Soybeans:

March soybeans advanced 7.75 cents on volume of 144,422 contracts. Total open interest increased by 3,045 contracts, which relative to volume is approximately 20% less than average. The March contract lost 1,303 of open interest, which makes the total open interest increase more impressive (bullish). January 30 and 31 have seen price increases along with and open interest increases. This is potentially bullish in the short-term. As this report is being compiled on February 3, March soybeans are trading 13.50 higher and have made a high for the move of $12.99 3/4. We recommended that bearish position should be exited at 12.96 3/4, therefore clients should be out of the market. In the January 30 report, which was composed on January 31, we recommended light bullish positions in soybean meal for clients with profits in soybeans. March soybeans remain on a short and intermediate term sell signal.

Soybean meal:

March soybean meal gained 90 cents on light volume of 53,273 contracts. Total open interest increased by 942 contracts, which relative to volume is approximately 25% less than average. The March contract lost 651 of open interest, which makes the total open interest increased more impressive (bullish). As this report is being compiled on February 3, March soybean meal is trading $9.10 higher and has made a new high for the move at 436.80, which is its highest price since January 16 when it reached $440.20. March soybean meal remains on a short and intermediate term buy signal. We have advocated a stand aside posture with the exception of clients who held bearish positions in soybeans.

Corn:

March corn gained 0.50 cents on volume of 271,231 contracts. Total open interest declined by 5,682 contracts, which relative to volume is approximately 20% below average. The March contract lost 14,957 of open interest from January 24 through January 31, total open interest has declined for 6 consecutive days as prices have advanced. This is bearish open interest action relative to the price advance. It is clear that managed money is slowly, but steadily liquidating bearish positions as corn moves higher. In the February 2 Weekend Wrap, we stated that if March corn was to continue moving higher , the daily low must be above our pivot point of $4.32 1/4. As this report is being compiled on February 3, March corn is trading 2.75 cents higher and has made a new high for the move at 4.38 3/4 and the daily low of 4.33 1/4, is above the pivot point. Corn is likely to advance, but may run into trouble at $4.39 5/8. This is an area of formidable resistance.

Chicago wheat:

March Chicago wheat advanced 2.25 cents on relatively heavy volume of 91,555 contracts. Total open interest declined by 1,587 contracts, which relative to volume is approximately 25% less than average. The March contract accounted for loss of 3,108 of open interest. As this report is being compiled on February 3, March Chicago wheat is trading 5.00 cents higher on the day. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

April live cattle advanced 5 points on heavy volume of 76,535 contracts. Volume was the heaviest since January 22 when 113,320 contracts were traded and April cattle advanced 1.575 cents while total open interest increased by 2,235 contracts. On January 22, April cattle made its contract high of 1.43125. On February 3, total open interest increased by 4,646 contracts, which relative to volume is approximately 140% above average meaning that both longs and shorts were aggressively initiating new positions, but neither side was able to move the market one way or the other. There was a major battle between longs and shorts on January 31, but we have seen this action for the past week as cattle prices have been moving sideways ever since it topped out on January 22. Additionally, we have been warning about the open interest build as cattle prices move sideways. We have posited this is a danger sign indicating that lower prices may be ahead. As this report is being compiled on February 3, April cattle is trading 95 points lower and has made a new low for the move at 1.39000.

From the January 30 report:

“From January 24 through January 30, April cattle has been trading sideways and our concern is that open interest has increased 10,682 contracts each of the 5 days, but prices are essentially unchanged. Often, when a market moves sideways and there is a substantial increase of open interest, it signals the market is ready to breakout. In this case, we tend to think a further correction is in store. One could argue that the open interest increase could result in a move higher, however, commercials are on the short side and speculators are on the long side. With cattle prices in the stratosphere, there is a greater likelihood that commercial short sellers are on the right side of the market at this juncture. Although we think prices are headed higher, clients must be prepared for a further setback. One way of mitigating loss of profit is to write out of the money calls against bullish positions.”

