Soybeans:

March soybeans gained 21.25 cents on extremely heavy volume of 336,824 contracts. Volume was the highest since August 26, 2013 when 359,207 contracts were traded and March soybeans closed at $13.53. On February 13, total open interest increased by 13,127 contracts, which relative to volume is approximately 50% above average meaning that new longs were initiating positions in heavy numbers and driving prices to new highs for the move (13.47). The March contract lost 9,583 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on February 14, March soybeans have again made a new high at 13.56 and is currently trading 0.75 cents higher on the day.

The COT report will be released this afternoon and it will provide the stats for the upcoming Weekend Wrap. Our concern remains the lopsided number of longs held by manage money. Also, the massive soybean crop in Brazil is being harvested and the only problem with it is simple logistics: moving beans from the interior to ports and to their final destination. On February 5, March soybeans generated a short and intermediate term buy signal, and it appears that beans will continue to move higher, until there is an announcement by the Chinese of a massive cancellation of previous orders. Stand aside.

Soybean meal:

March soybean meal advanced $9.30 on heavy volume of 130,961 contracts. Volume was the highest since November 26 when 149,860 contracts were traded and March soybean meal closed at $419.30. On February 13, total open interest increased by 6,188 contracts, which relative to volume is approximately 75% above average meaning that aggressive new longs were initiating positions and driving prices to new highs for the move (455.00). As this report is being compiled on February 14, March soybean meal has made another new high at 458.10 and currently is trading 90 cents lower on the day. March soybean meal remains on a short and intermediate term buy signal. We recommend a stand aside posture.

Soybean oil:

March soybean oil gained 55 points on huge volume of 190,825 contracts. Volume was the highest since November 21 when 203,161 contracts were traded and March soybean oil closed at 42.16. On February 13, total open interest increased by a healthy 4,967 contracts, which relative to volume is average. The March contract lost 12,199 of open interest, which makes the total open interest increase much more impressive (bullish). Additionally, there were open interest increases in the May 2014 through December 2014 contracts. It will be fascinating to see the COT ratio for managed money in the upcoming report. The reason is on Wednesday total open interest increased by 4,592 contracts and Thursday open interest increased well. In other words, shorts were not liquidating on the advance. 

The compilation date for the COT report was Tuesday February 11, and if it remains as elevated as we think, the open interest increases of the past two days is bad news for shorts and good news for longs. As this report is being compiled on February 14, March soybean oil is made a new high for the move at 39.83 and currently is trading 31 points lower. In the February 10 report we recommended the initiation of bullish positions in soybean oil and to use the February 7 low of 38.46 as an exit point for these positions. Soybean oil generated a short-term buy signal on February 7 and remains on an intermediate term sell signal.

Corn:

March corn advanced 0.50 cents on heavy volume of 407,006 contracts. Volume fell from the 470,171 contracts traded on February 12 when March corn fell 1.50 cents and total open interest increased by 17,188 contracts. On February 13, total open interest increased by 6,794 contracts, which relative to volume is approximately 35% less than average. The March contract lost 16,433 of open interest. As this report is being compiled on February 14, March corn is trading 3.75 cents higher on the day. March corn remains on a short and intermediate term buy signal, and though it appears that corn will work its way higher, OIA is not an enthusiastic bull.

 Chicago wheat:

March Chicago wheat advanced 8.50 on healthy volume of 135,158 contracts. Total open interest increased by 542 contracts, which relative to volume is approximately 85% less than average. The March contract accounted for loss of 5,319 of open interest. The last major increase of open interest occurred on February 10 when it advanced by 6,060 contracts and March Chicago wheat gained 7.25 cents. From February 11 through February 13 March Chicago wheat has advanced 10.75 cents while open interest has declined 2,608 contracts. This is bearish open interest action relative to the price advance. Normally, this would be a red flag, however we know that managed money is massively short wheat and it is not unexpected to see open interest decline as prices advance, at least in the initial stage. On February 5, March Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal. As this report is being compiled on February 14, March wheat has made another new high for the move at $6.03.00 which is only slightly above its 50 day moving average of 5.97. In short, despite the move higher, March wheat is not significantly overbought. As we mentioned in yesterday’s report, sell stops on bullish positions should be moved up from the previous recommendation of 5.66 1/4. 

Kansas City wheat:

March Kansas City wheat advanced 9.75 cents on volume of 34,078 contracts. Volume declined from the 39,774 contracts traded on February 12 when March KC wheat lost 2.50 cents and total open interest increased by 1,259 contracts. On February 13, total open interest declined by 540 contracts, which relative to volume is approximately 35% less than average. The March contract accounted for loss of 3,896 of open interest. The total open interest decline on a healthy advance in yesterday’s trading on the lowest volume since February 5 is disappointing to say the least. Although clients who took our recommendation and initiated bullish positions per the February 6 report are making money, the market internals are performing sub par. As a result, we advise moving up sell stops to at least break even in the event of a reversal. Although we think prices will continue to move higher from here, the road maybe somewhat rocky. As this report is being compiled on February 14, March KC wheat has made another new high for the move at $6.78 1/2, which is approximately 30 cents above its 50 day moving average of 6.48 5/8. A correction is overdue. 

Live cattle:

April live cattle gained 1.625 on volume of 55,617 contracts. Volume was lower than the 58,917 contracts traded on February 11 when April cattle advanced 1.00 cent and total open interest increased by 3,473 contracts. On February 13, total open interest increased only 1,101 contracts, which relative to volume is approximately 20% below average. The February contract lost 1,678 of open interest. Based upon the unimpressive volume and below average increase of open interest, it appears that market participants are reluctant to make a major new commitments at the upper end of the trading range. As this report is being compiled on February 14, April cattle is trading 1.075 cents lower on the day. We have advised staying with the short call position, which is coupled with bullish positions recommended nearly 2 months ago on the theory that the move higher was going to be a slow grind. Today’s action is example of this.

