Soybeans:

March soybeans advanced 11.00 cents on volume of 173,220 contracts. Total open interest declined by 1,435 contracts, which relative to volume is approximately 60% below average. The January contract lost 260 of open interest. As this report is being compiled on January 16, March soybeans are trading 2.00 cents higher and have made a new high for the move at 13.30 1/2, which is its highest price since December 23 when March printed a high of 13.39 1/4. This was the highest for the March contract since September 19 when it made a high of 13.43 1/4. It is highly likely that March soybeans will generate a short and intermediate term buy signal on January 16, however because March is trading at the very high-end of its range, longs should be cautious.

Export sales released by the USDA was positive with 701.5 thousand metric tons (tmt) being sold, which was the highest in 2 weeks. Total commitments for the season to date is 1.523 billion bushels (bb), which is above the USDA projections for the season of 1.495 bb. Although exports to date are fantastic, the fact remains Brazil is harvesting a very large crop and the concern is that buyers of American soybeans will cancel sales or resell inventory.

Soybean meal:

March soybean meal gained $4.40 on volume of 62,718 contracts. Total open interest increased by 1,066 contracts, which relative to volume is approximately 35% less than average. The March contract lost 1,456 of open interest, however the January contract gained 2,172 contracts, which is unusual, especially since the open interest gain was large. On January 14, March soybean meal generated a short-term buy signal and remains on an intermediate term buy signal. As this report is being compiled on January 16 March soybean meal has made a new high for the move at $440.20, which is 20 cents shy of the high print made on December 18 of 440.40. Caution is in order at current levels. We have no recommended position at this juncture.

The USDA reported that sales of soybean meal totaled 234.7 tmt, which was the highest in 7 weeks and brings total commitments to 6453.5 tmt versus USDA projections for the season of 9707 tmt.

Corn:

March corn lost 5.75 cents on volume of 216,158 contracts. Total open interest increased by a massive 15,420 contracts, which relative to volume is approximately 185% above average meaning that new short sellers were aggressively entering the market and driving prices lower. The March contract lost 1,316 of open interest. As this report is being compiled on January 15, March corn is trading 0.50 cents lower and remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

The USDA reported that sales of corn totaled 821 tmt, which was the highest in 3 weeks bringing total commitments season to date of 1.160 bb versus USDA projections for the season of 1.450 bb.

Chicago wheat:

March Chicago wheat lost 11.50 cents on volume of 76,964 contracts. Total open interest increased by 2,292 contracts, which relative to volume is approximately 20% above average meaning that new short sellers were entering the market at an above average pace and driving prices lower. The July contract lost 2,319 of open interest, which makes the total open interest increase more impressive (bearish). Stand aside.

The USDA reported that sales of wheat in all categories totaled 319.9 tmt, which was the highest in 2 weeks and brings total commitments season to date to 914.5 mb versus USDA projections for the entire season of 1.125 bb.

Live cattle: 

April live cattle advanced 1.15 cents on huge volume of 102,107 contracts. Volume was the highest since January 18, 2013 when 128,439 contracts were traded and the February 2013 contract closed at 1.24950. On January 15, total open interest increased by 2,380 contracts, which relative to volume is average. The February contract lost 8,816 of open interest, which makes the total open interest increase more impressive (bullish). On January 15, April cattle made a new contract high at 1.39375, and as this report is being compiled on January 16 another new contract high has been made at 1.39825.

Currently, April cattle is trading 47.5 points higher. We are becoming increasingly concerned about the parabolic move occurring in cattle. Undoubtedly, large numbers of speculators are rushing in to catch a piece of the move and this concerns us. The February-April 2014 spread has blown out to a new high on January 16 trading at 1.15 cent premium to February, which took out the previous high of 42.5 premium to February made on October 31. Per our recommendation, clients are long  cattle at significantly lower levels and have good-sized profits. Do not add new positions on this current rally. We suspect there will be an extremely sharp pullback before the final contract high is made.

WTI crude oil:

February WTI crude oil advanced $1.58 on volume of 670,669 contracts. Total open interest declined by 5,099 contracts, which relative to volume is approximately 60% less than average. The February contract lost 42,424 of open interest. As this report is being compiled on January 16, March crude oil is trading 29 cents lower and the February contract has made a high of 94.64, which was the high on January 15. The WTI looks weak and the fact that it was not able to take out yesterday’s high indicates that crude oil may not see much more of a rally from here. On December 30, we recommended that adventurous traders could write out of the money calls and this trade has worked well. On January 2, WTI crude oil generated a short-term sell signal and had already been on an intermediate term sell signal. Continue to stand aside.

Natural gas: On January 15, February natural gas generated a short-term buy signal, which reversed the short-term sell signal generated on January 9. Natural gas has remained on an intermediate term buy signal.