WTI crude oil:

March WTI crude oil lost 74 cents on heavier than recent volume. Volume was the highest since January 23 when 646,012 contracts were traded and open interest declined by 5,775 contracts while March WTI advanced 59 cents. On January 31, total open interest declined by 8,441 contracts, which relative to volume is approximately 40% less than average. The March contract lost 9,774 of open interest. As this report is being compiled on February 3, March WTI is trading 86 cents lower. We think March WTI will struggle to move decisively above $98.59, the high made on January 30. March WTI remains on a short-term buy signal, but an intermediate term sell signal. There is no reason to be involved in the market at this juncture.

Natural gas:

March natural gas lost 6.8 cents on light volume of 380,680 contracts. Volume was the weakest since January 17 when 291,849 contracts were traded and March natural gas closed at $4.259, which was a couple of days before the blow off move to 5.486 on January 29. On January 31, total open interest increased by 894 contracts, which is minuscule and dramatically below average. The March contract gained 1,595 of open interest. As this report is being compiled on February 3, March natural gas is trading 1.6 cents lower. Natural gas remains on a short and intermediate term buy signal. Stand aside.

Euro: On January 31, the March euro generated a short and intermediate term sell signal.

The March euro lost 66 pips on very heavy volume of 328,809 contracts. Volume on Friday exceeded January 23 when 321,124 contracts were traded and the March euro closed at 1.3696. On January 31, total open interest increased by 5,667 contracts, which relative to volume is approximately 25% less than average, but is negative in two respects. First, it indicates that new short sellers were willing to enter the market at the lower end of the recent trading range. And two, as we discussed in the February 2 Weekend Wrap, managed money remains substantially long, which will add fuel to the downside move. The euro should have a countertrend rally, and this will be the opportunity to initiate bearish positions. Until this occurs, we recommend a stand aside posture.

British pound:

The March British pound lost 44 pips on volume of 101,942 contracts. Total open interest declined by 3,673 contracts, which relative to volume is approximately 40% above average, meaning that both longs and shorts were liquidating on the move lower. This is the 2nd day in a row that prices have declined and open interest along with it. As this report is being compiled on February 3, the March pound is trading 1.29 cents lower and has made a new low for the move at 1.6284. We have been cautioning clients about a potential downside move and wanted to see a pullback to at least the 50 day moving average of 1.6385, but the market has slipped below the 100 day moving average of 1.6209. It appears likely the March British pound will generate a short-term sell signal on February 3. Stand aside.

Yen:

The March yen advanced 37 pips on volume of 215,152 contracts. Total open interest increased by 2,205 contracts, which relative to volume is approximately 50% below average. During the past 3 sessions beginning on January 29, price and open interest action has been bullish. On January 29, the March yen advanced 80 pips and total open interest increased by 3,759 contracts and on January 30, the March yen declined by 66 pips and total open interest declined by 5,756 contracts. As this report is being compiled on February 3, the March yen has skyrocketed to a new high of .9899, which is its highest price since November 22 when it reached 9910. As the extract from the January 30 report indicates, the March yen had to make a low above .9738 for it to continue moving higher. The low on February 3 has been .9766.

From the January 30 report:

On January 27, the March yen generated a short-term buy signal, and the market has acted extremely well since then. For the yen to continue moving higher, the March yen must make a daily low above .9738.

Gold:

April gold lost $2.70 on low volume of 126,364 contracts. Total open interest declined by 2,505 contracts, which relative to volume is approximately 20% below average. The February contract lost 3,128 of open interest. As this report is being compiled, April gold is trading $10.90 higher and has made a high of 1266.10 on low volume. Stand aside.

From the January 30 report:

Although gold remains on a short-term buy signal and an intermediate term sell signal, we think the market is going to struggle. Platinum is going to generate a short and intermediate term sell signal on January 30 and silver will generate a short-term sell signal on the 31st as well. In this scenario, we do not see how gold will swim against the tide. If clients have not liquidated bullish positions, we suggest they do so.

Silver: On January 31, March silver generated a short-term sell signal, which reversed the short-term buy signal generated on January 14. Silver remains on an intermediate term sell signal. Until we see a trading opportunity, we will discontinue reporting on silver.

S&P 500 E mini:

The March S&P 500 E mini lost 2.50 points on heavier than normal volume of 2,397,161 contracts.Total open interest increased by 29,984 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on February 3, the March E mini is trading 34.50 points lower and has made a new low for the move at 1737.75. We have been strongly advising clients to maintain long put protection if they hold long equity positions.