable to move above the
$1586 level. On March 7, the dollar is trading about a half a percent lower, yet gold is trading approximately unchanged. The market looks very weak and it appears that it is only a matter of time before new lows are made.

Platinum:

April platinum lost $5.90 on volume of 11,615 contracts. Open interest declined 16 contracts, which is minuscule and dramatically below average. By far, palladium is the stronger of the two metals, but the liquidity in palladium is unacceptable from a trading point of view. One way to play the palladium and platinum market is through Stillwater Mining (SWC).

Silver:

May silver gained 19.9 cents on volume of 42,548 contracts. Open interest declined 130 contracts, which is minuscule and dramatically below average. Stand aside.

Euro:

The May euro lost 46 points on volume of 236,929 contracts. Open interest increased by 3,052 contracts, which in relation to volume is approximately 45% less than average. March 6 was the first day since February 26 when the euro declined and open interest increased. On February 26, the euro declined 66 points on volume of 452,787 contracts while open interest increased by a minuscule 161 contracts. As is usually the case, extreme bearishness occurs at the bottom of the trading range, and this appears to be the case with the euro. We have been warning the market is oversold and due for a rally. As this report is being compiled, the euro is trading 1.18 cents higher and has made a new high for the move at 1.3119 on heavy volume. Wait for a rally to the 1.3200-1.3250 area before contemplating bearish positions.

S&P 500 E mini:

The S&P 500 E mini gained 2.00 points on heavy volume of 2,651,453 contracts. Open interest increased 41,686 contracts, which in relation to volume is approximately 40% less than 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 5, the total number of NYSE stocks above their 50 day moving average totaled 1624. However, on March 6 when the market rallied 2.00 points, the number of stocks above their 50 day moving average rose to 1631, or 7 stocks more than on March 5. On March 6, the E mini made a new high for the move at 1544.75, which is the highest price for the E mini since October 2007, yet the number of stocks trading above their 50 day moving average  barely moved. Until we see a greater percentage of NYSE stocks trading above their 50 day moving averages, we will continue to recommend writing calls, which are significantly out of the money to take advantage of what will be a slow grind higher at best.