Soybeans: On February 5, March soybeans generated a short and intermediate term buy signal.

March soybeans advanced 3.00 cents on volume of 218,251 contracts. Volume declined from the 224,538 contracts traded on February 4 when March soybeans advanced 20.50 cents and total open interest increased by 9,446 contracts. On February 5, total open interest increased again, this time by 10,323 contracts, which relative to volume is approximately 75% above average meaning that new longs were heavily initiating positions and driving prices to new highs for the move ($13.21 1/4). The March contract lost 1,612 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on February 6, March soybeans are trading 13.25 cents higher and have made a new high for the move at 13.34 1/2. With soybeans on a short and intermediate term buy signal, we suggest that clients wait for a pullback before initiating new long positions.

The USDA reported that 577 thousand metric tons (tmt) have been sold bringing total commitments season to date of 1.580.8 billion bushels (bb) versus USDA projections for the entire season of 1.495 bb. Although current sales are the best by far since the 2007-2008 season, we have to keep in mind that Brazil is going to harvest a bumper crop. At some point, massive cancellations by Chinese importers could begin to surface due to cheaper Brazilian beans. For now however, the trend is higher, but we discourage chasing the market at current levels.

Soybean meal:

March soybean meal lost $5.00 on volume of 81,099 contracts. Total open interest increased by 1,299 contracts, which relative to volume is approximately 40% below average. The March contract lost 5,013 of open interest. As this report is being compiled on February 6, March soybean meal is trading $4.10 higher, but has not taken out yesterdays high of 448.80. March soybean meal remains on a short and intermediate term buy signal.

The USDA reported that 283.7 tmt had been sold in the most recent reporting period. This is the highest sale in 10 weeks. Total commitments season to date are 7047 tmt versus USDA projections for the entire season of 9707 tmt.

Corn:

March corn advanced 1.50 cents on heavy volume of 342,757 contracts. Volume was higher than the 322,106 contracts traded on February 4 when March corn advanced 6.00 cents and total open interest increased by 8,512 contracts. On February 5, total open interest declined by 7,138, which relative to volume is approximately 20% less than average. The March contract lost 22,676 of open interest. March corn will generate an intermediate term buy signal on February 6. We have no recommended position in corn.

The USDA reported another blazing week of sales totaling 1700 tmt, which is the 3rd highest since the season began on September 1. Total commitments season to date are 1.319.3 bb versus USDA projections for the entire season of 1.450 bb. Sales as of this date are the best since 2007-2008.

Chicago wheat: On February 5, March Chicago wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

March Chicago wheat advanced 3.00 cents on heavy volume of 148,470 contracts. Sales were nearly equal to the 148,428 contracts traded on February 4 when March wheat advanced 20.75 cents and total open interest declined by 459 contracts. On February 5, total open interest declined by 5,413 contracts, which relative to volume is approximately 40% above average meaning that liquidation was substantial on the advance. March wheat made a new high for the move at $5.88 3/4 on February 5 and this has been taken out on February 6 ($5.92 3/4), which is the highest price since January 10 when the March contract printed 5.93 1/4. Chicago wheat has a heavy net short position held by managed money, and as the market continues to move higher, we expect short covering to be the dominant feature. As is usually the case after the generation of a short-term buy signal, the market has a tendency to pullback from 1-3 days. This is the opportunity to enter bullish positions.

Kansas City wheat: On February 5, March Kansas City wheat generated a short-term buy signal, but remains on an intermediate term sell signal.

March Kansas City wheat advanced 4.75 cents on volume of 28,409 contracts. Volume fell approximately 3,000 contracts from February 4 when March KC wheat advanced 22.25 cents and open interest declined by 945 contracts. On February 5, total open interest declined by a massive 3,293 contracts, which relative to volume is approximately 360% above average meaning that liquidation was off the charts heavy. The March contract accounted for loss of 3,430 of open interest. The action in Chicago and KC wheat indicates there remains a great deal of skepticism about wheat’s ability to move higher. As this report is being compiled on February 6, March KC wheat is trading 2.00 cents higher while March Chicago wheat is trading 3.00 lower. Like Chicago wheat, clients should wait for a pullback, which is typical after the generation of a buy signal.

The USDA reports that in all wheat categories 638.8 tmt have been sold in the most recent reporting period, which brings total commitments to date of 980.8 million bushels (mb) versus USDA projections for the season of 1.125. The season ends on May 31 and current sales are slightly below the 2010-2011 season, which was the highest since 2007-2008. 

