Soybeans: On January 16, March soybeans generated a short and intermediate term buy signal.

March soybeans lost 3.00 cents on fairly heavy volume of 191,000 contracts. Total open interest increased by a massive 12,396 contracts, which relative to volume is approximately 160% above average meaning that new longs were aggressively entering the market and driving prices to new highs ($13.30 1/2). Open interest increased in the March 2014 through March 2015 contracts. Although there was range expansion on the move yesterday, it was somewhat disappointing to see soybeans close lower at $13.15 after trading 15 cents higher on the day. On the continuation chart the 50 day moving average of 13.14 1/4 is below the 150 day moving average of 13.30 1/2 and the 200 day moving average of 13.39 1/4. On the other hand the March chart the 50 day moving average of 12.97 1/4 is above the 150 day moving average of 12.83 and the 200 day moving average of 12.75 1/2. Though March soybeans have generated a short and intermediate term buy signal, we are a bit skeptical about soybean’s ability to move significantly higher from here. Stand aside.

Soybean meal:

March soybean meal lost $2.50 on volume of 67,741 contracts. Total open interest increased by 1,455 contracts, which relative to volume is approximately 15% less than average. The March-October 2014 contracts had open interest increases. The market made a high of $440.20, however it pullback to close lower at 432.00. Soybean meal remains on a short and intermediate term buy signal. Stand aside.

Corn:

March corn advanced 2.25 cents on volume of 256,733 contracts. Total open interest increased by 3,522 contracts, which relative to volume is approximately 40% less than average. The March contract accounted for loss of 7,355 of open interest. As this report is being compiled on January 17, March corn is trading 4.75 lower and has made a new low for the move at $4.22 1/4. Although we were hoping for more of a rally in order to initiate bearish positions, it now appears imminent that corn will generate a short-term sell signal, which will reverse the short-term buy signal generated on January 13. Stand aside.

Chicago wheat:

March Chicago wheat gained 5.00 cents on volume of 95,038 contracts. Total open interest increased by 5,341 contracts, which relative to volume is approximately 120% above average meaning that new longs were entering the market and pushing prices higher. The March-July 2014 contracts all gained open interest. As this report is being compiled on January 17, March Chicago wheat is trading 6.00 cents lower and has made a low of 5.63 3/4, which is only slightly above the contract low of 5.60 1/2 made on January 10. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle gained 27.5 points on heavy volume of 99,483 contracts. Total open interest declined by 133 contracts, which is minuscule and dramatically below average. The February contract accounted for loss of 8,281 of open interest. The minimal decline of total open interest may indicate that there was a bout of profit taking since April cattle has rallied solidly for the past couple of weeks. April cattle made a new contract high at 1.39825, and this has not been taken out on January 17. As we said in yesterday’s report, we expect a very sharp pullback at some point and then a rally to a new contract high. Stay with bullish positions, but be prepared for a correction.

WTI crude oil:

March WTI crude oil lost 25 cents on fairly light volume of 509,874 contracts. Total open interest increased by 7,286 contracts, which relative to volume is approximately 40% below average. The February contract lost 17,313 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on January 17, March WTI crude oil is trading 29 cents higher. The market continues to look very weak and we would like to recommend additional bearish positions, but would like to see more of a rally before doing so. For those who took our advice on December 30, continue to hold short call positions.

Natural gas:

February natural gas advanced 5.7 cents on extremely heavy volume of 601,777 contracts. To put the volume on January 16 in perspective consider there have been only 3 other days going back to May 1, 2013, when volume exceeded the amount traded on Thursday. On December 18, volume of 586,255 contracts was below January 16, but on December 18 natural gas advanced 21.5 cents and the advance on January 16 was a fraction of this. However, the biggest disappointment was the abysmal open interest increase on January 16 of 3,109 contracts, which is 75% below average. The February contract accounted for loss of 17,313 of open interest, which makes the total open interest increase a little bit more impressive, but not by much. The importance of extremely high volume on yesterday’s move accompanied by a minor increase of open interest reason cannot be underestimated. We think it is more than likely that a secondary top was made at yesterday’s high of $4.495. However, it gets worse.

From January 10 through January 16 February natural gas advanced 37.7 cents while total open interest in this time frame declined by 6,007 contracts. This is definitively bearish open interest action relative to the price advance. As we said in the previous paragraph we think it is highly likely that a secondary top was made at $4.495 and that the short-term buy signal generated on January 15 will be reversed.

