Soybeans:

May soybeans advanced 13.75 cents on very light volume of 148,109 contracts. Volume was the lowest since January 31 when 144,422 contracts were traded and May soybeans closed at $12.68 1/2. Additionally, volume declined from the 196,968 contracts traded on March 3 when May soybeans lost 4.75 cents and total open interest declined by 4,879 contracts. On March 4, total open interest declined by 4,353 contracts, which relative to volume is approximately 20% above average meaning that liquidation was fairly substantial on the advance. The March contract lost 1,994 of open interest and May -3,449. 

The action on March 4 was abysmal and the very low volume accompanied by a decline of open interest on the advance only confirms our thesis that soybeans have topped. On February 28, May soybeans advanced 24 cents on low volume of 194,661 contracts and this time, total open interest declined by 795 contracts . In short, we have seen 2 days when soybean prices advanced on low volume and open interest declined. This is bearish. On February 27, we recommended to tighten stops in any long soybean positions and write out of the money calls. As this report is being compiled on March 5, May soybeans are trading 13.25 cents lower. If holding long positions, pare these to a minimum, or liquidate the position entirely. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

May soybean meal lost 80 cents on very light volume of 61,991 contracts. Total open interest increased by 2,016 contracts, which relative to volume is approximately 25% above average meaning there was a battle between longs and shorts and neither side was able to move the market much. The March contract lost 1,997 of open interest. Like soybeans, we think soybean meal has topped and on February 27 advised clients to write out of the money calls and tighten stops on remaining positions. At this juncture, long positions should be at a minimum with tight sell stops, and our preference is to liquidate long positions entirely.

Soybean oil:

May soybean oil advanced 1.33 cents on volume of 89,947 contracts. Surprisingly volume declined from the 93,001 contracts traded on March 3 when May soybean oil advanced 59 points and total open interest declined by 1,527 contracts. On March 4, total open interest increased by 1,842 contracts, which relative to volume is approximately 20% below average, but this is the first total open interest increase since February 26 when March soybean oil advanced 61 points and total open interest increased by 2575 contracts. The March contract lost 1,081 of open interest. If we begin to see further open interest increases on advances, this would be a potential sign of a top or short-term top. It would likely be indicative of speculators climbing aboard at the high-end of the range, which is almost always a negative. Stay with bullish positions recommended on February 10, and with the short call position. As the report on soybean indicates, we think soybeans are in the process of rolling over, and this will most definitely affect the trading of soybean oil. Soybean oil remains on a short and intermediate term buy signal.

Corn:

May corn advanced 13.75 cents on volume of 385,236 contracts. Volume declined from the 549,381 contracts traded on March 3 when May corn advanced 7 cents and total open interest increased by 19,072 contracts. On March 4, total open interest increased by 12,563 contracts, which relative to volume is approximately 25% above average meaning that new longs were aggressively entering the market and driving May corn prices to a new high (4.85). As this report is being compiled on May 5, May corn is trading 2.25 cents higher and has made a new high for the move at $4.88. March 3 is the tabulation date for the COT report, which will be released this Friday, and we expect managed money to have significantly increased their long positions and further decreased their short positions. As we pointed out in last weekend’s report, managed money is long by a stratospheric number that matches the highs last seen in June 2013. Although the market looks strong, and May corn is on a short and intermediate term buy signal, the fact remains farmers are holding large supplies of corn. Corn has been given a lift by the political troubles in Ukraine, but if this lessens to any degree, sales of cash corn could increase dramatically.

Chicago wheat: It is likely that May Chicago wheat will generate an intermediate term buy signal on March 5. Chicago wheat generated a short-term buy signal on February 5.

May Chicago wheat advanced 12.00 cents on volume of 104,317 contracts. Volume declined from the 213,769 contracts traded on March 3 when May wheat advanced 29.25 and total open interest declined by 8,891 contracts. On March 4, total open interest declined by 4,261 contracts, which relative to volume is approximately 55% above average. The March contract lost 347 of open interest, May – 4,805, July – 172.  It is remarkable that May wheat has rallied approximately $1.00 from the lows, but total open interest increases are rare. It is apparent that speculative shorts are getting blown out of the market, but the question remains: will there be new buyers entering the market to take wheat prices to new highs. As this report is being compiled on March 5, May Chicago wheat is trading 1.75 lower and has not taken out yesterday’s high of $6.45  3/4, which is the high for the move. If long, stay with bullish positions, but tighten sell stops. Our preferred trade is Kansas City wheat.

Kansas City wheat:

May Kansas City wheat advanced 9.50 cents on light volume of 18,971 contracts. Total open interest declined by 327 contracts, which relative to volume is approximately 25% less than average. The March contract lost 141 of open interest and May – 445. It is difficult to get to back-to-back increases of open interest when prices advance and KC wheat obviously has its share of bearish players based upon fairly consistent declines of open interest on price advances. As this report is being compiled on March 5, May KC wheat is trading 0.25 cent higher but has not taken out yesterdays high of 7.12 1/2, which has been the high for the move. Like Chicago wheat, the question remains whether new longs are willing to enter the market at current prices to drive them ever higher Continue to hold bullish positions recommended on February 5, but make sure that sell stops are relatively tight. If the situation in Ukraine improves, the market could take a tumble rapidly.

