We apologize for yesterday’s delay of the January 21 report. The stats for the Energy Information Administration report were in error and this will be corrected in today’s report.

Soybeans:

March soybeans lost 1.00 cent on volume of 188,595 contracts. Total open interest declined by 11,536 contracts, which relative to volume is approximately 140% above average meaning there was massive liquidation as soybeans declined to a new lows for the move at $12.72. The March contract accounted for loss of 10,530 of open interest. On January 21, March soybeans generated a short and intermediate term sell signal, and as is usually the case after the generation of sell signals, the market has a tendency to rally from 1 to 3 days. As this report is being compiled on January 23, March soybeans of rallied to a high of 12.96 3/4, but is now trading unchanged on the day. The market looks weak, and we suspect the rally was due to the sharply lower dollar. The high on January 23 was unable to take out $13.14 made on January 21. Look to initiate bearish positions on rallies and we would use today’s high as an exit point for bearish positions.

 Soybean meal:

March soybean meal advanced $2.90 on volume of 97,169 contracts. Total open interest declined by 1,666 contracts, which relative to volume is approximately 25% below average. The March contrast lost 3,905 of open interest. As this report is being compiled on January 23, March soybean meal is trading $1.30 higher and has made a high of 427.30, which is below the high made on January 21 of 432.30. We think it is inevitable that soybean meal will generate a short and intermediate term buy signal, but this has not occurred on January 23. Stand aside.

Corn:

March corn advanced 1.25 cents on volume of 227,093 contracts. Total open interest increased by 276 contracts. The March contract lost 11,825 of open interest, which makes the total open interest increase somewhat bullish. There were open interest increases in the May 2014 through March 2016 contracts. As this report is being compiled on January 23, March corn is trading 2.75 cents higher and has made a high of 4.31 1/4. This is the highest price for March corn since January 15 when it reached $4.31 1/2. Corn remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Chicago wheat:

March Chicago wheat lost 1.00 cent on very light volume of 57,661 contracts. Total open interest increased by 4,122 contracts, which relative to volume is approximately 185% above average meaning new longs and shorts were aggressively initiating positions, but prices moved only fractionally lower. The March-July 2014 contracts gained open interest. As this report is being compiled on January 23, March Chicago wheat is trading 7.25 cents higher on low volume and has made a high of $5.78, which is th high since January 15 when it reached $5.79 3/4. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle gained 1.575 on huge volume of 113,320 contracts. Volume was the highest of 2014 and calendar year 2013. On January 22, total open interest increased 2,235 contracts, which relative to volume is approximately 20% below average. The February contract lost 7,283 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled, April cattle is trading 1.40 cents lower and has made a low for the day at 1.40275. We have been warning about an imminent correction, and the only question is how much lower does it go. Do not enter new long positions at current levels.

WTI crude oil:

March WTI crude oil advanced $1.76 on fairly light volume of 546,143 contracts. Total open interest declined by 16,207 contracts, which relative to volume is approximately 20% above average, meaning that liquidation was fairly substantial on a  healthy price advance. The decline of open interest occurred over several contract months, and the February contract only lost 2,336 of open interest. Apparently, there was a great deal of skepticism about yesterday’s advance. As this report is being compiled on January 23, March WTI is trading 89 cents higher and has made a new high for the move at 97.79. 

The solid support of WTI is evidenced by the market action from the time the evening session began at 5 o’clock CST and within 3 hours after the opening of the session March WTI dipped to 96.41, which was only 32 cents below 96.73 the close on January 22. This low held throughout the rest of the evening and through the day session. We would use 96.41 as an exit point for any bullish positions being contemplated. March Brent crude oil is trading 57 cents lower. From January 9, when WTI made its low at $ 91.24 through January 22, March WTI has advanced 5.28% while Brent crude oil has advanced only 1.55%. We think the big story regarding WTI is the TransCanada pipeline and the prospect of inventory flowing from Cushing Oklahoma to the refineries of Texas and the Gulf coast. In essence it appears that the spread between Brent and WTI is going to narrow and this has been taking place since January 9. It appears that March WTI will generate a short-term buy signal on January 23, but will remain on an intermediate term sell signal.

The Energy information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.0 million barrels from the previous week. At 351.2 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 2.1 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 3.2 million barrels last week and are well below the lower limit of the average range for this time of year. Propane/propylene inventories fell 3.4 million barrels last week and are well below the lower limit of the average range. Total commercial petroleum inventories decreased by 4.0 million barrels last week.

Natural gas:

February natural gas advanced 25.8 cents on heavy volume of 512,630 contracts. The March contract advanced 19.2 cents while April +8.9. In short the spread was widening as natural gas prices moved to new highs. Volume was the highest since January 16 when 601,777 contracts were traded and February natural gas advanced 5.7 cents while total open interest increased by 3,109 contracts. On January 22, total open interest declined by 3,321 contracts, which relative to volume 65% below average. The February contract lost 2,323 of open interest. The fact that total open interest declined on a massive advance on heavy volume signifies there was a bout of profit taking, and that shorts got blown out of the market. February natural gas made a new high at $4.725 on January 22, and as this report is being compiled on January 23 February natural gas made another new high at $4.947, but has since pulled back and is trading 8.6 cents higher on the day. Natural gas remains on a short and intermediate term buy signal. Stand aside.

