Soybeans:

May soybeans advanced 9.25 cents on volume of 222,838 contracts. Total open interest increased by 8,315 contracts, which relative to volume is approximately 45% above average meaning that new longs were aggressively entering the market and driving prices higher. The March contract accounted for loss of 360 of open interest. The May contract made a high of 14.12 1/2, and then promptly sold off from the highs. It appears that new longs were faked out by yesterday’s move because after making the daily high, promptly sold off, and this continues on Friday as the May contract is trading 10.50 lower, and has taken out yesterday’s low of 13.80 3/4. We think a short-term sell signal in soybeans is imminent. Although soybeans remain on a short and intermediate term buy signal, bullish positions should have been liquidated leaving clients with only short call positions.

Soybean meal:

May soybean meal advanced $5.40 on volume of 86,099 contracts. Total open interest increased by 389 contracts, which is approximately 75% below average. The March contract lost 193 of open interest and May – 451. As this report is being compiled on March 14, May soybean meal is trading $1.10 lower on the day and has not taken out yesterdays low of 434.10. Like soybeans, we think May soybean meal will generate a short-term sell signal perhaps next week.

Soybean oil: Liquidate bullish positions and short calls

May soybean oil lost 43 points on volume of 75,445 contracts. Total open interest increased by 57 contracts. The March contract lost 354 of open interest and May – 1194. May soybean oil has closed lower for 5 consecutive days ever since it topped out on March 7 at 45.05. As this report is being compiled on March 14, May soybean oil is trading 64 points lower and has made a new low for the move at 42.26. Since topping out on March 7, soybean oil has been the underperformer and through March 13 has declined 3.37% versus May soybeans -2.90%, May soybean meal -2.00%. Because we think soybeans have topped, soybean oil remains vulnerable, at least in the short-term. We recommend closing out bullish positions along with the short call position and move to the sidelines. Another factor is that the equity market appears vulnerable to continued downside action, and depending upon the magnitude of the decline, could negatively impact commodity markets. 

Corn:

May corn lost 3.50 cents on volume of 225,487 contracts. Total open interest declined by 4,112 contracts, which relative to volume is approximately 25% below average. The March contract lost 635 of open interest and May -9956. As this report is being compiled on March 14, May corn is trading 5.50 lower and has made a new low for the move at $4.78 1/2. We think there is a high probability that corn topped out on March 7 when the May contract reach 5.02 1/2. We also believe that corn is highly vulnerable to the downside because managed money is extraordinarily long the corn market. Also, it is apparent that the crisis in the black sea region and Ukraine specifically is not impacting corn the same way as wheat. Corn remains on a short and intermediate term buy signal. We have no recommendation.

Chicago wheat:

May Chicago wheat lost 10.00 cents on heavy volume of 133,465 contracts. Total open interest increased by 6,655 contracts, which relative to volume is approximately 100% above average. The March contract lost 14 of open interest. The total open interest increase on the decline is bearish, but it is reminiscent of the hefty open interest increase in soybeans when the move in soybeans was an upside fake out, just as the wheat move yesterday was a downside fake out. As this report is being compiled on March 14, May wheat is trading 8.75 higher, but has not taken out yesterdays high of $6.96 1/2.

The trajectory of wheat is going to depend upon this weekend’s election in Crimea and any possible fallout that would further exacerbate the political turmoil in Ukraine. We want to point out that if today’s high as a secondary high, the market will definitely have a further pullback. Also, if the tensions in Crimea lessen, we could expect to see a strong pullback in wheat due to the overbought condition of the market. We strongly advise taking partial profits. We think the market has discounted much of the situation in Crimea, and although there could be another spike higher. Wheat is well overdue for correction, and the 20 day moving average stands at $6.31 1/4 while the 50 day is 6.01 1/4. We urge that stops be tightened on bullish positions.

Kansas City wheat:

May Kansas City wheat lost 11.00 cents on volume of 21,001 contracts. Total open interest increased by 426 contracts, which relative to volume is approximately 20% below average. The March contract lost 5 of open interest and May lost 869, which makes the total open interest increase more impressive (bearish). Much of what we said about Chicago wheat is applicable to KC wheat. We strongly suggest that clients take partial profits. Stops should be tightened to mitigate risk on remaining bullish positions.

