Soybeans:

May soybeans advanced 13.00 cents on volume of 168,629 contracts. Volume increased from the 156,494 contracts traded on March 18 when May soybeans advanced 26.50 cents and total open interest declined by 3,206 contracts. On March 19, total open interest declined by a massive 13,205 contracts, which relative to volume is approximately 210% above average meaning that large numbers of market participants were liquidating as soybean prices advanced to new highs for the move (14.42). The May contract lost 8,391 of open interest and July -5,673. This is the second day in a row that soybean prices have advanced and open interest has declined. This is bearish. As this report is being compiled on March 20, May soybeans are trading 4.25 cents lower and has made a low of 14.22 1/4, but also made a new high for the move at 14.56 1/2, which is 3.50 cents short of the high of 14.60 made on March 7. We think there is a good chance that today’s high is the extent of the move. Soybeans remain on a short and intermediate term buy signal. We have no recommendation.

The USDA announced that 202.24 thousand metric tons (tmt) had been sold, which brings total commitments to 1.632.6 billion bushels (bb) versus USDA projections for the season of 1.530 bb.

Soybean meal:

May soybean meal advanced $6.20 on light volume of 58,912 contracts. Total open interest declined by 749 contracts, which relative to volume is approximately 45% less than average. The May contract lost 1,338 of open interest and July -18. As this report is being compiled on March 20, May soybean meal is trading $1.80 higher and has made a new high for the move at 471.80, which is slightly above the high of 471.50 February 27. We think there is a good chance that the high of March 20 will be the high for the move. Soybean meal remains on a short and intermediate term buy signal. We have no recommendation.

The USDA announced that 242.9 tmt of meal had been sold, which brings total commitments to 8044.8 tmt versus USDA projections for the season of 9888 tmt. Meal sales for the recent week was above the average weekly sale year to date.

Corn:

May corn lost 1.50 cents on volume of 204,733 contracts. Total open interest declined by 674 contracts, which relative to volume is approximately 85% below average. The May contract lost 3,883 of open interest and July -925. As this report is being compiled on March 20, May corn is trading 8.25 lower. We have been warning clients that corn prices appeared to be topping. The long to short ratio of managed money is at a stratospheric level, and was last seen in the COT report of March 26, 2013 when corn was trading in the $7.00 range. May corn remains on a short and intermediate term buy signal. We have no recommendation at this juncture.

From the March 16 Weekend Wrap:

“As remarkable as it is, managed money’s long position exceeds that of March 26, 2013, when the long to short ratio made a high of 3.62:1 and corn closed at $7.34 3/4. From February 26 through March 11, which encompasses 2 COT periods, the long to short ratio has increased from 1.68:1 to 3.78:1, yet May corn prices have advanced only 22.00 cents. We consider this to be a danger sign to anyone long the market. There is extreme bullishness in the market, yet corn’s advance  has been tepid. Although we are unwilling to call a top in the corn market, the massive long position of manage money and the unimpressive performance during the past couple of weeks should give anyone pause about having any significant position in the market.”

“Another reason for caution is that commercials are increasing their net short position and have gone from a short ratio of 1.88:1 on February 25 to being short by 2.30:1 on March 11. In summary as prices have been advancing, commercials were doing what they usually do, which is to protect themselves in the event of a market decline. We suggest if clients are long corn that they do the same. Another important point is that the crisis in Ukraine is not doing much to bolster corn prices and the main effect of the turmoil has been to increase the price of wheat.”

The USDA reported that 745.8 tmt had been sold, which brings total commitments to 1.534 bb versus USDA projections for the season of 1.625 bb.