Euro:

The March euro advanced 15 pips on volume of 210,129 contracts. Total open interest increased by 116 contracts. On January 8, the March euro generated a short-term sell signal and as is usually the case after the generation of a sell signal, the market tends to rally from 1-3 days and the March euro advanced to 1.3700 on January 14, and has been declining ever since. As this report is being compiled on January 17, the March euro is trading 94 pips lower and has made a new low for the move at 1.3515. We have no recommended position in the euro, rather we have advocated bullish positions in the March dollar index.

Dollar index:

The March dollar index lost 12.3 points on volume of 21,437 contracts. Total open interest declined by 2,307 contracts, which relative to volume is approximately 320% above average meaning that liquidation was extremely heavy on the very minor decline. As this report is being compiled on January 17, the dollar index is trading 37.9 points higher and is made a new high for the move at 81.43. A move to 81.50 would be considered a breakout and would be the highest price for the dollar index since October 2013. We think the dollar index is headed higher, and we recommend bullish positions continue to be held, and if not long, initiate new positions on setbacks.

British pound:

The March British pound lost 10 pips on volume of 89,698 contracts. Total open interest declined by 1,422 contracts, which relative to volume is approximately 35% low average. In yesterday’s trading, the March British pound made a low of 1.6308, and made a new fractional low of 1.6301 on January 17. As this report is being compiled on January 17, the March pound is trading 51 pips higher. We were hoping for a move down to the 50 day moving average before recommending bullish positions in the March pound and our favored currency crosses. Stand aside.

Australian dollar: On January 16, the March Australian dollar generated a short-term sell signal, which reversed the short-term buy signal generated on January 13. The Australian dollar has remained on an intermediate term sell signal.

This will be our last report on the Australian dollar until such time as we see a trading opportunity.

The March Australian dollar lost 91 pips on heavy volume of 120,777 contracts. Volume was the highest since January 10 when 130,842 contracts were traded and total open interest declined by 3,848 contracts. On January 16, total open interest increased by a massive 14,104 contracts, which relative to volume is approximately 360% above average meaning that new short sellers were aggressively entering the market and driving prices down to new lows for the move. As this report is being compiled on January 17 the March Australian dollar is trading 41 pips lower and has made a new low for the move at 87.30.

Gold:

February gold advanced $1.90 on volume of 141,456 contracts. Total open interest declined by 3,175 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on January 17, gold is trading $11.70 higher on the day and has made a new closing high at 1251.90, which takes out the previous closing high of 1251.10 made on January 13 when February gold made its high for the move at 1255.30. The market continues to look firm and its performance on January 17 was outstanding considering the dollar index was sharply higher and made a new high for the move. After February gold generated a short-term buy signal on January 13, we recommended the initiation of bullish positions. Continue to hold these and if you’re not long, it is okay to buy at current levels because February gold is only a couple of dollars above its 50 day moving average, which means it is neither overbought nor oversold at this point.

Platinum:

April platinum advanced $2.90 on light volume of 7221 contracts. Total open interest increased by a massive 629 contracts, which relative to volume is approximately 225% above average meaning that new longs and shorts were aggressively entering the market, but longs had the advantage and were able to put push prices fractionally higher. April platinum made a low of $1418.20, but recovered nicely to close at 1430.00.  Based upon the massive open interest increase, new buying lifted prices from their lows and platinum closed positively. The open interest action on January 16 was the first positive open interest action relative to the price advance that we’ve seen since April platinum generated a short-term buy signal on January 2. As this report is being compiled on January 17, April platinum has closed at 1454.10, which is an advance of 14.10 from yesterday. It appears that platinum is getting the attention of the speculative crowd, but we feel there is more to go on the upside before the market is liable to have a major correction. If long, maintain bullish positions.

Silver:

March silver lost 8.00 cents on light volume of 34,588 contracts. Total open interest increased by 1,049 contracts, which relative to volume is approximately 20% above average meaning that new short sellers were entering the market and attempting to drive prices lower. Silver open interest action relative to price advances and declines has left much to be desired. On January 14, March silver generated a short-term buy signal and on that day advanced to a high of $20.67 , then proceeded to pull back for 3 days, which as stated yesterday’s report is not unusual. However, on January 17, it’s a completely different picture with silver rallying 25 cents to close at $20.304. We feel comfortable recommending long positions at current prices because silver is approximately 24 cents above its 50 day moving average of 20.070, and is somewhat overbought, but not out of line for new positions. Additionally, during the past 3 days silver has made a daily lows as follows: 19.960 January 17, 19.970, January 16, 19.905 January 15. Therefore, we would recommend exiting bullish positions if silver penetrates the January 15 low of 19.905.

S&P 500 E mini:

The March S&P 500 E mini lost 5.25 points on very light volume of 955,739 contracts. Total open interest increased by 3,607 contracts, which is dramatically below average. We continue to advocate the initiation of long put protection for clients who hold long equity positions if this has not been done already.