Live cattle:

April live cattle lost 25 points on heavy volume of 82,941 contracts. Total open interest increased by 531 contracts, which relative to volume is approximately 60% less than average. The April contract lost 9,947 of open interest. As this report is being compiled on March 14, April cattle is trading 1.50 cents higher and has made a new high for the move of 1.45500, which is below its contract high of 1.46825 made on March 5. Maintain bullish positions recommended in late December.

WTI crude oil:

April WTI crude oil gained 21 cents on heavier than normal volume of 686,106 contracts. Total open interest declined by 4,722 contracts, which relative to volume is approximately 60% less than average. The April contract lost 30,067 of open interest. Since topping at 105.22 on March 3 through March 13, May WTI has lost 5.81% compared to May Brent which has outperformed by losing only 3.30%. We think the spread will continue to widen with Brent taking the lead away from WTI as the situation in Ukraine most affects Europe and therefore Brent crude oil. On March 12, April WTI generated a short-term sell signal, but remains on an intermediate term buy signal. Brent remains on a short and intermediate term buy signal. In yesterday’s report, we recommended writing out of the money calls in WTI, or alternatively to wait for a rally before initiating bearish positions. As this report is being compiled on March 14, April WTI is trading 48 cents higher while May Brent is trading $1.23 higher.

Natural gas:

April natural gas lost 10.7 cents on volume of 308,649 contracts. Total open interest declined by 10,171 contracts, which relative to volume is approximately 35% above average meaning that liquidation was fairly heavy on the decline. The April contract lost 15,318 of open interest. The low in the April contract $4.355, is the lowest print since January 31 (4.335). As this report is being compiled on March 14, April natural gas is trading 5.3 cents higher on the day. We have no recommendation at this juncture.

Euro:

The March euro lost 44 pips on huge volume of 562,086 contracts. Volume traded on March 13 was the highest in at least one year. As on March 13, total open interest increased by 21,320 contracts, which relative to volume is approximately 50% above average. This is a huge number for the euro and it appears the sharp move to new highs (1.3967) and the reversal was likely the cause. As this report is being compiled on March 14, the June euro is trading 52 pips higher and has made a daily high of 1.3937 , but has not taken out yesterday’s high. The euro remains on a short and intermediate term buy signal. We have no recommendation. 

Yen:

The March yen gained 100 pips on huge volume of 366,715 contracts. Volume was the highest since June 13 when 469,324 contracts were traded. On March 13, total open interest declined by 12,601 contracts, which relative to volume is approximately 40% above average meaning that liquidation was heavy on a major advance. As this report is being compiled on March 14, the June yen is trading 24 pips higher and has made a new high for the move at .9886. Although the yen has risen sharply during the past couple of days, it will not generate a short or intermediate term buy signal on March 14. When we have no recommendation.

Gold:

April gold advanced $1.90 on fairly heavy volume of 217,799 contracts. Total open interest declined by 2,778 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on March 14, April gold is trading $5.50 higher and has made a new high for the move at 1388.40. Maintain bullish positions recommended in the February 6 report.

Silver:

May silver lost 16 cents on volume of 46,261 contracts. Total open interest increased by 1,107 contracts, which relative to volume is approximately 10% below average, but it is disappointing to see open interest increase on a rather modest decline. As this report is being compiled on March 14, May silver is trading 20.2 cents higher and has made a new high for the move at $21.795, which is its highest print since February 26. Maintain bullish positions recommended in the February 6 report.

S&P 500 E mini:

The March S&P 500 E mini lost 21.00 points on huge volume of 3,491,657 contracts. The huge volume can be attributed to the expiration of the March contract and the switching into the June E mini. As this report is being compiled on March 14, the E mini is trading 1.00 point lower and has made a new low for the move at 1832.25. With the slowing of the Chinese economy and the tensions in Ukraine and Crimea along with concerned about the strength of the US economy, we think the path of least resistance for the E mini and major indices is lower. Maintain the long call position recommended on February 21, coupled with long puts to protect positions in the event of a major decline if you are holding long equity positions.