Chicago wheat:

May Chicago wheat advanced 23.25 cents on heavy volume of 155,953 contracts. Volume was the heaviest since March 3 when 213,769 contracts were traded and May Chicago wheat gained 29.25 cents while total open interest declined by 8,891 contracts. On March 19, total open interest increased by 4,146 contracts, which relative to volume is average. However this is the first time that total open interest has increased by nearly this amount on a price advance since May wheat generated a short-term buy signal on February 5. The July 2014 contract lost 425 of open interest , which makes the total open interest increase more impressive (bullish). There were open interest increases in May 2014 through December 2015 contracts with the exception of the July 2014.

In short, we think yesterday’s open interest increase on heavy volume is a sign of a top, or temporary top. It appears that speculative market participants may be getting long at the top of the range, which is fairly typical. We have been waiting for this signal before recommending defensive measures and advise the initiation of long puts against bullish positions we recommended on February 6. On March 20, May wheat has made another new high at $7.23 1/2, which is the highest print for the May contract since June 26, 2013 when it reached $7.26 1/2. The market is massively overbought and due for correction. The 5 day moving average is 6.94 1/8 and the 20 day moving average is 6.49 1/8.

Kansas City wheat:

May Kansas City wheat advanced 25.00 cents on very heavy volume of 40,185 contracts. Volume was the highest since February 25 when 40,223 contracts were traded as and May KC wheat advanced 7.00 cents while total open interest declined by 3,452 contracts. On March 19, total open interest increased by a massive 7,731 contracts, which relative to volume is approximately 530% above average. The May contract lost 724 of open interest, which makes the total open interest increase much more impressive (bullish). When you combine the massive volume with the astounding increase of open interest on March 19, we conclude that a top or temporary top is in place. As a result, we recommend the initiation of long put positions to protect profits, but will allow clients to participate in further upside. As this report is being compiled on March 20, May KC wheat has made a new high for the move at $7.99, which is the highest print since June 5, 2013 when it reached $7.99 1/4.

The USDA reported that sales of wheat in all categories totaled 401.8 tmt, which brings total commitments season to date of 1.084.5 bb versus USDA projections for the season of 1.175 bb.

Live cattle:

April live cattle advanced 42.5 points on light volume of 42,064 contracts. Total open interest increased by 1,236 contracts, which relative to volume is approximately 20% above average meaning that new longs were entering the market and driving prices to new highs for the move (1.46375). The April contract lost 3,217 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on March 20, April cattle is trading 1.175 cents lower after making a new high for the move and the new contract high of 1.46850, which is slightly above the high of 1.46825 made on March 5. First notice day is April 7, for the April contract, which means there is plenty of time for April cattle to advance to the high of 1.5300 made in the February contract. Maintain bullish positions recommended in late December 2013.

WTI crude oil:

May WTI crude oil advanced 29 cents on heavy volume of 666,208 contracts. Volume was about 3000 contracts below trading on March 18 when April WTI advanced $1.26 and total open interest declined by 21,570 contracts. On March 19, total open interest declined by 827 contracts, which is minuscule and dramatically below average. The April contract accounted for loss of 32,421 of open interest. As this report is being compiled on March 20, May WTI is trading 5 cents lower on the day after making a high of 99.45. On March 12, when WTI generated a short-term sell signal, we recommended shorting out of the money calls, and clients should continue to hold this position. Additionally, more aggressive bearish positions can be initiated using the following parameters:If the low for the day is above $98.76, we recommend liquidating bearish positions. Also, May WTI should not advance much beyond 99.98.

Natural gas:

April natural gas advanced 2.8 cents on extremely low volume of 152,499 contracts. Total open interest increased by 5,199 contracts, which relative to volume is approximately 40% above average meaning that new longs were aggressively entering the market and driving prices fractionally higher. On March 20, April natural gas is trading 11.8 cents lower and has made a new low for the move at $4.349. On March 12, April natural gas generated a short-term sell signal, but remains on an intermediate term buy signal.  As we have said before, we think natural gas will drift lower and trade between $4.16-4.29. The 100 day moving average is 4.18 and natural gas should find support there.

