On February 18, the dollar is trading lower and almost all commodities are trading higher on the day, which is confirming buy signals for all commodities OIA discussed in the February 9 and February 16 Weekend Wrap. GCC is trading 1.22% higher on the day.

Soybeans:

March soybeans lost 6.75 cents on volume of 251,027 contracts. Total open interest declined by 3,390 contracts, which relative to volume is approximately 45% less than average. The March contract lost 21,244 of open interest. As this report is being compiled on February 18, March soybeans are trading 22.25 cents higher and have made a new high for the move at $13.61 3/4, which is the highest price for March beans since the print of 13.69 on September 13. We have no recommended position in soybeans, and our preferred trade has been the long side of soybean oil. March soybeans remain on a short and intermediate term buy signal.

Soybean meal:

March soybean meal lost $2.80 on volume of 86,675 contracts. Total open interest increased by 723 contracts, which is 60% below average. As this report is being compiled on February 18 March soybeans are trading $6.80 higher and has made a high of $458.10, which was the high on February 14. We have no recommended position in soybean meal, and it remains on a short and intermediate term buy signal.

Soybean oil:

March soybean oil lost 39 points on volume of 127,072 contracts. Volume declined from the 190,825 contracts traded on February 13 when March soybean oil advanced 55 points and total open interest increased by 4,967 contracts. On February 14, total open interest declined by 7280 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy on the decline. The March contract lost 11,920 of open interest. On February 7, March soybean oil generated a short-term buy signal, and it remains on an intermediate term sell signal. On February 10, we recommended that clients initiate bullish positions in soybean oil and to use the February 7 low of 38.46 to exit positions. As this report is being compiled on February 18, March soybean oil is trading 90 points higher and has made a new high for the move at 40.22. The short to long ratio of managed money remains at a stratospheric 2.13:1, which is down from its record high of 2.30:1 made 2 weeks ago. The massive short position of manage money will add fuel to the upside move. Continue to hold bullish positions.

Corn:

March corn advanced 4.75 cents on volume of 380,819 contracts. Volume declined from the 407,006 contracts traded on February 13 when March corn advanced 0.50 cents and total open interest increased by 6,794 contracts. On February 14, total open interest increased by 9,565 contracts, which relative to volume is average. The March contract lost 21,244 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on February 18, March corn is trading 2.25 cents higher and has made a daily high of $4.48 1/2, which is shy of 4.49 made on February 10. On January 13, March corn generated a short-term buy signal and generated an intermediate term buy signal on February 6. We have no recommended position in corn.

Chicago wheat:

March Chicago wheat advanced 3.00 cents on healthy volume of 121,784 contracts. Total open interest declined by 3,930 contracts, which relative to volume is approximately 20% above average meaning that market participants were closing out positions as Chicago wheat advanced. The March contract accounted for loss of 10,204 of open interest. During the past 2 days, March Chicago wheat has advanced 11.50 cents, but total open interest has declined by 3,388 contracts. Based upon the COT report, managed money is liquidating short positions, but not adding much to their long positions. On February 5, Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal. As this report is being compiled on February 18, March Chicago wheat is trading 9.00 cents higher and has made a new high for the move at 6.11. For those clients who are long Chicago wheat from lower levels, we have recommended moving up stops to break even.

Kansas City wheat:

March Kansas City wheat advanced 1.75 cents on volume of 26,966 contracts. Volume fell from the 34,078 contracts traded on February 13 when March KC wheat advanced 9.75 and total open interest declined by 540 contracts. On February 14, total open interest declined by 994 contracts, which relative to volume is approximately 40% above average meaning that liquidation was fairly heavy on the modest advance. The March contract accounted for loss of 3,956 of open interest. As this report is being compiled on February 18, March KC wheat has taken out Friday’s high of 6.79 1/2 has made a new high at 6.84 1/2. On February 5, March KC wheat generated a short-term buy signal, and is getting close to generating an intermediate term buy signal. In the February 6 report, we recommended the initiation of bullish positions in KC wheat with a sell stop at 6.39 1/4. However, we have subsequently recommended that sell stops be moved up to at least break even. Stay with bullish positions.

Live cattle:

April live cattle lost 1.30 cents on surprisingly light volume of 37,997 contracts. Although we have to keep in mind that Friday preceded the three-day holiday weekend, the fact remains that volume was the lowest since February 5 when 35,898 were traded and April cattle advanced 20 points while open interest increased by 3,484 contracts. On February 14, total open interest declined by 5,576 contracts, which relative to volume is approximately 360% above average meaning that liquidation was extremely heavy on the decline. As this report is being compiled on February 18, April cattle is trading 85 points higher. Maintain bullish positions initiated at significantly lower levels and the short call position recommended on January 30.

