Soybeans:

March soybeans advanced 3.00 cents on volume of 170,820 contracts. Total open interest declined by 742 contracts, which relative to volume is approximately 80% below average. The March contract lost 2,463 of open interest. For the past 2 sessions, March soybeans advanced 10.75 cents and total open interest has declined 3,817 contracts. This is bearish open interest action relative to the price advance. As this report is being compiled on January 28, March soybeans are trading 5.75 cents lower. Soybeans should only be traded from the bearish side and we recommend using the January 23 high of $12.96 3/4 as an exit point for bearish positions. March soybeans remain on a short and intermediate term sell signal

Soybean meal:

March soybean meal advanced $5.20 on volume of 67,328 contracts. Total open interest increased by 2,614 contracts, which relative to volume is approximately 50% above average meaning that new longs were entering the market aggressively and driving prices higher. There were open interest increases in the March through July 2014 contracts. This is the 2nd day in a row total open interest increased and that open interest increased in the March through July 2014 contracts. The open interest action in soybean meal is bullish whereas it is bearish in soybeans. As this report is being compiled on January 28, March soybean meal is trading $4.50 lower on the day. Soybean meal remains on a short and intermediate term buy signal. Stand aside because we think that eventually soybean meal will be weighed down by soybeans.

Corn:

March corn advanced 2.25 cents on volume of 229,240 contracts. Total open interest declined by 2,294 contracts, which relative to volume is approximately 50% below average. The March contract lost 6,088 of open interest. On January 27, March corn closed at $4.31 3/4, which is its highest close since January 13 when it corn closed at 4.34 1/2. As this report is being compiled on January 28, March corn is trading 1.00 cent higher and has made a new high for the move at 4.33 3/4. March corn remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Chicago wheat:

March Chicago wheat lost 1.75 cents on volume of 82,343 contracts. Total open interest increased by 34 contracts. The March contract lost 208 of open interest. As this report is being compiled on January 28, March Chicago wheat is trading 3.25 cents higher. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle advanced 45 points on volume of 44,313 contracts. Volume was the lowest since December 31 when 34,104 contracts were traded and cattle lost 47.5 points while open interest increased 3,095 contracts. On January 27, total open interest increased by 1,286 contracts, which relative to volume is approximately 20% above average. The tepid volume on the advance along with a slightly above average increase in open interest increases the likelihood that cattle will continue to trade in a consolidation pattern. As we’ve said before, we would like to see open interest decline, especially among speculators, but the dramatic shortfall in cattle inventory is well-known, which may make it difficult to shake loose more speculative longs. Exacerbating the smallest national cattle herd in several decades is the recent cold weather, which will reduce slaughter weights. Also, the drought in California will force temporary herd liquidation, which will tighten inventory down the road. Maintain bullish positions.

 WTI crude oil:

March WTI crude oil lost 92 cents on light volume of 460,727 contracts. Total open interest declined only 670 contracts. The March contract lost 5,558 of open interest. As this report is being compiled on January 28, March WTI is trading $1.71 higher on very low volume, but has not taken out the high of 97.80 made on January 24 and 97.84, the high of January 23.

From the January 24 report: 

“In the January 26 Weekend Wrap, we discussed our lack of enthusiasm for crude oil even though it had generated a short-term buy signal. Despite this, we tend to think there will be a test of the January 24 high of 97.80 and the January 23 high of 97.84. With gasoline, heating oil and Brent crude oil on sell signals, we cannot make a bullish recommendation in WTI, and the short-term buy signal warns us about getting bearish. Stand aside.”

Natural gas:

March natural gas lost 32.4 cents on volume of 572,872 contracts. Volume declined from 711,763 contracts on January 24, even though the range on January 27 was 54.9 cents and on January 24 was 40.4 cents the dramatic shrinkage in volume accompanied by a larger range day and a new contract high of $5.199 suggests that the volatility of natural gas is moving large numbers of participants to the sidelines. On January 27, total open interest increased by only 1,221 contracts, which is minuscule and dramatically below average. The February contract accounted for loss of 10,519 of open interest. As this report is being compiled on January 28, March natural gas is trading 21.4 cents higher and has made a high for the day of $4.926. This is a market that should be viewed through the lens of a spectator, not a speculator. Stand aside.

