Soybeans:

May soybeans advanced 12.50 cents on volume of 270,762 contracts. Volume increased from the 247,535 contracts traded on February 20 when May soybeans advanced 5.75 cents and total open interest increased by 6,797 contracts. On February 21, total open interest declined by 6,187 contracts, which relative to volume is approximately 10% below average. The March contract accounted for loss of 25,587 of open interest. As this report is being compiled on February 24, May soybeans are trading 24.50 higher and have made a new high for the move at 13.77 3/4. Soybeans remain on a short and intermediate term buy signal. We have no recommendations at this juncture.

From the February 23 Weekend Wrap:

“Old crop stocks are tight, and sales have been brisk up to this point, but there is a risk of major cancellations by the Chinese once the Brazilian crop begins to move out to the marketplace. Last year, cancellations did not begin until April, and there appears to be a window between now and the planting intentions report on March 31 for soybeans to grind slowly higher. Additionally, the very dry conditions in Brazil should give soybeans an added lift.”

Soybean meal:

May soybean meal advanced $3.20 on volume of 109,437 contracts. Total open interest increased by 300 contracts, which is minuscule and dramatically below average, but the March contract accounted for loss of 10,077 of open interest. Despite the large decline of open interest in the March contract, there was sufficient buying in the forward months to bring total open interest to a positive number. As this report is being compiled on February 24, May soybean meal is trading $8.20 higher and has made a new high for the move at 448.40. Soybean meal remains on a short and intermediate term buy signal. We have no recommendations at this time.

Soybean oil:

May soybean oil advanced 41 points on volume of 116,286 contracts. Total open interest declined by 1,267 contracts, which relative to volume is approximately 50% below average. The March contract lost 9,161 of open interest, and there were open interest increases in the May 2014 through March 2015 contracts. As this report is being compiled on February 24, May soybean oil is trading 52 points higher and has made a new high for the move at 41.42, which is the high print since December 9 when the May contract reached 41.49. On February 7, soybean oil generated a short-term buy signal, and on February 10 OIA recommended the initiation of bullish positions. Continue to hold these, but keep in mind that May soybean oil is significantly overbought relative to its 20 day moving average of 39.06 and the 50 day moving average of 39.11. Stops should be raised to protect profits.

Corn:

May corn lost 3.25 cents on volume of 398,704 contracts. Volume shrank from the 455,739 contracts traded on February 20 when May corn advanced 2.00 cents and total open interest increased by 6,562 contracts. On February 21, total open interest declined by 25,930 contracts, which relative to volume is approximately 160% above average meaning that liquidation was extremely heavy on a rather modest decline. The March contract lost a huge 44,203 of open interest. May corn made a new high for the move at $4.63, which is its highest price since October 24 when the high print was 4.65 1/4. With the market making a new high for the move, then reversing to close lower, may signal a temporary top. At the very least, we expect a test of the high. May corn remains on a short and intermediate term buy signal. We have no recommendations at this juncture.

Chicago wheat:

May Chicago wheat lost 8.00 cents on volume of 99,864 contracts. Interestingly, volume declined substantially from the 172,587 contracts traded on February 20 when May wheat closed unchanged and total open interest declined by 3,596 contracts. Additionally, volume was the lightest since February 3 when 81,501 contracts were traded and May Chicago wheat closed at 5.65 3/4. On February 21, total open interest declined by a massive 12,213 contracts, which relative to volume is approximately 410% above average, meaning that liquidation was off the charts heavy. The March contract accounted for loss of 16,152 of open interest.

The low volume on the 8 cent decline is positive and compares favorably to the last decline of a similar magnitude which occurred on February 6 when May wheat declined 6 cents on volume of 134,406 contracts. Low volume indicates that longs are not panicking and the market appears to be in strong hands. As this report is being compiled on e February 24, May Chicago wheat is trading 5.00 cents higher. We continue to think the market is headed for new highs. However, if clients hold long positions, from significantly lower levels, we recommend taking partial profits.

Kansas City wheat:

May Kansas City wheat lost 8.25 cents on volume of 26,127 contracts. Total open interest declined by 2,908 contracts, which relative to volume is approximately 240% above average, meaning that liquidation was extremely heavy. The March contract lost 4,417 of open interest. Volume traded on February 21 was lower than the 28,534 contracts traded on February 20 when May KC wheat advanced 2.00 cents and total open interest increased by 189 contracts. Like Chicago wheat, the fact that volume was light on the decline is positive, and as this report is being compiled on February 24, May KC wheat is trading 4.75 cents higher on the day. Continue to hold bullish positions initiated per our February 6 recommendation, however we recommend taking partial profits in KC wheat. Additionally, we recommend moving up sell stops to protect remaining profits.

Sugar #11:

May sugar advanced 38 points on volume of 184,027 contracts. Total open interest increased by 4,599 contracts, which relative to volume is average. The March contract lost 8,996 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on February 24, May sugar is trading 1.16 cents higher and has made a new high for the move at 17.79. This is the highest print for the May contract since November 13 when it reached 17.79.

The open interest increase on Friday is bad news for shorts because there has been surprisingly small open interest declines since the beginning of the move on February 12. For example, from February 12 through February 21, May sugar advanced 1.34 cents, however total open interest declined only 11,484 contracts. What’s worse, is from the very beginning of the move on January 30 through February 21, total open interest has declined only 15,722 contracts while May sugar has advanced 2.12 cents. Speculators who are playing the short side of the market are getting murdered as sugar skyrockets and are refusing to liquidate. On February 19, May sugar generated a short-term buy signal, and will generate an intermediate term buy signal on February 24. Frankly, we don’t think this is a move that should be played on the long side because the catalyst for it has been dry conditions in Brazil. However, sugar fundamentals are distinctly bearish, and once shorts get blown out of the market, we expect sugar to resume its decline.