February natural gas lost 4.4 cents on volume of 350,820 contracts. Total open interest increased by 6,210 contracts, which relative to volume is approximately 25% less than average. The February contract lost 4,546 of open interest, which makes the total open interest increase more impressive (bullish). On January 15, February natural gas made a new high for the move at $4.432, and as this report is being compiled on January 16 has made another new high at 4.495. February natural gas is trading 5.9 cents higher on the day. As we said in yesterday’s report, it appears likely that February natural gas is headed for a test of the December 23 high of 4.578. At current levels, we cannot recommend bullish positions. In essence what we are seeing is a rebound from the low of $3.953 made on January 10 and a possible test of the high. It will be interesting to see whether  February natural gas reaches the December 23 high. Natural gas has a tendency to generate short-term buy and sell signals that are quickly reversed.

The Energy Information Administration announced that working gas in storage was 2,530 Bcf as of Friday, January 10, 2014, according to EIA estimates. This represents a net decline of 287 Bcf from the previous week. Stocks were 659 Bcf less than last year at this time and 443 Bcf below the 5-year average of 2,973 Bcf. In the East Region, stocks were 292 Bcf below the 5-year average following net withdrawals of 149 Bcf. Stocks in the Producing Region were 104 Bcf below the 5-year average of 1,016 Bcf after a net withdrawal of 107 Bcf. Stocks in the West Region were 46 Bcf below the 5-year average after a net drawdown of 31 Bcf. At 2,530 Bcf, total working gas is below the 5-year historical range.

Euro:

The March euro lost 74 pips on volume of 205,296 contracts. Total open interest increased by 1,917 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on January 16, the March euro has made a high of 1.3649, which is below yesterday’s high of 1.3675. Yesterday’s low of 1.3579 has not been taken out on January 16. The March euro remains on a short-term sell signal, but an intermediate term buy signal. Stand aside.

Dollar index:

The March dollar index advanced 38.8 points on volume of 23,308 contracts. Volume was the highest since January 10 when 38,856 contracts were traded. On January 15, total open interest increased by a massive 2,174 contracts, which relative to volume is approximately 250% above average meaning that new longs were aggressively entering the market and driving prices higher. The dollar index remains on a short and intermediate term buy signal. We advise buying setbacks.

British pound:

The March British pound lost 67 pips on heavy volume of 116,124 contracts. Volume was the highest since January 10 when 120,599 contracts were traded and the March pound advanced 2 pips while open interest increased by 1,532 contracts. On January 15, total open interest declined by 436 contracts, which is minuscule and dramatically below average. As this report is being compiled on January 15, the March pound is trading 28 pips lower and has made a new low for the move at 1.6308, which takes out yesterday’s low of 1.6313. As we said in yesterday’s report, we think the pound is headed for the 50 day moving average, at which point it may be an opportunity to get long the March pound and some of our favorite currency crosses.

Australian dollar:

The March Australian dollar lost 48 pips on volume of 90,464 contracts. Total open interest increased by a massive 8,002 contracts, which relative to volume is approximately 190% above average meaning that new short sellers were aggressively entering the market and driving prices lower. As this report is being compiled on January 16, the March Aussie dollar is trading 1.01 cents lower and has made a low for the move of 87.43. The Aussie dollar will likely generate a short-term sell signal on January 16, and remains on an intermediate term sell signal.

Gold:

February gold lost $7.10 on light volume of 118,224 contracts. Total open interest increased by 839 contracts, which relative to volume is approximately 60% below average. Gold has been trading in a very firm manner and it appears that it is consolidating its recent gains before it resumes an assault on the high for the move at 1255.30 made January 13. We continue to recommend the initiation of bullish positions at current levels.

Platinum:

April platinum lost $5.20 on volume of 8,485 contracts. Total open interest increased by a massive 1,032 contracts, which relative to volume is approximately 360% above average meaning that short sellers were extremely aggressive about entering new positions and driving prices lower. However, the market rebounded smartly and as this report is being compiled on January 16, April platinum is trading $1.50 higher and has made a high for the day at 1437.30. However, this is below its recent high made on January 13 of 1455.50. The remarkable aspect of platinum trading is the firmness of the market, and this is contradicted by terrible open interest action. This underscores our thinking that platinum will continue to move higher until such time the systematic trend following crowd begins to get significantly long.

Silver:

March silver lost 14.8 cents on volume of 32,873 contracts.Total open interest increased by 687 contracts, which relative to volume is approximately 20% below average. On January 14, March silver generated a short-term buy signal, and since then has pulled back losing 10.3 cents on January 14 and it appears will close in the minus column for the 3rd day in a row on January 16. A three-day decline after the generation of a buy signal is not unusual, but this reveals some short-term weakness. We find that gold and platinum are trading in a much firmer manner than silver, and would advise against initiating bullish positions in silver at this juncture. We want to see better price and open interest action before recommending bullish positions.

S&P 500 E mini:

The March S&P 500 E mini gained 8.50 points on low volume of 1,263,724 contracts. Total open interest increased by 7,769 contracts, which relative to volume is approximately 65% less than average. We continue to recommend long put protection for those clients who hold long equity positions.