WTI crude oil:

March WTI crude oil lost 2 cents on volume of 551,190 contracts. Total open interest increased by 1,941 contracts, which relative to volume is minuscule and dramatically below average. The March contract lost 31,068 of open interest. February 13 was the 2nd day in a row when open interest increased by a minor number. This is in contrast to the action of the past several sessions when open interest increased fairly substantially. We have cautioned clients about getting overly bullish at the upper end of the current trading range and recommend a stand aside posture. March WTI remains on a short and intermediate term buy signal.

Natural gas:

March natural gas advanced 40.1 cents on heavy volume of 580,662 contracts. Volume was the highest since January 24 when 711,753 contracts were traded and March natural gas advanced 41.9 cents while total open interest increased by 850 contracts. On February 13, total open interest increased by 9,423 contracts, which relative to volume is approximately 35% less than average. The March contract accounted for loss of 20,667 of open interest. Stand aside.

Euro:

The March euro gained 80 pips on surprisingly light volume of 200,482 contracts. Volume declined from the 225,403 contracts traded on February 12 when the March euro lost 44 pips and total open interest declined by 604 contracts. On February 13, total open interest increased by 5,509 contracts, which relative to volume is average. Yesterday, we stated if the daily low in the March euro was above the pivot point of 1.3660, the short call position should be liquidated. As this report is being compiled, the March euro is trading 22 pips higher and the low for the day is 1.3673. We recommend that short call positions be liquidated immediately. Additionally, we are seeing strength across the board in many major currencies. It is a certainty the March dollar index will generate a short and intermediate term sell signal on February 14.

British pound: On February 13, the March British pound generated a short-term buy signal, which reversed the short-term sell signal generated on February 4. March sterling has been on an intermediate term buy signal.

The March British pound advanced 58 pips on volume of 116,109 contracts. Volume fell substantially from the 158,259 contracts traded on February 12 when the March pound advanced 1.48 cents and total open interest increased by 13,292 contracts. On February 13, total open interest increased again, this time by a massive 10,256 contracts, which relative to volume is approximately 250% above average meaning that huge numbers of new longs were entering the market and driving prices to new highs (1.6672), which is slightly above the previous high of 1.6662 made on January 24. As this report is being compiled on February 14, March sterling is trading 82 pips higher and has made a new high for the move at 1.6739.

Yen:

The March yen advanced 17 pips on volume of 155,463 contracts. Volume was the highest since February 7 when 195,624 contracts were traded and the March yen lost 17 pips while total open interest declined by 3,115 contracts. On February 13, total open interest increased by 2,882 contracts, which relative to volume is approximately 25% less than average. Open interest action during the price declines of the previous couple of days and the open interest increase on February 13 is positive for a continued advance in the yen. As this report is being compiled on February 14, the March yen is trading 45 pips higher and has made a daily high of .9847. We expect the yen to test the previous high for the move at .9927.

Gold:

April gold advanced $5.10 on volume of 136,115 contracts. Total open interest increased by 5,600 contracts, which relative to volume is approximately 55% above average, meaning that new longs were aggressively entering the market and driving prices to new highs for the move ($1303.00). As this report is being compiled on February 14, April gold is trading $15.20 higher on the day and has made another new high for the move at 1321.50 on low volume. On February 6, OIA recommended that clients initiate bullish positions in gold, and this trade continues to work well. However, we advise against getting overly bullish at current prices due to the significantly overbought condition of the market. The 50 day moving average for the April contract is $1241.00, and April gold is trading nearly $80.00 above it. Additionally, from February 5 through February 14, gold has closed higher each day. As we have said in previous reports, there are more than a few would be participants on the sidelines waiting for correction. A correction is coming, the question is from what level.

Platinum:

April platinum advanced $9.30 on volume of 8,829 contracts. Total open interest increased by 279 contracts, which relative to volume is approximately 20% above average, meaning that fairly aggressive longs were entering the market and driving prices to new highs for the move ($1418.40). February 13 was the 2nd day in a row in which prices advanced along with open interest, which is highly positive, especially since the rally continues on February 14, and platinum is again making a new high for the move at 1431.50. On February 14, April platinum closed at 1430.1. April platinum will generate a short-term buy signal on February 14.

Silver:

March silver advanced 5.4 cents on total volume of 55,712 contracts. Total open interest declined by 1,464 contracts, which relative to volume is average. The March contract lost 3,249 of open interest. On February 13, March silver made a high of 20.52, which is the highest price since January 14 when March silver printed 20.67. As this report is being compiled on February 14, March silver has skyrocketed to a new high of $21.44, and is currently trading 99.5 cents higher on the day. This is the highest price for March silver since November 8 when the high print was $21.995. In the February 6 report, we recommended that clients initiate long straddle or long strangle positions, and the trade is working well. When we recommended the straddle and strangle position, March silver closed at 19.936, and the close on February 14 is $21.421. Additionally volatility has increased substantially from the time we recommended straddles and strangles. 

S&P 500 E mini:

The S&P 500 E mini advanced 7.25 points on volume of this 1,651,382 contracts. Total open interest increased by 22,986 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on February 14, the E mini is trading 11.75 points higher on low volume. Continue the maintenance of long put protection if holding long equity positions.