Corn:
For the week, May corn lost $.10 per bushel. The commitment of traders report, which was tabulated on Tuesday and released Friday showed that in the money managed category, speculators closed out 10,563 contracts of their long positions, and added 6,513 contracts to their short positions. Commercial interests liquidated 15,342 contracts of their long positions, and added 20,022 contracts of their short positions.
I am getting increasingly bearish on corn. The market was not able to sustain a rally and made its high of 665 1/4, on Monday, but could not follow through. The high for the week nearly touched the 200 day moving average of 668. The 200 day moving average has been acting as resistance going back to October 2011. The open interest action for the period of Monday, March 5 through Thursday, March 8 (Friday’s open interest is not available until Monday) confirm that the corn market is losing upside momentum. During that period, corn lost 19 1/2 cents, or 2.98% and open interest increased by 23,968 contracts. This is bearish price and open interest action. Another red flag is that May corn’s 50 day moving average (643) is $.25 under its 200 day moving average. Based upon corn’s performance during the past couple of months, it is unlikely that the 50 day is going to cross above the 200 day moving average anytime soon. Another worrisome sign for corn is that the old crop versus new crop spread is narrowing. The long July 2012 versus short December 2012 spread topped out on February 28 at 93 3/4 cents. On Friday the spread had narrowed 10 1/4 cents to 82 1/2 cents. The reason why this is significant is that old crop corn is in a far tighter fundamental position than new crop corn. Private forecasters have indicated that new crop corn plantings could be at a record high. The weakness in old crop vis-à-vis new crop does not bode well for corn prices near term.
Soybeans:
For the week, May soybeans closed 4 3/4 cents higher. The commitment of traders report showed that in the managed money category, speculators added 25,466 contracts to their long positions, and liquidated 9,714 contracts of their short positions. Commercial interests liquidated 1,433 contracts of their long positions and added 32,692 contracts to their short positions.
With the prospect of a sharply higher dollar, speculators have to be willing to stand aside and wait for a signal to get back into the markets. If we see lower prices for equities and petroleum products, I believe corn and soybeans will follow.
Sugar #11:
For the week, May sugar lost 1.30 cents. The commitment of traders report showed that in the managed money category, speculators liquidated 6,790 contracts of their long positions and liquidated 683 contracts of their short positions. Commercial interests liquidated 10,173 contracts of their long positions, and also liquidated 15,619 contracts of their short positions.
Crude oil:
For the week, April crude oil gained $.70. The commitment of traders report showed that in the money managed category, speculators liquidated 6,455 contracts of their long positions, and also liquidated 12,402 contracts of their short positions. Commercial interests added 29,511 contracts to their long positions, and also added 19,653 contracts to their short positions.
Gasoline:
For the week, April gasoline added 6.03 cents. The commitment of traders report showed that in the managed money category, speculators added 3,901 contracts to their long positions, and also added 1,084 to their short positions. Commercial interests added 5,150 contracts to their long positions, and also added 6,713 contracts to their short positions.
The risk on the downside for both crude oil and gasoline is the very real possibility of a sharply higher dollar, which is a major negative for petroleum. Just as I pointed out in the S&P 500 E mini commentary, crude oil and gasoline seem to be at critical juncture. If crude oil and gasoline continue to move higher, they will present a major negative to the equity markets. Also, it appears that the fears of a confrontation with Iran is lessening, if only temporarily. Stand aside.
Gold:
For the week, gold added $1.70. The commitment of traders report showed that in the money managed category, speculators liquidated 31,557 contracts of their long positions, and added 1,488 contracts to their short positions. Commercial interests added 2,978 to their long positions, and liquidated 29,699 contracts of their short positions.
Silver:
For the week, may silver lost $.31. The commitment of traders report showed that in the managed money category, speculators liquidated 6,722 contracts of their long positions, and added 1,354 contracts to their short positions. Commercial interests liquidated 643 contracts of their long positions, and also liquidated 4,733 contracts of their short positions.
The prospect of a higher dollar and its impact on the precious metals market cannot be overstated. Although I am friendly to both markets, in the short term, a major break in the Euro could send both gold and silver lower.
Euro:
For the week, the March Euro closed 99 points lower. The commitment of traders report showed that leveraged funds added 5,268 contracts to their long positions, and also added 1,688 to their short positions. The March Euro closed at 1.3107 on Friday.
The close of 1.3107 (basis March) was significantly below my key pivot point of 1.3248. If the market is unable to breach the pivot point on Monday, March 12, a sell signal will be generated. The reversal on Friday is bad news for the Euro, and possibly many other markets
S&P 500 E mini:
For the week, the March S&P 500 E mini added 3.80 points. The commitment of traders report showed that leveraged funds added 26,156 contracts to their long positions, and also added 68,308 contracts of their short positions.
Based upon the close of the S&P 500 E mini of 1372.50, the market is two points from the high close of 1374.50 made on March 1. The market is at a critical juncture, and it comes at a time when it appears that the Euro is headed significantly lower, which is bearish. Although we experienced a rally in the S&P 500 E mini and commodities during Friday’s dollar rally, this kind of market action is anomalous. If the Euro moves significantly lower, the dollar index will rise. Also, the market is trading at highs last made in early May 2011. If the S&P 500 fails to make a new high, I believe that sellers will move in. On the other hand, the market could take out the old high and then reverse. The key area to watch is 1380 for the S&P 500 cash index. If the market moves to the 1380 level, but no higher than 1390 and then reverses down to 1350, it is likely this will be the high for the year. If the market moves to 1390, then another leg higher is in the offing.
