Soybeans:

March soybeans lost 6.75 cents on volume of 251,651 contracts. Total open interest increased by 4,091 contracts, which relative to volume is approximately 35% below average. The March contract lost 11,540 of open interest. March soybeans made a new high for the move at 13.71 3/4 and was unable to hold it, reversed and closed lower. As this report is being compiled on February 20, March soybeans are trading 2.00 cents higher, May +4.00. It appears that soybeans are struggling at the upper end of its trading range and with the long to short ratio of managed money at an elevated 8.91:1, the market needs more aggressive buyers to push prices higher. Soybeans remain on a short and intermediate term buy signal. We have no recommendations at this time.

Soybean meal:

March soybean meal lost $3.90 on volume of 99,500 contracts. Volume was the highest since February 13 when 130,961 contracts were traded and March soybean meal advanced $9.30 while total open interest increased by 6,188 contracts. On February 19, total open interest increased by 2,570 contracts, which relative to volume is average. The March contract lost 9,392 of open interest, which makes the total open interest increase potentially bullish. As this report is being compiled on February 20, March meal is trading 3.30 lower while May – 40 cents. Soybean meal remains on a short and intermediate term buy signal. We have no recommendations at this juncture.

Soybean oil:

March soybean oil lost 12 points on volume of 152,187 contracts. Total open interest declined by 15,853 contracts, which relative to volume is approximately 300% above average, meaning that liquidation was extremely heavy. The March contract accounted for loss of 17,387 of open interest. March soybean oil made a new high for the move at 40.46, which took out the previous days high of 40.43. As this report is being compiled on February 20, March soybean oil is trading 34 points higher and has made a new high for the move at 40.88. On February 7, March soybean oil generated a short-term buy signal, but remains on an intermediate term sell signal. In the February 7 report, we recommended that clients wait for a pullback before initiating bullish positions and in the report of February 10 recommended the initiation of bullish positions. If clients initiate initiated the trade we recommended, they have healthy profits. For those trades, we recommend  moving sell stops up to at least break even.

Corn:

March corn advanced 4.25 on heavy volume of 554,886 contracts. Volume was the highest since February 10 when 565,486 contracts were traded and March corn lost 1.25 cents while total open interest increased by a massive 17,453 contracts. On February 19, total open interest increased by 7,287 contracts, which relative to volume is approximately 45% less than average. The March contract lost a massive 39,120 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on February 20, March corn is trading unchanged on the day and has taken out yesterdays high of $4.54 1/2. We have no recommended position in corn.

Chicago wheat:

March Chicago wheat advanced 8.25 cents on very healthy volume of 144,529 contracts. Total open interest declined by 6,344 contracts, which relative to volume is approximately 60% above average, meaning that liquidation was very heavy. The March contract lost 19,743 of open interest. Despite the dismal open interest action relative to the price advance, the March-May 2014 spread widened to 6.75 cents premium to March and the March-July 2014 spread widened to 3.25 cents premium to March. This is very constructive for prices and we first wrote about the March contract moving to a premium over May in the February 16 Weekend Wrap. We have little doubt in the upcoming COT report that the short to long ratio will decline, but we suspect most of this will be from managed money covering short positions rather than the initiation of new long positions. We think Chicago wheat prices are headed higher. March Chicago wheat generated a short-term buy signal on February 5. If long from significantly lower levels, stay with the position, but move stops up to at least break even.

Kansas City wheat:

March Kansas City wheat advanced 6.75 cents on light volume of 26,410 contracts. Volume was above the 24,441 contracts traded on February 18 when KC wheat advanced 11.50 cents and open interest declined by 1,541 contracts. Volume traded on February 18 was the lowest since December 31, 2013. On February 19, total open interest declined by 1,666 contracts, which relative to volume is approximately 140% above average meaning that liquidation was extremely heavy. It is fascinating to examine the price and open interest action of Chicago and KC wheat versus corn during the past couple of weeks. When corn has a small advance, open interest tends to increase whereas when KC and Chicago wheat advance by a larger percentage, open interest declines. We have known for many years that managed money favors the long side of corn whereas they prefer the short side of wheat. In the great bull market of 2007-2008, speculators were net short Chicago wheat even when it was selling at $11.00.

Sugar # 11: On February 19, May sugar generated a short-term buy signal, but remains on an intermediate term sell signal.

March sugar advanced 30 points while May gained 35 points on volume of 192,267 contracts. Volume declined from the 292,994 contracts traded on February 18 when March sugar advanced 53 points and total open interest declined by 10,418 contracts. On February 19, total open interest declined by 4,658 contracts, which relative to volume is  average. It has only been during the past 2 sessions that open interest has begun to decline in earnest. On February 4 when sugar advanced 38 points, open interest increased by 965 contracts and on February 12 when March sugar advanced 35 points, total open interest increased by 5,787 contracts. Although the short to long ratio of managed money is down from 1.33:1 made 2 weeks ago, it remains at elevated 1.19:1. This means there will be plenty of buying power provided by distressed shorts for sugar to continue its upward trajectory. However, as is usually the case after the generation of a buy signal, the market has a tendency to pullback from 1-3 days. This would be the opportunity to establish bullish positions.

Live cattle:

April live cattle lost 30 points on volume of 55,651 contracts. Total open interest increased by 2,334 contracts, which relative to volume is approximately 55% above average. The February contract accounted for loss of 1,783 of open interest. As this report is being compiled on February 20, April live cattle is trading unchanged on the day. Maintain bullish positions established in late December and the short call position recommended on January 30.