Live cattle:

April live cattle advanced 1.50 on volume of 71,222 contracts. Total open interest increased by 4,612 contracts, which relative to volume is approximately 160% above average meaning that new longs were aggressively entering the market and driving April cattle prices to new contract highs (1.46300). The April contract lost 3,499 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on March 5, April cattle is trading 2.40 lower and has made a low of 1.42625. Expect to see more volatility and occasional shake outs before cattle prices finally top out. We think the market has further to go on the upside. Maintain bullish positions initiated in late December 2013.

WTI crude oil:

April WTI crude oil lost $1.59 on light volume of 467,847 contracts. Total open interest declined only 568 contracts. The April contract lost 9,106 of open interest. The fact that total open interest declined only fractionally, is very positive considering that open interest has increased every day since February 21. As this report is being compiled on March 5, April WTI is trading 1.39 lower and has made a low of $101.71, which takes out the low of 101.75 made on February 27. Although the market continues to act well, we have no strong conviction about WTI at this juncture. April WTI remains on a short and intermediate term buy signal.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the previous week. At 363.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories decreased by 1.6 million barrels last week, but are above the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.4 million barrels last week but are below the lower limit of the average range for this time of year. Propane/propylene inventories rose 0.5 million barrels last week but are near the lower limit of the average range. Total commercial petroleum inventories increased by 2.2 million barrels last week.

Natural gas:

April natural gas advanced 17.5 cents on low volume of 262,811 contracts. Volume was slightly above the 259,107 contracts traded on March 3 when April natural gas declined by 11.7 cents and total open interest declined by 14,315 contracts. On March 4, total open interest declined by 5,816 contracts, which relative to volume is approximately 10% below average, but a total decline of open interest coupled with low volume indicates a complete lack of enthusiasm for the upside of natural gas. The April contract lost 9,749 of open interest. As we have been saying in past reports, we think natural gas prices have topped and that the path of least resistance is lower. However, if the low for the day in the April contract is above $4.578, it is likely that a rally would be likely. As this report is being compiled on March 5, April natural gas is trading 15.3 cents lower on the day. Natural gas remains on a short and intermediate term buy signal.

Euro:

The March euro declined 20 pips on volume of 162,054 contracts. Total open interest increased by 1,849 contracts, which relative to volume is approximately 45% below average. As this report is being compiled on March 5, the March euro is trading unchanged on the day. The euro remains on a short and intermediate term buy signal. We have no recommendation.

British pound:

The March British pound advanced 14 pips on light volume of 90,150 contracts. Total open interest declined by 1,853 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on March 5, the March pound is trading 53 pips higher and has made a high of 1.6740, which is its highest print since 1.6715 made on March 3. The pound remains on a short and intermediate term buy signal. We have no recommendation.

Yen:

The March yen lost 79 pips on light volume of 140,563 contracts. Total open interest increased by 3,458 contracts, which relative to volume is average. There is no question the open interest increase on March 4 is negative, however this was coupled by a strong advance in the major equity indices based upon relief that the chaos in Ukraine may be tamped down.  Additionally, the yen and the S&P 500 are inversely correlated, and it would be expected to see a pullback in the yen after the generation of the intermediate term buy signal on March 3. As this report is being compiled on March 5, the March yen is trading 11 pips lower and has made a low of .9752, which is its lowest price since February 26 (.9746). The yen remains on a short and intermediate term buy signal. As mentioned in yesterday’s report, we suggested that clients initiate long call positions in the yen and use the February 21 low of .9725 as an exit point.

Gold:

April gold lost $12.40 on volume of 147,412 contracts. Total open interest declined by 2,035 contracts, which relative to volume is approximately 40% less than average. Gold continues to act well and for the past 4 days including March 5, the lows in April gold have been higher. Low volumes in gold continue to reinforce the idea that many market participants are on the sidelines, or just not interested in gold. For this reason, we continue to think higher prices are in store, and for those not involved, the low of February 28 ($1319.30) should be used as an exit point for new positions. Maintain bullish positions recommended on February 6.

Platinum:

April platinum advanced $3.40 on volume of 14,435 contracts. Total open interest increased by a massive 1,063 contracts, which relative to volume is approximately 185% above average meaning that new longs were aggressively entering the market and driving prices to new highs for the move (1467.60). As this report is being compiled on March 5, April platinum is trading sharply higher again and has made a new high for the move at $1489.00, which is the highest price on the continuation chart since September 9, 2013 when the high print was 1499.40. April platinum generated a short-term buy signal on February 14 and an intermediate term buy signal on February 24.

Silver:

May silver lost 26.3 cents on volume of 47,903 contracts. Total open interest declined by 1,110 contracts, which relative to volume is approximately 10% below average. May silver made a low of $21.040, which is in its area of support going back to February 26. As this report is being compiled on March 5, May silver is trading 4.1 lower on the day. Maintain the long straddle, strangle, or long call position recommended in the February 6 report.

S&P 500 E mini:

The March S&P 500 E mini advanced 28.50 points on volume of 1,768,546 contracts. Total open interest increased by 23,463 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on March 5, the E mini is trading unchanged on the day and has taken out yesterday’s high with a new high print of 1875.50,a new all-time high. Maintain the long call position recommended on February 21 to offset the loss in the long put position, which we recommend for clients who hold long equity positions.