The USDA will release its WASDE report on January 10.

Soybeans:

March soybeans lost 0.75 cents on volume of 148,924 contracts. Total open interest increased by 4,702 contracts, which relative to volume is approximately 25% above average, meaning that new short sellers and buyers were aggressively entering the market, but shorts were only able to move prices fractionally lower. The January contract lost 1,249 of open interest and March -1,228, which makes the total open interest increase much more impressive (bearish). As this report is being compiled on January 8, March soybeans are trading 5.50 lower on the day. Continue to hold short call positions in soybeans and if clients are contemplating bearish positions and holding them into the report, long put options is the safest way to trade beans. Soybeans remain on a short and intermediate term sell signal.

Soybean meal:

March soybean meal gained $2.00 on volume of 75,473 contracts. Total open interest increased by 267 contracts, which is minuscule and dramatically below average. The January contract lost 1,169 of open interest and March -1,108, which makes the total open interest increased more impressive (bullish). Soybean meal remains on a short-term sell signal, but an intermediate term buy signal. Stand aside

Corn:

March corn lost 1.75 cents on relatively heavy volume of 200,381 contracts. Total open interest increased by 1,214 contracts, which relative to volume is approximately 65% less than average. The March contract lost 4,060 of open interest, which makes the total open interest increase more impressive (bearish). Corn continued its open interest build and the only exception to this for the past several sessions occurred on January 6 when open interest declined by 674 contracts as corn advanced 4.25 cents. As this report is being compiled on January 8, March corn is trading 7.75 cents lower and has made a daily low of $4.17 1/4, which is 0.25 cents above 4.17 the contract low made on January 3. Corn remains on a short and intermediate term sell signal. Stand aside.

Chicago wheat:

March Chicago wheat lost 3.25 cents on volume of 73,661 contracts. Total open interest declined by 713 contracts, which relative to volume is approximately 50% below average. The March contract lost 955 of open interest. As this report is being compiled on January 8, March Chicago wheat is trading 9.00 cents lower and has made a new contract low of 5.92 1/2, which took out the previous low of 5.95 1/2 made on January 2. Chicago wheat remains on a short and intermediate term sell signal. Please see the January 5 Weekend Wrap for our analysis on wheat and the strategy that accompanies it.

Live cattle:

February live cattle lost 30 points on volume of 52,984 contracts. Total open interest increased by 3,626 contracts, which relative to volume is approximately 160% above average meaning that longs and shorts were aggressively entering the market, but shorts had the edge and were able to drive prices fractionally lower. February cattle made a new high for the move at 1.37 225, and as this report is being compiled on January 8, February cattle is trading 40 points higher, but has not taken out the high made on January 7. Continue to hold bullish positions; cattle prices are headed higher.

Lean hogs:

February lean hogs lost 1.10 cents on volume of 46,591 contracts. Volume was the highest since January 2 when 51,160 contracts were traded and February hogs advanced 1.65 cents while open interest increased by 3,088 contracts. On January 7, total open interest increased by 1,408 contracts, which relative to volume is approximately 20% above average. The February contract lost 3,216 of open interest, which makes the total open interest increase much more impressive (bearish). As this report is being compiled on January 7, February hogs are trading 17.5 points higher, but it appears inevitable that February hogs will test the low of 84.650 made on December 31. Keep in mind, as cattle prices continue to move higher, hogs may begin to follow.

WTI crude oil:

February WTI crude oil advanced 24 cents on volume of 466,772 contracts. Total open interest declined by 5,925 contracts, which relative to volume is approximately 45% less than average. The February contract lost 9,983 of open interest. As this report is being compiled on January 8, February WTI is trading 74 cents lower and has made a new low for the move at $92.76. As we pointed out yesterdays report, the stratospheric net long position of managed money will continue to provide fuel for the downside move, and thus far, open interest stats are showing that liquidation has been minimal since the tabulation date of the COT report on December 31. February WTI remains on a short and intermediate term sell signal, and there has not been a rally to allow for the initiation of new bearish positions. On December 30, we recommended short call positions for more adventurous clients. Continue to hold this position. As we said in yesterday’s report, rallies will likely be muted by massive numbers of speculators who will be selling into any rally in order to trim losses. The decline in crude oil prices is all the more spectacular considering there has been a decline in stocks and in this week’s EIA report stocks continued their decline.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 357.9 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 6.2 million barrels last week, and are in the lower half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 5.8 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 3.5 million barrels last week and are well below the lower limit of the average range. Total commercial petroleum inventories increased by 3.1 million barrels last week.

