Soybeans:

March soybeans gained 12.75 cents on fairly heavy volume of 220,963 contracts. Total open interest increased by 702 contracts, which is minuscule and dramatically below average. The January contract lost 149 and March -480 of open interest. As this report is being compiled on January 15, March soybeans are trading 10.75 cents higher, and has taken out yesterday’s high of 13.16 3/4. Soybeans remain on a short and intermediate term sell signal.

Soybean meal: On January 14, March soybean meal generated a short-term buy signal, which reverses the short-term sell signal generated on January 2. Soybean meal remains on an intermediate term buy signal.

March soybean meal gained $8.20 on fairly heavy volume of 84,788 contracts. Total open interest increased by a staggering 6,268 contracts, which relative to volume is approximately 185% above average meaning that new longs were entering the market very aggressively and pushing March soybean meal to new highs for the move ($434.70). This is the highest price since December 24 when March meal reached 434.50. The January contract lost only 12 lots of open interest. As this report is being compiled on January 15, March soybean meal is trading 4.40 higher on the day. Stand aside.

Corn:

March corn lost 3.00 cents on heavier than normal volume of 270,627 contracts. Total open interest increased only 218 contracts, which is minuscule and dramatically below average. The March contract lost 1,290 of open interest. March corn remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Chicago wheat:

March Chicago wheat gained 5.75 cents on volume of 68,645 contracts. Total open interest increased by a massive 6,410 contracts, which relative to volume is approximately 250% above average, meaning that new longs were aggressively entering the market and driving prices higher. Open interest increased in the March through July 2014 contracts. As this report is being compiled on January 15, March Chicago wheat is trading 6.75 cents lower. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle advanced 72.5 points on very heavy volume of 77,694 contracts. Volume was the heaviest since October 25, 2013 when 77,415 contracts were traded and April cattle closed at 1.34450. On January 14, total open interest increased by 4,326 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and driving prices to new contract highs (1.38100). As this report is being compiled on January 15, April cattle is trading 1.100 cents higher and is making new contract highs. Continue to hold bullish positions. We think the market is headed higher from here, but is overdue for a healthy correction. Since December 19, cattle prices have been moving straight up with few setbacks.

Lean hogs:

On January 9 we recommended that bearish positions be liquidated and said the major part of the move was over. The market has rallied since then and on January 15 has made a new high for the move at 87.000. 

“We think there is a good chance that an interim low has been made, and suggest clients take profits on their bearish positions. With an interim low in place, and rising cattle prices, a healthy rebounded hogs is more than likely. We think the easy money has been made for now.”

WTI crude oil:

February WTI crude oil advanced 79 cents on volume of 666,467 contracts. Total open interest declined by 2,256 contracts, which is minuscule and dramatically below average. The February contract lost 30,887 of open interest, and there was open interest increases in the forward months to bring the total open interest decline to a minor number. As this report is being compiled on January 15, February crude oil is trading $1.83 higher. We want to see a further advance, and a decline of open interest on that advance before recommending bearish positions.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.7 million barrels from the previous week. At 350.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.2 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased last week while blending components inventories increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 3.8 million
barrels last week and are well below the lower limit of the average range. Total commercial petroleum inventories decreased by 10.3 million barrels last week.

Natural gas:

February natural gas advanced 9.5 cents on healthy volume of 400,679 contracts. Total open interest increased by 6,311 contracts, which relative to volume is approximately 40% below average. The February contract lost 7,306 of open interest, which makes the total open interest increase more impressive (bullish). However, for the past 3 days, beginning on January 10, total open interest has declined 15,326 contracts while February natural gas has advanced 36.4 cents. This is very bearish open interest action relative to the price advance. Natural gas will generate a short-term buy signal on January 15, which will reverse the short-term sell signal generated on January 9. At current levels, we cannot get  enthusiastic about the long side of natural gas, especially with terrible open interest action during the past 3 sessions. It appears natural gas is about to test of the December 23 high of $4.578. Stand aside.

Euro:

The March euro closed unchanged on volume of 167,843 contracts. Total open interest increased by 2,068 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on January 15, the March euro is trading 83 pips lower having made a low of 1.3579. The euro generated a short-term sell signal on January 8, but remains on an intermediate term buy signal. Rather than initiate bearish positions in the euro, we much prefer being long the dollar index.

Dollar index:

The March dollar index advanced 14.5 points on light volume of 13,323 contracts. Total open interest increased by 395 contracts, which relative to volume is approximately 20% above average. As this report is being compiled on January 15, the March dollar index is trading 42.9 points higher. The dollar index remains on a short and intermediate term buy signal. Although the dollar dipped to 80.540, this was above the recommended sell stop of slightly below the January 6 low of 80.537. We think the dollar is headed higher and setbacks should be bought.

British pound:

The March British pound gained 47 pips on volume of 93,263 contracts. Total open interest declined by 566 contracts, which relative to volume is approximately 70% below average. We looked at our records for the past month and couldn’t find a day in which the British pound advanced by nearly 47 pips and open interest declined. In short, the action yesterday may be the first major sign the pullback in the pound will continue and test of the 50 day moving average of 1.6274. As this report is being compiled on January 15, the March pound has made a low of 1.6313, which is slightly below the December 24 print of 1.6314. Sterling remains on a short and intermediate term buy signal. Stand aside.

Australian dollar:

The March Australian dollar lost 1.00 cent on volume of 96,368 contracts. Total open interest increased by 1,970 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on January 15, the March Australian dollar is trading 47 pips lower, but will not generate a short-term sell signal. For this to occur, the March Aussie dollar’s daily high must be below 88.57. Stand aside.

Gold:

February gold lost $5.70 on volume of 174,232 contracts. Total open interest increased by 4,563 contracts, which relative to volume is average. On January 13, February gold generated a short-term buy signal, but remains on an intermediate term sell signal. There is a tremendous amount of skepticism about gold’s ability to move higher, but we have seen a change in the way gold trades. Additionally, we are seeing higher volume on a daily basis, which means market participants are getting active. We think gold is headed higher and recommend bullish positions.

Platinum:

April platinum lost $10.10 on heavier than normal volume of 10,343 contracts. Total open interest increased by 205 contracts, which relative to volume is approximately 20% below average. The abysmal open interest action relative to price advances and declines continues. Despite this, on January 15, April platinum closed at 1428.60, which is the 4th highest close of the past week. On January 14, April platinum reached the highest level (1447.50) since November 15 when the high print was 1452.40. Platinum is massively overbought and is more than entitled to a healthy correction, but this may not occur just now because managed money is on the sidelines. In short, there will be little selling pressure on the part of speculators because of their very low net long position. Platinum remains on a short and intermediate term buy signal.

Silver: On January 14, March silver generated a short-term buy signal, but remains on an intermediate term sell signal.

March silver lost 10.3 cents on volume of 56,627 contracts. Total open interest declined by 799 contracts, which relative to volume is approximately 40% below average. Like the other precious metals, there is a great deal of skepticism about silver’s ability to move higher, however elevated volume stats show that market participation is increasing. The real barrier to an advance in precious metals is going to be the advancing dollar. However, as we pointed out in the January 12 Weekend Wrap,  precious metals had advanced in the face of a flat dollar index. Due to the volatility of silver, we recommend it be traded via call options only.

S&P 500 E mini:

The March S&P 500 E mini gained 18.00 points on volume of 1,599,181 contracts. Total open interest increased by 26,053 contracts, which relative to volume is approximately 35% below average. As this report is being compiled on January 15, the E mini is trading 9.25 points higher and has made a new high for the move at 1845.75. We continue to recommend long put protection for those clients who hold on equity positions.