Euro:

The March euro lost 10 pips on volume of 162,022 contracts. Total open interest increased by 167 contracts. As this report is being compiled on January 28, the March euro is trading 8 pips lower and has made a low of 1.3628. The euro remains on a short and intermediate term buy signal, and we think a trade on the bullish side makes sense at this juncture. For example the 20 day moving average for the March euro is 1.3641, 50 day MA, 1.3635, 100 day MA, 1.3579 and the euro is currently trading at 1.3656. In short, it is trading close to its value zone of the 20 and 50 day moving averages.

As it stands, the euro, pound and Swiss franc are on short and intermediate term buy signals. The yen is on a short-term buy signal, but an intermediate term sell signal and the Canadian dollar is on a short and intermediate term sell signal. The two currencies which comprise 69.5% of the dollar index are on short and intermediate term buy signals. While the dollar index has not yet generated a short-term sell signal, we think this is imminent. We recommend using of call options instead of futures because it is easy to get stopped out, especially in the overnight session.

British pound:

The March British pound advanced 68 pips on volume of 83,689 contracts. Volume was the lowest since January 9 when 82,152 contracts were traded and the March pound advanced 20 pips while open interest increased 832 contracts. On January 27, open interest increased only 319 contracts, which relative to volume is approximately 85% less than average. The low volume and tepid increase of open interest tells us the market will continue to trade sideways to lower. Stand aside.

Yen: On January 27, the March yen generated a short-term buy signal, but remains on an intermediate term sell signal

The March yen lost 44 pips on heavy volume of 216,317 contracts. Total open interest declined by 2,712 contracts, which relative to volume is approximately 45% less than average. As we pointed out in the January 26 Weekend Wrap, managed money is less bearish on the yen than they are the Canadian dollar, Australian dollar and dollar index. We think the trend of managed money covering their short positions and lightly adding to their long positions will continue. In the most recent COT report tabulated on January 21, revealed that managed money added 2,844 contracts to their long positions and liquidated 4,062 contracts of their short positions.

Gold:

February gold lost 90 cents on heavy volume of 241,898 contracts. Total open interest declined by 7,049 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than usual. The February contract, which is approaching 1st notice day lost 28,077 of open interest. As this report is being compiled on January 28, February gold is trading $12.90 lower and has made a new low for the move at 1248.20. Yesterday, after the S&P 500 E mini made its low and began to rally, gold, platinum and silver began to selloff. Today, the E mini is trading 10.00 points higher and another decline is occurring in the precious metals. We think it is okay to stay with bullish gold positions, but each client should have their risk parameters in place in order to walk away with profits, rather than with losses. Silver continues to trade bearishly and this a major negative for gold.

Platinum:

April platinum lost $7.50 on volume of 11,136 contracts. Total open interest declined by 687 contracts, which relative to volume is approximately 150% above average, meaning that both longs and shorts were liquidating in heavy numbers. As this report is being compiled, April platinum has closed at $1409.40, which is below the pivot point of 1413.40. In yesterday’s report, we stated that platinum could reverse if it penetrated the pivot point. If clients have not liquidated their long positions, we suggest they do so. With gold and especially silver acting negatively, we see no reason to maintain bullish positions in platinum. Although, April platinum has not generated a short-term sell signal, it could occur sometime this week.

From the January 24 report:

“Maintain bullish positions, but make sure sell stops are in place. If April platinum penetrates $1413.40, this would be the first sign of a possible reversal.”

Silver:

March silver advanced 2.8 cents on volume of 40,744 contracts. Total open interest increased by 1,530 contracts, which relative to volume is approximately 50% above average meaning that new longs and shorts were aggressively entering silver, but prices closed only fractionally higher. As this report is being compiled on January 28, silver is trading near its lows at 19.49, which is 3 1/2 cents above the low of 19.455. As we said in a number of previous reports, precious metals are going to be stymied in their advance unless silver begins to trade in a more positive manner. In yesterday’s report, we mentioned that silver could generate a short-term sell signal if it penetrated 19.595. Silver not only penetrated this key pivot point, but closed at 19.503, several cents below it. We have recommended a sideline stance in silver. 

S&P 500 E mini: On January 27, the March S&P 500 E mini generated a short-term sell signal, but remains on an intermediate term buy signal.

The March S&P 500 E mini lost 6.25 points on heavy volume of 2,785,316 contracts. Volume was the highest since December 18 when 3,414,804 contracts were traded and the March E mini closed at 1804.75. On January 27, total open interest declined by 12,050 contracts, which relative to volume is approximately 80% below average. As this report is being compiled on January 28, the March E mini is trading 10.00 points higher on very light volume. Continue to maintain long put protection if you hold long equity positions.