Live cattle:

April live cattle lost 42.5 points on volume of 41,615 contracts. Total open interest declined by 1,038 contracts, which relative to volume is average. The February contract lost 2,065 of open interest. As this report is being compiled on February 24, April cattle is trading 72.5 points lower. Maintain bullish positions established in late December, however make sure sell stops are in place to protect profits and continue to hold the short call position recommended on January 30.

WTI crude oil:

 April WTI crude oil lost 55 cents on extremely light volume of 381,151 contracts. Volume was the lightest since December 31 when 264,754 contracts were traded and April WTI closed at $98.44. On February 21, total open interest increased by 1,482 contracts, which relative to volume is 85% less than average. The March contract accounted for loss of 408 of open interest. As this report is being compiled on February 24, April gold is trading 82 cents higher and has made a new high for the move at $103.45, which takes out the high print of 103.29 made on February 19. WTI crude oil remains on a short and intermediate term buy signal. We have no recommendations at this time.

Natural gas:

March natural gas advanced 7.1 cents on fairly light volume of 391,477 contracts. Total open interest declined by 8,846 contracts, which relative to volume is approximately 10% below average. The March contract lost 21,215 of open interest. As this report is being compiled on February 24, March natural gas is trading 59.5 cents lower after making a new high for the move at $6.493, which took out the previous high of 6.40 made on February 20. The April contract is trading 28.8 cents lower. The action on February 24 looks like a key reversal day. Based upon the open interest action in the latest COT report, which saw managed money liquidating longs and shorts liquidating positions, it appears that volatility is scaring large numbers of speculators out of the market. We have been saying for quite some time: this is a spectator market not a speculator market. 

Euro:

The March euro advanced 24 pips on light volume of 136,228 contracts. Total open interest declined by 460 contracts, which is approximately 80% below average. As this report is being compiled on February 24, the March euro is trading 16 pips higher and has made a high of 1.3773, which matches the previous high of 1.3773 made on February 19. The euro remains on a short and intermediate term buy signal. We have no recommendations to make for the euro. 

British pound:

The March British pound lost 14 pips on volume of 123,782 contracts. Total open interest declined by 623 contracts, which relative to volume is approximately 75% below average. As this report is being compiled on February 24, the March pound has made a low of 1.6581, which is slightly below its recent low of 1.6597 made on February 13, but has since recovered and is unchanged on the day at 1.6652. The pound remains on a short and intermediate term buy signal and we have no recommendations at this time. Today’s low should be watched carefully as it may provide support. The 20 day moving average is 1.6520 and the 50 day is 1.6456.

Yen:

The March yen lost 20 pips on light volume of 104,307 contracts. Total open interest increased by 202 contracts, which is minuscule and dramatically below average. The March yen topped out on February 4 at .9927, and has been trading sideways to lower ever since. However, the yen has held up despite a rising Nikkei and US equities. It is trading between the 20 day moving average of .9785 and the 50 day moving average of .9684. We expect the yen to test the high of February 4. The yen remqains on a short-term buy signal, but an intermediate term sell signal.

Gold:

April gold advanced $6.70 on light volume of 131,239 contracts. Total open interest declined by 1,354 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on February 24, April gold has made another new high at 1339.20, which is its highest price since October 31 when the high print was 1342.00. However, as we have said ever since gold generated a short-term buy signal on January 31, speculators do not believe in the rally. In our view, the rally will continue, despite the overbought condition of the April contract. Maintain bullish positions recommended on February 6.

Platinum:

April platinum advanced $15.40 on heavy volume of 15,279 contracts. Total open interest increased by only 20 contracts. As this report is being compiled on February 24, April platinum is trading sharply higher and has made a new high for the move at $1443.50. Although the long to short ratio of 4.15:1 is almost double the ratio in gold of 2.26:1, the rise of the ratio in this week’s report was due primarily to managed money liquidating 1,362 contracts of their short positions and only adding 426 contracts to their long positions. In other words, managed money does not believe in the platinum rally either. April platinum will likely generate an intermediate term buy signal on February 24.

Silver

March silver advanced 9.8 cents on heavy volume of 92,022 contracts. Volume was the highest since February 18 when 123,185 contracts were traded and March silver advanced 47.7  cents while total open interest declined by 2,333 contracts. On February 21, total open interest declined by 2,662 contracts, which relative to volume is average. The March contract lost 6,694 of open interest. As this report is being compiled on February 24, March silver is trading 20.5 cents higher and has made a new high for the move at 22.18. Maintain long straddles or strangles and the long call position recommended in the February 6 report.

S&P 500 E mini:

The S&P 500 E mini lost 2.00 points on volume of 1,324,421 contracts. Total open interest increased by 22,501 contracts, which relative to volume is approximately 40% less than average. As this report is being compiled on February 4, the E mini is trading 16.75 points higher and has made a new high for the move at 1856.75, which takes out the previous all-time high made on December 31 of 1846.50. Although we think it is important to maintain long put protection, the reality is the market has broken out and unless it completely reverses today, it appears that the market is going to make another leg higher. With this in mind, we recommend on any pullback that clients initiate out of the money calls to offset any future losses in the long put position. Our concern is that as the market continues to move higher, it becomes more vulnerable to a sharp move to the downside. This is why the maintenance of long put protection is mandatory.