WTI crude oil:

April WTI crude oil advanced 74 cents on heavy volume of 681,572 contracts. Volume was the highest since February 12 when 769,751 contracts were traded and March WTI advanced 43 cents while total open interest increased by 1,566 contracts. On February 19, total open interest declined by 19,422 contracts, which relative to volume is average. The March contract lost 37,135 of open interest. For the past 2 days, April WTI has advanced $2.71, but total open interest declined 15,653 contracts. This is not exactly a vote of confidence by market participants regarding crude oil’s ability to move significantly higher from here. Crude oil supplies are plentiful, and as of yesterday’s high, April WTI is trading at the level last seen during the week of October 7, 2013 on the continuation chart when the high made that week was $104.08. It should be noted the 50 day moving average on the continuation chart is 97.19, 150 day 100.43, 200 day 99.61. April crude remains on a short and intermediate term buy signal. We have no recommended position.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.0 million barrels from the previous week. At 362.3 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 0.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 0.3 million barrels last week and are well below the lower limit of the average range for this time of year. Propane/propylene inventories fell 1.2 million barrels last week and are below the lower limit of the average range. Total commercial petroleum inventories decreased by 2.5 million barrels last week

Natural gas:

March natural gas advanced 59.8 cents on heavy volume of 621,768 contracts. Volume was the highest since January 24 when 711,753 contracts were traded and March natural gas closed at $4.998. On February 19, total open interest declined by 3,989 contracts, which relative to volume is approximately 65% less than average, but on an advance of the magnitude seen on February 19, a decline of open interest, however minor, clearly shows that market participants are very skittish. The March contract lost 9,790 of open interest. As this report is being compiled on February 20, March natural gas has reached another new high at $6.400, which is a multiyear high last seen in 2008. As we have said before, this is a market to be a spectator, not a speculator.

The Energy Information Administration announced that working gas in storage was 1,443 Bcf as of Friday, February 14, 2014, according to EIA estimates. This represents a net decline of 250 Bcf from the previous week. Stocks were 975 Bcf less than last year at this time and 741 Bcf below the 5-year average of 2,184 Bcf. In the East Region, stocks were 364 Bcf below the 5-year average following net withdrawals of 129 Bcf. Stocks in the Producing Region were 277 Bcf below the 5-year average of 806 Bcf after a net withdrawal of 91 Bcf. Stocks in the West Region were 100 Bcf below the 5-year average after a net drawdown of 30 Bcf. At 1,443 Bcf, total working gas is below the 5-year historical range.

Euro:

The March euro lost 13 pips on very low volume of 131,055 contracts. Total open interest declined by 560 contracts, which relative to volume is approximately 75% below average. For the past 2 days, the highs in the March euro have been 1.3771 and 1.3773. As this report is being compiled on February 20, the daily high has been 1.3762 and the March euro is trading 39 pips lower. The euro remains on a short and intermediate term buy signal. We have no recommended position.

British pound:

The March British pound advanced 14 pips on volume of 140,200 contracts. Volume declined from the 194,878 contracts traded on February 18 when the March pound lost 59 pips and total open interest increased by 7,878 contracts. On February 19, open interest increased by a massive 15,050 contracts, which relative to volume is approximately 320 percent above average meaning that a battle between longs and shorts occurred, yet the March pound was only able to advance 14 pips. Additionally, the pound did not make a new high for the move, which last occurred on February 14 at 1.6747. When we see a massive increase of open interest relative to volume and prices do not move much, a major move may be on the horizon. As this report is being compiled on February 20, the March pound is trading 49 pips lower and has made a new low for the move at 1.6622 which took out the low on February 19 , February 18. The previous low occurred on February 13 at 1.6597. We have no recommended position in the pound.

Yen:

The March yen lost 2 pips on light volume of 129,988 contracts. Total open interest increased by 1,268 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on February 20, the March yen is trading 2 pips lower. It remains on a short-term buy signal, but an intermediate term sell signal. The yen is acting quite well considering the dollar index is higher and major equity indices are trading higher as well. We continue to think a test of .9927 is in the offing. We have no recommended position in the yen.

Gold:

April gold lost $4.00 on light volume of 122,652 contracts. Total open interest increased by 383 contracts, which is minuscule and dramatically below average. As this report is being compiled on February 20, April gold is trading $3.30 lower and has made a low for the move at $1307.10 and is trading approximately $10.00 above the low. Thus far, gold is proving OIA right when we said that setbacks would be shallow making it harder for new participants to get on board. On February 20, gold is trading approximately $15.00 from the high made on February 18. Stay with bullish positions recommended in February 6 report.

Silver:

March silver declined 4.8 cents on volume of 80,074 contracts. Total open interest declined by 1,760 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on February 20, March silver is trading 15.5 cents lower and has made a daily low of 21.400, which is slightly above the February 19 low of 21.375. Like gold, we believe setbacks in silver will be shallow and that higher prices are ahead. Stay with long straddles – long strangles and long call positions recommended in the February 6 report.

S&P 500 E mini:

The S&P 500 E mini lost 12.00 point on volume of 1,778,479 contracts. Total open interest increased by 31,360 contracts, which relative to volume is approximately 30% less than average. As this report is being compiled on February 20, the March E mini is trading 11.25 points higher. Maintain long put protection if holding long equity positions.