Brent crude oil:

February Brent crude oil advanced 62 cents on heavier than normal volume of 613,238 contracts. Volume was the highest since December 10 when 823,589 contracts were traded. On January 7, total open interest increased by 5,109 contracts, which relative to volume is approximately 55% below average, however, the February contract lost 33,938 of open interest, which makes the total open interest increase much more impressive (bullish). The increased volume accompanied by an increase of open interest on the price advance is positive and explains why Brent has not generated in intermediate term sell signal, though it remains on a short-term sell signal. Stand aside. We much prefer the bearish side of WTI.

Natural gas:

February natural gas lost 7 ticks on fairly heavy volume of 358,959 contracts. Volume was the highest since December 20 when 360,146 contracts were traded. On January 7, total open interest increased by 11,073 contracts, which relative to volume is approximately 20% above average. The February contract lost 5,217 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on January 8, February natural gas is trading 4.7 cents lower on the day. Ever since natural gas topped out on December 23 at $4.578, we have been warning that natural gas was vulnerable to reversing. As a result, we recommended shorting out of the money calls on rallies of 10-15 cents. A close under $4.267 would be a very negative development for February natural gas. February natural gas remains on a short and intermediate term buy signal, but it looks like a short-term sell signal is imminent.

Euro:

The March euro lost 18 pips on volume of 166,136 contracts. Total open interest declined by 1,345 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on January 8, the March euro is trading 48 pips lower on volume that is heavier than January 7, and will generate a short-term sell signal today. According to the COT report compiled on December 31 managed money is long by ratio of 2.30:1. The heavy net long position of manage money will add fuel to a continued downside move.

Dollar index: The March dollar index will generate a short and intermediate term buy signal on January 8.

Swiss franc: On January 7, the March Swiss franc generated a short-term sell signal, but remains on an intermediate term buy signal.

British pound:

The March British pound advanced 2 pips on light volume of 63,812 contracts. Total open interest declined by 135 contracts, which is minuscule and dramatically below average. As this report is being compiled on January 8, the March British pound is trading 43 pips higher. We have said consistently the British pound would outperform the euro and Swiss franc. Unfortunately, the Sterling Swiss cross is massively overbought, however the Sterling euro cross is much less so. Now that the March Swiss franc has generated a short-term sell signal, it increases the likelihood of a countertrend rally, which may relieve the overbought condition of Sterling Swiss.

Gold:

February gold lost $8.40 on volume of 149,321 contracts. Total open interest increased by 2,005 contracts, which relative to volume is approximately 45% less than average. However, the open interest build on a price decline is bearish open interest action. Stand aside. Gold remains on a short and intermediate term sell signal.

Platinum:

April platinum lost $1.00 on volume of 7,873 contracts. Total open interest declined by a massive 735 contracts, which relative to volume is approximately 250% above average meaning that liquidation was extremely heavy. Though open interest action relative to price has been acting negatively, the price action of platinum has been outstanding. The problem with platinum and to a much greater degree silver and gold is that interest rates are rising and the dollar is strengthening. Additionally, there is a deflationary cycle occurring across the board in commodities. Platinum remains on a short-term buy signal, which was generated on January 2 and an intermediate term sell signal. We like the long side of platinum, but the aforementioned cross currents could prevent platinum from moving significantly higher from here.

Silver:

March silver lost 31.6 cents on volume of 43,368 contracts.Total open interest increased by a massive 2,513 contracts, which relative to volume is approximately 120% above average meaning that new short sellers were aggressively initiating positions in silver and driving prices lower. We have consistently seen negative open interest action relative to price advances and declines, which means a short-term buy signal is not in the cards. Stand aside.

S&P 500 E mini:

The March S&P 500 E mini advanced 10.00 points on low volume of 1,168,700 contracts. Total open interest increased by 12,243 contracts, which relative to volume is approximately 50% below average.We continue to recommend long put protection for those clients who hold on equity positions.