The Energy Information Administration announced that working gas in storage was 953 Bcf as of Friday, March 14, 2014, according to EIA estimates. This represents a net decline of 48 Bcf from the previous week. Stocks were 932 Bcf less than last year at this time and 876 Bcf below the 5-year average of 1,829 Bcf. In the East Region, stocks were 399 Bcf below the 5-year average following net withdrawals of 35 Bcf. Stocks in the Producing Region were 351 Bcf below the 5-year average of 742 Bcf after a net withdrawal of 11 Bcf. Stocks in the West Region were 126 Bcf below the 5-year average after a net drawdown of 2 Bcf. At 953 Bcf, total working gas is below the 5-year historical range.

Euro:

The June euro lost 1.00 cents on volume of 186,611 contracts. Total open interest declined by 79,517 contracts, which was due to the expiration of the March contract. Unfortunately, due to this the open interest stats are distorted. The June contract lost 1,874 of open interest, which relative to volume in the June contract of 185,644 contracts is approximately 50% below average. In other words, market participants are digging in and refusing to liquidate on a fairly significant move lower. As of the latest COT report, managed money is long the euro by a ratio of 2.44:1, which is the highest ratio going back a couple of months. In short, there is plenty of fuel for a continued downside move. As this report is being compiled on March 20, the June euro is trading 54 pips lower and has made a new low for the move at 1.3747, which is the lowest print since March 6 of 1.3722. The euro remains on a short and intermediate term buy signal. We have no recommendation.

Yen:

The June yen lost 94 pips on light volume of 144,245 contracts. Total open interest declined by 81,837 contracts, which is due to the expiration of the March contract. The June contract lost only 753 of open interest, which is approximately 70% below average. The June yen remains on a short and intermediate term sell signal.

British pound: On March 19, the June British pound generated a short-term sell signal, but remains on an intermediate term buy signal.

The June British pound lost 54 pips on light volume of 118,686 contracts. Total open interest declined by 70,720 contracts, which is due to the expiration of the March contract. The June contract lost 623 of open interest, which relative to June volume of 115,884 contracts is approximately 70% below average, meaning that market participants were only lightly liquidating. The most recent COT report showed that managed money was long the pound by a ratio of 3.77:1, which is the highest ratio of the past couple of months. In short there is plenty of fuel for a continued downside move. Usually, after the generation of a sell signal, there is a countertrend rally that lasts from 1-3 days and this will be the opportunity to initiate bearish positions.

Gold:

April gold lost $17.70 on heavy volume of 222,016 contracts. Volume was the highest since March 12 when 270,209 contracts were traded and April gold advanced $23.80 while total open interest increased by 9,107 contracts. On March 19, total open interest declined by 1,441 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on March 20, April gold is trading $9.50 lower. The 50 day moving average is about to cross above the 150 and 200 day moving averages, which is a very positive development. After the correction in gold is over, we expect the uptrend to resume. Gold has been fighting a number of cross currents  recently, one of which was a more hawkish view of the Federal Reserve in the minutes released on Wednesday. Additionally, the dollar index has been climbing, which is also negative for gold and the precious metals.

Silver:

May silver lost 3.6 cents on volume of 55,874 contracts. Total open interest declined by 235 contracts, which relative to volume is approximately 80% below average. As this report is being compiled on March 20, May silver has made a new low of 20.14, and will most likely generate a short-term sell signal on March 20. In the March 17 report, we recommended that clients take profits on bullish positions recommended on February 6. We have no recommendation at this juncture.

S&P 500 E mini:

The June S&P 500 E mini lost 11.50 points on heavy volume of 2,645,975 contracts. Total open interest increased by 48,247 contracts, which is due to the impending expiration of the March contract. As this report is being compiled on March 20, the June E mini is trading 10.75 points higher, but has not taken out yesterday’s high of 1867.50. For those clients who hold long equity positions, continue to hold out of the money calls coupled with long puts.

10 year Treasury Note: On March 19, the June Treasury Note generated a short and intermediate term sell signal.