Soybeans:

May soybeans advanced 19.75 cents on heavy volume of 224,385 contracts. Volume was the highest since the February 27 when 427,926 contracts were traded and May soybeans lost 7.00 cents while total open interest declined by 14,723 contracts. On March 7, total open interest declined by 5,514 contracts, which relative to volume is average. The liquidation was widespread with March losing 681 of open interest, May -5,873, July -2,370. Soybeans made a new high for the move at 14.60 on March 7, and as this report is being compiled on March 10 after the release of the WASDE report, May soybeans are trading 24.50 cents lower and have made a low of 14.14. We will provide the result of the report tomorrow. We have been cautioning clients about the overbought situation in soybeans, especially by managed money. It appears on March 7, that market participants decided to liquidate fairly substantially on a healthy advance, which is clearly a negative, especially in the light of today’s action. We have recommended shorting out of the money calls for those clients who hold bullish positions, and the short call position should continue to be held, but clients should have sell stop protection in place if positions have not already been liquidated as recommended on March 5. Conceivably, Friday’s high may be the top of the market. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

May soybean meal advanced  $6.90 on volume of 77,169 contracts. Total open interest declined by 642 contracts, which relative to volume is approximately 55% less than average. The March contract lost 491 of open interest and May -3,060. On Friday, May soybean meal made a high of $459.20, which is the highest print since 464.60 made on March 3. As this report is being compiled on March 10, May soybean meal is trading $8.60 lower and has made a daily low of 445.80, which is the lowest print since 444.80 made on February 25 . Like soybeans, maintain short call positions recommended on February 27  with sell stops on bullish positions if bullish positions have not been liquidated as recommended on March 5. OIA thinks the top is in on soybean meal and this occurred at 472.90 on February 27. Soybean meal remains on a short and intermediate term buy signal.

Soybean oil:

May soybean oil lost 17 points on volume of 94,385 contracts. Total open interest declined by 2,099 contracts, which relative to volume is approximately 10% below average. There was liquidation across the board with March losing 405 of open interest, May -2679, July -1287. As this report is being compiled on March 10, May soybean oil is trading fractionally lower on the day and is the strongest component of the bean complex. However, clients have healthy profits on the trade and we recommend maintaining the short call position in soybean oil along with fairly tight sell stop protection on bullish positions. If in fact soybeans are rolling over, which we think is the case, soybean oil will be taken down with it. Soybean oil remains on a short and intermediate term buy signal.

Corn:

May corn lost 2.00 cents on heavy volume of 392,664 contracts. Volume was the highest since March 3 when 549,381 contracts were traded and May corn advanced 7.00 cents while total open interest increased by 19,072 contracts. On March 7, total open interest increased by 465 contracts, which is minuscule and dramatically below average. However, the nearby months saw liquidation with March losing 3,352 of open interest, May -259, July – 333. On March 7, May corn made a new high for the move at $5,02 1/2, which is the highest print since $5.13 on September 3, 2013. As this report is being compiled on March 10 after the release of the USDA report, May corn is trading 12.75 cents lower on the day on heavy volume. We have been writing about the massive long position of managed money, and as we pointed out in the weekend report, there will be plenty of fuel for a downside move once managed money realizes the top is likely in for corn, at least in the short-term.

From the March 9 Weekend Wrap:

“In last weekend’s report, we wrote about the large net long position of manage money, and according to this week’s COT report, they have increased long positions to a level last seen in early April and late March of 2013. The last time the long to short ratio approached the level of this week’s COT report occurred in the report of April 2, 2013 when the long to short ratio reached 2.43:1 In the report tabulated on March 26, 2013, the ratio reached 3.62:1. On April 2, 2013, May corn closed at $6.42 and on March 26, 2013, May corn closed at 7.34 3/4.”

“We have no idea whether the USDA is going to raise exports, however, based upon the current reading for managed money in the COT report, they are all in on the long side. This makes the market vulnerable to a sharp correction if there is a disappointment.”