Live cattle:

April live cattle advanced 20 points on very light volume of 35,898 contracts. Total open interest increased by a massive 3,484 contracts, which relative to volume is approximately 250% above average meaning that a battle was being waged between longs and shorts, yet prices only moved fractionally higher. We see prices trading sideways to lower until such time that April cattle makes a low for the day above 1.39600. In the January 30 report, we advised clients to write out of the money calls against bullish positions.

WTI crude oil:

March WTI crude oil advanced 19 cents on volume of 514,958 contracts. Total open interest increased by 10,242 contracts, which relative to volume is approximately 20% below average. The March contract lost 6,484 contracts of open interest, which makes the total open interest increase somewhat bullish. As this report is being compiled on February 6, March WTI has made a high of 98.83, which takes out the previous high of 98.59 made on January 30. We see no reason to be involved in WTI in the current environment. March WTI remains on a short-term buy signal, but an intermediate term sell signal

Natural gas:

March natural gas lost 34.5 cents on volume of 489,790 contracts. Total open interest increased by 4,344 contracts, which relative to volume is approximately 55% less than average. The March contract lost 7,347 of open interest. Considering there was an open interest increase of 13,628 on February 4 when March natural gas advanced 47 cents, it would have been healthy to see open interest decline as prices moved sharply lower on February 5. As this report is being compiled on February 6, March natural gas is trading 9.4 cents lower and has taken out yesterday’s low of 4.99. Natural gas remains on a short and intermediate term buy signal. Stand aside.

The Energy Information Administration announced that working gas in storage was 1,923 Bcf as of Friday, January 31, 2014, according to EIA estimates. This represents a net decline of 262 Bcf from the previous week. Stocks were 778 Bcf less than last year at this time and 556 Bcf below the 5-year average of 2,479 Bcf. In the East Region, stocks were 312 Bcf below the 5-year average following net withdrawals of 143 Bcf. Stocks in the Producing Region were 187 Bcf below the 5-year average of 889 Bcf after a net withdrawal of 93 Bcf. Stocks in the West Region were 56 Bcf below the 5-year average after a net drawdown of 26 Bcf. At 1,923 Bcf, total working gas is below the 5-year historical range.

Euro:

The March euro advanced 18 pips on volume of 210,155 contracts. Total open interest declined by 3,354 contracts, which relative to volume is approximately 35% less than average. As this report is being compiled on February 6, the March euro is trading 60 pips higher and has made a high for the day at 1.3620. In yesterday’s report, we advised clients to stand aside pending the meeting of the ECB. It appears the euro is having a relief rally because the ECB did not act on interest rates. We think the March euro will run into trouble at the 1.3650 area, and depending upon open interest action on today’s rally, we recommend bearish positions with tight stops.

British pound:

The March British pound lost 8 pips on volume of 110,225 contracts. Total open interest declined by 137 contracts. As this report is being compiled on February 6, the March British pound is trading 16 pips higher and has made a high at 1.6343 which is its highest print since 1.6435 made on February 3. The pound remains on a short-term sell signal, but an intermediate term buy signal. Stand aside.

Yen:

The March yen advanced 30 pips on volume of 210,096 contracts. Total open interest increased by 766 contracts, which is minuscule and dramatically below average. As this report is being compiled on February 6, the March yen is trading down 60 pips on low volume and has made a new low for the move of .9788, which is below the February 5 print of .9829 and the February 4 low of .9837. As long as the equity market rallies, expect to see the yen correct. However, watch for a day when the stock indices are higher, and the yen begins to recover. After the pullback, we expect the yen to resume its climb. The yen remains on a short-term buy signal, but an intermediate term sell signal. We have no recommended position in the March yen.

Gold:

April gold advanced $5.70 on light volume of 135,850 contracts. Total open interest increased by 2,873 contracts, which relative to volume is approximately 20% below average. Although, we are recommending a stand aside posture in gold, it has been trading sideways to higher and refuses to break down. What is lacking is the speculative community getting more active on the long side. Even silver, which is on a short and intermediate term sell signal is not acting terribly bearish. It has the same problem as gold with respect to speculative interest.

S&P 500 E mini:

The S&P 500 E mini advanced 0.25 points on volume of 2,084,678 contracts. Total open interest increased by 7,976 contracts, which is minuscule and dramatically below average. As this report is being compiled on February 6, the E mini is trading 23.50 points higher on very low volume. We continue to recommend long put protection for clients who hold long equity positions.