The Energy Information Administration announced that working gas in storage was 2,423 Bcf as of Friday, January 17, 2014, according to EIA estimates. This represents a net decline of 107 Bcf from the previous week. Stocks were 598 Bcf less than last year at this time and 369 Bcf below the 5-year average of 2,792 Bcf. In the East Region, stocks were 253 Bcf below the 5-year average following net withdrawals of 67 Bcf. Stocks in the Producing Region were 75 Bcf below the 5-year average of 962 Bcf after a net withdrawal of 25 Bcf. Stocks in the West Region were 41 Bcf below the 5-year average after a net drawdown of 15 Bcf. At 2,423 Bcf, total working gas is below the 5-year historical range.

Euro:

The March euro lost 13 pips on light volume of 143,876 contracts. Total open interest declined by 1,640 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on January 23, the March euro has advanced 1.43 cents and has made a new high for the move at 1.3695. There is major trading activity occurring in currency, commodity and equity markets, and despite today’s rally, the euro will not generate a short-term buy signal, which would reverse the short-term sell signal generated on January 8. In yesterday’s report, we stated: “Consider initiating bearish positions on a rally to the 50 day moving average of 1.3612.” Obviously, the market is considerably above the 50 day moving average, but for the March euro to reverse the sell signal in tomorrow’s trading, the low for the day must be above 1.3657. We are seeing a massive rally in the 10 year note, and tomorrow the March 10 year treasury note may generate a short-term buy signal. Lower interest rates are negative for the dollar. Be mindful of risk management. There is nothing wrong with liquidating a position and reinstating it once signals have become clearer.

Dollar index:

The March dollar index advanced 7.9 points on very light volume of 15,076 contracts. Total open interest declined by 845 contracts, which relative to volume is approximately 120% above average meaning that both longs and shorts were liquidating on a minor advance. As this report is being compiled, the March dollar index is trading sharply lower with a loss of 76.5  points on the day. Despite the sharp move lower, the dollar index will not generate a short or intermediate term sell signal on January 23. We advised clients to buy setbacks in the dollar index, and if long, use the exit point of 80.055, which is the December 30 low. Otherwise, stand aside. We want to see how currencies trade tomorrow before making a further recommendation.

British pound:

The March British pound advanced 98 pips on heavy volume of 130,962 contracts. Volume was 553 contracts fewer than January 21 when the March pound advanced 59 pips and open interest increased by 7,517 contracts. On January 22, total open interest increased by a massive 12,587 contracts, which relative to volume is approximately 300% above average, meaning that new longs were entering the market at an extraordinarily high rate. As this report is being compiled on January 23, March sterling is trading 46 pips higher and has made a new high for the move at 1.6629. If not long from lower levels, stand aside.

Gold:

February gold lost $3.20 on very light volume of 108,906 contracts. Total open interest declined by 2,424 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on January 23, February gold is trading $22.50 higher on very heavy volume and has made a new high for the move at $1267.00. Although we have been impressed with gold’s performance compared to silver over the past couple of weeks, the fact remains the dollar is sharply lower and it would be extremely negative if gold didn’t rally. Year to date through January 22, gold has advanced 2.66% while silver +1.31%.On January 23, gold is massively outperforming silver. Stay with bullish positions. Gold remains on a short-term buy signal, but an intermediate term sell signal. 

Platinum:

April platinum advanced $8.90 on volume of 9,135 contracts. Total open interest increased only 52 contracts. Platinum is in the midst of the correction, and we recommend a stand aside posture if not long. If long from lower levels stay with the position. April platinum remains on a short and intermediate term buy signal.

Silver:

March silver lost 3.1 cents on light volume of 19,520 contracts. Total open interest increased by 42 contracts. As this report is being compiled on January 23, March silver is trading 21.2 cents higher. Silver continues to exhibit sluggish behavior, especially compared to platinum and gold. We think the most important event on January 23 was that silver made a low in yesterday’s evening session of 19.645, which was slightly below the low of 19.655 made on January 21 when silver declined 43.4 cents and open interest increased by 1,045 contracts. In other words, though silver is the weakest of the precious metals, its decline was limited to the lower end of its recent trading range during the past 72 hours. Clients should be on the sidelines in silver. March silver remains on a short-term buy signal, but an intermediate term sell signal,

S&P 500 E mini:

The S&P 500 E mini closed unchanged on light volume of 944,609 contracts. Total open interest declined by 3,094 contracts, which is minuscule and dramatically below average. As this report is being compiled on January 23, the E mini is trading 21.25 points lower on fairly low volume considering the magnitude of the decline. In short, market participants are not panicking. We continue to recommend the initiation of long put protection for those clients who hold long equity positions.