WTI crude oil:

April WTI crude oil lost 5 cents on volume of 566,499 contracts. Total open interest declined by 3,397 contracts, which is approximately 65% below average. The March contract accounted for loss of 47,799 contracts. As this report is being compiled on February 18, April WTI is trading $1.42 higher and has made a new high for the move at $101.70. The March contract has made a new high for the move at 101.99. Although the long to short ratio of managed money is at a stratospheric 10.53:1, crude  is being carried higher by the tidal wave of higher commodity prices across the board. From a fundamental point of view, current prices cannot realistically be justified. The inflation scenario that we have written about for the past 2 weeks is affecting all commodities, including sugar which is trading substantially higher on the day. We have no recommended position for WTI crude oil and it remains on a short and intermediate term buy signal.

Natural gas:

March natural gas closed unchanged on volume of 480,616 contracts. Total open interest declined by 11,311 contracts, which relative to volume is average. The March contract accounted for loss of 24,841 of open interest. As this report is being compiled on February 18, March natural gas is trading 26 cents higher and has made a daily high of 5.559, which is shy of the high print of 5.737 made on February 5. On that day, the market had a reversal and closed 34.5 cents lower on volume of 489,790 contracts while total open interest increased by 4,344 contracts. Natural gas remains on a short and intermediate term buy signal, and we advise a stand aside posture.

Euro: on February 14, the March euro generated a short and intermediate term buy signal.

The March euro advanced 26 pips on low volume of 147,301 contracts. Total open interest increased by 841 contracts, which relative to volume is approximately 65% less than average. As this report is being compiled on February 18, the March euro is trading 57 pips higher and has made a new high for the move at 1.3771. On February 14, the March euro generated a short and intermediate term buy signal, which reversed the short and intermediate term sell signal of January 31. It appears the move in the euro has legs, especially because the dollar index is now on a short and intermediate term sell signal.

Swiss franc: on February 14, the March Swiss franc generated a short-term buy signal, which reversed the short-term sell signal of January 31. It remains on an intermediate term buy signal.

Dollar index: on February 14, the March dollar index generated a short and intermediate term sell signal.

British pound:

The March British pound advanced 88 pips on surprisingly low volume of 95,944 contracts. Volume was the lowest since February 11 when 88,570 contracts were traded and the March pound advanced 45 pips while total open interest increased by 4,440 contracts. On February 18, total open interest increased by 5,063 contracts, which relative to volume is approximately 100% above average meaning that new longs were aggressively bidding prices higher and moving the pound to new highs for the move at 1.6747. As this report is being compiled on February 18, the March pound is trading 47 pips lower. On February 13, the March pound generated a short-term buy signal, which reversed the short-term sell signal of February 4. The March pound remains on an intermediate term buy signal.

Yen:

The March yen advanced 40 pips on light volume of 122,855 contracts. Total open interest declined by 1,405 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on February 18, the March yen is trading 48 pips lower and the March Nikkei is trading 365 points higher. We continue to think the March yen will attempt to test the recent high of .9927. The March yen remains on a short-term buy signal, but an intermediate term sell signal.

Gold:

April gold advanced 18.60 on fairly light volume of 159,637 contracts. Volume increased from the 136,115 contracts traded on February 13 when April gold advanced $5.10 and total open interest increased by 5,600 contracts. On February 14, total open interest increased by 2,931 contracts, which relative to volume is approximately 25% less than average. On Friday, April gold made a new high for the move at $1321.50 and on February 18 and has made another new high of 1332.40. As we pointed out in the February 16 Weekend Wrap regarding the COT report, managed money does not believe in the rally and open interest stats confirm it. The market has had a fairly steep rally since the beginning of the year, and managed money may be waiting for a decent size pullback before getting long. However, it is more likely that gold has shallow setbacks and will move higher before correcting from higher prices. In other words, the market is not going to make it easy to get on board the gold trade. In February 6 report, we recommended the initiation of bullish positions in gold for those who were not already long. Continue to hold these positions.

Platinum: On February 14, April platinum generated a short-term buy signal, but remains on an intermediate term sell signal.

April platinum advanced $13.50 on fairly heavy volume of 10,504 contracts. Total open interest increased by 122 contracts, which relative to volume is approximately 45% less than average. The COT report revealed that managed money is long platinum by ratio 3.46:1, which is at the low-end of its range. It is only a matter of time before platinum generates an intermediate term buy signal.

Silver:

March silver advanced $1.026 on heavy volume of 94,140 contracts. Surprisingly, volume was only slightly above the 91,346 contracts traded on February 12 when March silver advanced 18.8 cents and total open interest increased by 3,592 contracts. On February 14, total open interest declined by 748 contracts, which is approximately 65% below average, however a decline of open interest on an advance of  Friday’s magnitude indicates that market participants do not believe in the silver rally. The long to short ratio in silver is at the very low-end of its range of 1.43:1, which is up from only 1.08:1 the previous week. Like gold, we think silver will continue to rally, making it very difficult for new longs to get on the silver trade.

S&P 500 E mini:

The S&P 500 E mini gained 10.75 points on volume of 1,371,999 contracts. Total open interest increased by 12,860 contracts, which relative to volume is approximately 50% below average. For quite some time, we have been recommending the maintenance of long put protection for those holding long equity positions. We recently read that George Soros has bought approximately 1.3 billion of put protection on his holdings. It is gratifying to be in such good company.