Chicago wheat:

May Chicago wheat advanced 8.00 cents on heavy volume of 126,176 contracts. Volume was the highest since March 3 when 213,769 contracts were traded and May Chicago wheat advanced 29.25 cents while total open interest declined by 8,891 contracts. On March 7, total open interest declined by 3,822 contracts, which relative to volume is approximately 20% above average meaning that liquidation was heavier than normal. The March contract lost 68 of open interest and May -6,608. As this report is being compiled on March 10, May Chicago wheat is trading 7.00 cents lower. March 10 is going to be a very negative day for the grains, and we have recommend that sell stops be tightened to protect profits. May Chicago wheat remains on a short and intermediate term buy signal.

Kansas City wheat:

May Kansas City wheat gained 8.00 cents on volume of 21,622 contracts. Total open interest declined by 614 contracts, which relative to volume is average. There was liquidation across the board with March losing 37 contracts of open interest, May -1198, July -62. As this report is being compiled on March 10, May KC wheat is trading 5.25 cents lower on the day. We have recommended that sell stops on bullish positions be tightened because the entire grain complex is in a correction mode. May KC wheat remains on a short and intermediate term buy signal.

Live cattle:

April live cattle gained 10 cents on volume of 57,231 contracts. Total open interest increased by 1,027 contracts, which relative to volume is approximately 25% less than average. The April contract lost 5,555 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on March 10, April cattle is trading unchanged on the day. Maintain bullish positions, but be prepared for a consolidation move of sideways to lower. Ultimately, we think cattle prices are headed higher.

WTI crude oil:

April WTI crude oil advanced $1.02 on volume of 525,729 contracts.Total open interest declined by 7,164 contracts, which relative to volume is approximately 45% less than average. The April contract lost 16,674 of open interest. As this report is being compiled on March 10, April WTI crude is trading $1.22 lower and has made a daily low of 100.85, which is above the low of 100.13 made on March 6.Though crude oil is on a short and intermediate term buy signal, we have no recommendation to make and have no strong position about the market at this juncture.

Natural gas:

April natural gas lost 4.4 cents on extremely light volume of 195,843 contracts. Total open interest declined by 3,360 contracts, which relative to volume is approximately 25% less than average. The April contract lost 4,409 of open interest. As this report is being compiled on March 10, April natural gas is trading 2 cents higher on the day. April natural gas remains on a short and intermediate term buy signal, and we have no recommendation at this juncture. 

 Euro:

The March euro advanced 11 pips on healthy volume of 264,447 contracts. Volume declined from the 354,273 contracts traded on March 6 when the March euro advanced 1.30 cents and total open interest increased by 10,255 contracts. On March 7, total open interest increased by 3,979 contracts, which relative to volume is approximately 40% below average. The March euro made a new high for the move at 1.3915, which broke above the previous high of 1.3893 made on December 27. As this report is being compiled on March 10, the March euro is trading 16 pips higher but has not taken out Friday’s high. The euro remains on a short and intermediate term buy signal. We have no recommendation.

British pound: This will be our last report in the pound until we see a trading opportunity.

The March British pound lost 13 pips on volume of 123,236 contracts. Total open interest increased by 4,922 contracts, which relative to volume is approximately 50% above average meaning that both longs and shorts were aggressively entering the market, but the shorts had a slight edge. As this report is being compiled on March 10, the March pound is trading 1.00 cent lower and has made a low of 1.6620, which is its lowest price since 1.6615 made on February 27. The pound remains on a short and intermediate term buy signal. We have no recommendation.

Yen: On March 7, the March yen generated a short and intermediate term sell signal. This will be our last report until we see a trading opportunity.

The March yen lost 24 pips on volume of 163,917 contracts. Total open interest declined by 3,890 contracts, which relative to volume is approximately 5% below average. As this report is being compiled on March 10, the March yen is trading 19 pips lower, but has not taken out Friday’s low of .9637.

