The dollar index has made a new high for the move on March 13, and this negative factor is weighing on commodities.
May soybeans lost 10.75 cents on volume of 135,773 contracts. Open interest increased 3,123 contracts, which in relation to volume is approximately 5% below average. As this report is being compiled, May soybeans are trading 23.50 cents lower and have broken through the March 8 low of $14.50 1/4. In prior reports, we recommended that longs place stops at the March 8 low of $14.50 1/4. On March 8, soybeans have made a new low on March 13 of 14.40 1/4. At 5:00 p.m. cdt when the evening session began, soybeans opened at $14.68, and immediately made a high of 14.68 3/4, which was the closing price for March 12. Soybeans were unable to surpass the closing price throughout the evening and into the day session, which reveals the essential weakness of soybeans. In yesterday’s report, we commented on the inability of soybeans to rally much beyond the 14.84 area. Although soybeans remain on a short and intermediate term buy signal, we recommend that clients stand aside and wait for more clarification about the ultimate direction of the current move. Everyone should be out of their long positions in futures and in options.
May soybean meal lost $1.80 on very light volume of 44,182 contracts. Open interest increased 2,917 contracts, which in relation to volume is approximately 160% above average meaning that new shorts were entering the market and pushing prices somewhat lower. In prior reports, we recommended that clients placed stops at or slightly below the March 8 low of $428.60. All long positions should have been liquidated in futures and in options. Soybean meal remains on a short and intermediate term buy signal. Stand aside.
May soybean oil lost 46 points on light volume of 59,029 contracts. Open interest increased 1,012 contracts, which in relation to volume is approximately 25% below average. The market has been unable to rally to our target price of 51.50-52.00 to implement bearish positions. As this report is being compiled, May soybean oil is trading 58 points lower. Soybean oil remains on a short and intermediate term sell signal. Stand aside.
May corn advanced 3 cents on volume of 210,959 contracts. Open interest increased 1,088 contracts, which in relation to volume is approximately 70% less than average. The market made a new high for the move at $7.17 3/4, which is the highest price since February 8 when May corn reached $7.20 1/4. As this report is being compiled, May corn is trading 4.75 cents lower and has made a low at $7.00 1/2. Corn remains on a short and intermediate term sell signal.
April crude oil advanced 48 cents on heavy volume of 724,564 contracts. Volume was the heaviest since February 11 when 831,563 contracts were traded and April crude oil closed at $97.58. On March 12, open interest declined 5,501 contracts, which in relation to volume is approximately 65% less than average. The heavy volume and the decline of open interest shows that as the market rallied, both longs and shorts were liquidating. The market made a new high for the move at $93.47, which fractionally took out the high of $93.37 made on February 27, but was slightly above the February 26 high of $93.44. In short, there is resistance at the 93.40 level. As this report is being compiled, crude oil is trading 20 cents lower and has made a high of $93.40, just 7 cents shy of yesterday’s high. In the Wednesday Department of Energy report, there was a stock build of 2.624 million barrels. The poor performance of the Shanghai Composite Index is likely weighing on crude oil prices. We suggest waiting until Thursday’s session to see whether we get another thrust higher before implementing bearish positions.
May copper gained 3.75 cents on volume of 72,394 contracts. Volume was the highest since March 1 when 80,970 contracts were traded and May copper declined 4.65 cents, while open interest declined 2,907 contracts. On March 12, open interest declined 638 contracts, which in relation to volume is approximately 60% less than average. As this report is being compiled, May copper is trading 2.45 cents lower. The market is unable to mount a sustained rally, which serves to underscore the weakness of the metal. The Shanghai Composite Index has been performing dismally for the past couple of weeks and through March 13 is down 0.23% year to date. Additionally, it appears the index has an active head and shoulders pattern, which has ominous implications for the Chinese market.
April gold gained $13.70 on volume of 186,610 contracts. Volume increased approximately 53,500 contracts from March 11 when gold advanced $1.10 and open interest increased 2,335 contracts. On March 12, open interest increased 2,793 contracts, which in relation to volume is approximately 40% less than average. As we said in yesterday’s report, gold has much work to do before it is in a position to make a sustained move higher. There is no reason to be involved with gold at this juncture. We would recommend writing out of the money call options on the current rally, but are concerned about the overbought condition of the dollar index and the oversold condition of currencies that make up the index. When these begin to correct, we could see a further rally in gold and other precious metals.
April platinum lost $6.20 on heavier than normal volume of 15,461 contracts. Volume was the highest since March 1 when 16,374 contracts were traded and April platinum lost $10.00 while open interest declined 320 contracts. On March 12, open interest declined by 87 contracts, which is minuscule and dramatically below average. Platinum continues to struggle and remains on a short and intermediate term sell signal along with gold and silver. Stand aside.
May silver gained 31.8 cents on light volume of 30,480 contracts. Open interest declined 232 contracts, which in relation to volume is approximately 60% below average. Stand aside.
The March euro lost 15 points on volume of 305,651 contracts. Open interest increased 6,235 contracts, which in relation to volume is approximately 15% below average. As this report is being compiled, the March euro is trading 59 points higher and has made a new low for the move at 1.2924. The market was unable to mount a rally to the 1.3200 area where we had recommended the implementation of bearish positions. The euro, like the other currencies comprising the dollar index are massively oversold and due for a rally. It is difficult to determine when the decline in the euro begins to abate, but clients should not implement bearish positions at this juncture.
S&P 500 E mini:
The S&P 500 E mini lost 3.75 points on heavy volume of 2,885,864 contracts. Open interest increased 91,548 contracts, which in relation to volume is approximately 20% above average. As we have said previously when the E mini contract nears its expiration, volume and open interest expands.
The market internals continue to display weakness. The number of stocks trading above their 50 day moving average on the NYSE fell to 1673 from 1700 on March 11. However, the biggest drop occurred in the number of stocks making new 52-week highs minus stocks making new 52-week lows. On March 11, this number was 778 and on March 12 dropped nearly 200 stocks to 593. The 50 day moving average for stocks making new 52-week highs minus 52-week lows is 583 stocks. In short, as the E mini closed at its second highest price since March 2009, the number of stocks making new 52-week highs minus 52-week lows is only at the 50 day moving average.
From the report of March 11:
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 recommend writing calls that are significantly out of the money. As an alternative, bear call spreads can be implemented, which would be to write an out of the money call and purchase a call that is further out of the money.