Australian dollar: On March 7, the March Australian dollar generated an intermediate term buy signal after generating a short-term buy signal on February 7.

The March Australian dollar lost 28 pips on volume of 105,937 contracts. Total open interest increased by 3,630 contracts, which relative to volume is approximately 40% above average meaning there was a battle between longs and shorts and shorts had the edge. As this report is being compiled on March 10, the March Australian dollar is trading 76 pips lower and has made a low of 90.08. This is fairly typical action after a market generates a buy signal, and in this case an intermediate term buy signal.

Gold:

April gold lost $13.60 on heavy volume of 201,134 contracts. Volume was the highest since January 30 when 221,410 contracts were traded and April gold closed at $1242.50. On March 7, total open interest declined by 2,991 contracts, which relative to volume is approximately 40% less than average, but it is healthy to see open interest decline when price declines. April gold made a low on Friday of 1326.60, which is its lowest print since 1319.30 made on February 28. As this report is being compiled on March 10, April gold has made a daily low of 1327.50 and is currently trading $2.40 higher on the day. During the past several days beginning on February 24, April gold has been trading in a range between 1318.70-1355.00. We consider this to be healthy considering the overbought condition of April gold. For example, the year to date moving average for April gold is 1280.60 and the 20 day average is 1324.30. As we have pointed out in our weekend reports, managed money does not believe in the rally and in the last week, we have heard financial commentators claiming they were short gold. Until this mindset changes, we expect gold to grind its way higher. Maintain bullish positions recommended in the February 6 report.

Silver:

May silver lost 64.6 cents on volume of 66,901 contracts. Total open interest increased by 896 contracts, which relative to volume is approximately 45% less than average. As this report is being compiled on March 10, May silver is trading 2.5 cents lower after making a new low for the move at $20.61, which is its lowest print since February 14 (20.48). If silver penetrates today’s low, we would turn negative. The price and open interest action silver has been disappointing, and clearly gold and platinum are the leaders. Silver may be the victim of the terrible performance of copper. Maintain long straddles-strangles and long call positions recommended in February 6 report. If silver is unable to hold above today’s low of 20.61, the long call position should be liquidated. 

Copper:

May copper lost 13.55 cents on heavy volume of 105,688 contracts. Volume was the highest since November 13 when 111,803 contracts were traded and May copper closed at $3.1785. On March 7, total open interest increased by a massive 8,259 contracts, which relative to volume is approximately 210% above average meaning that new short sellers were heavily entering the market and driving copper to new contract lows. As this report is being compiled on March 10, May copper has made another contract low at $2.9955. This is the lowest price on the copper continuation chart since October 3, 2011 ($3.00). Copper remains on a short and intermediate term sell signal. We have no recommendation.

10 year Treasury notes: On March 7, June treasury notes generated a short-term sell signal, but remains on an intermediate term buy signal.

June treasury notes lost 15 points on heavy volume of 1,727,281 contracts. Total open interest increased by 9,382 contracts, which relative to volume is approximately 70% less than average. As this report is being compiled on March 10, the 10 year treasury note is trading 5 points higher, but has not taken out Friday’s low of 123-10.5, which is the lowest print since January 29. After the generation of a sell signal, the market has a tendency to rally from 1-3 days, which is the opportunity to initiate bearish positions.

S&P 500 E mini:

The March S&P 500 E mini advanced 1.75 points on volume of 1,805,593 contracts. Total open interest declined by 16,324 contracts, which relative to volume is approximately 55% below average. We encourage readers to check out the March 9 Weekend Wrap in which we compared the returns of the current bull market versus 2002 and 2007. It clearly shows the current market is massively overbought and as a result long positions are at risk if a normal correction morphs into something worse. We strongly encourage long put protection for those clients who hold long equity positions coupled with long out of the money calls.