February 6 was a low volume day in a variety of markets. The markets which displayed lower than normal volume were: corn, gasoline, copper, gold, 10 year treasury notes, and the S&P 500 E mini. Low volume in Apple has been apparent for the last couple of days. For example, the past 20 day average volume has been 11,858,000 shares and the past 90 days volume is average 12,396,400 shares. However, the volume between February 1 and February 6 has averaged 8,866,000 shares, despite the fact that Apple advanced $7.49 and has been making new all-time highs. The reason that continued low volume is important to watch for is that it can be the first sign that the market may correct. I believe markets correct, not because people are selling at the top, but because there is an absence of buyers at the top. As prices advance, more and more people are reluctant to make commitments at ever-increasing prices. As the price advance stalls, sellers begin to take profits and that starts the downward cycle.
March corn closed nearly unchanged on low volume of 252,480 contracts. Open interest increased by a massive 24,372 contracts. Open interest has increased every day since January 26 and from January 26 through February 6, open interest has increased 66,516 contracts. The price performance of corn has been disappointing to say the least as it rose a minuscule 9 3/4 cents. In my view, no one should be involved in this market on the long or short side until after the USDA crop report, which will be released on Thursday, February 9. The build up in open interest indicates to me that there is going to be an explosive move. Stand aside.
March soybeans closed essentially unchanged on volume of 195,743 contracts. Open interest increased by 8384 contracts. As I said in the report of February 3, I am friendly to soybeans, but no new position should be taken until after the USDA crop report’s release on Thursday.
March sugar closed higher by 56 points for the second day of gains on heavy volume of 157,451 contracts. Open interest continued to increase by 6160 contracts. The key pivot point to watch is 24.86. Until the low the day is above that pivot point, continue to stand aside.
March crude oil closed $.86 lower on volume of 682,698 contracts. Open interest increased by 14,312 contracts. Open interest has been increasing in crude oil every day since January 23. During this time crude oil is declined $1.31. Stand aside.
March gasoline closed higher by 1.35 cents on low volume of 99,822 contracts. Open interest declined 2702 contracts. Stand aside and wait for lower prices before entering into long positions.
March copper closed 3.70 cents lower on low volume of 49,065 contracts. Open interest increased by 338 contracts. As I’ve said before, I do not like the fact that open interest has been increasing on declines. Although the market may advance and take out its high of 3.94, unless open interest action is more positive, there is no reason to be involved in this market. Stand aside.
April gold closed $15.40 lower on volume of 144,425 contracts. Open interest increased on the declined by 631 contracts. Stand aside and wait for lower prices.
March silver closed unchanged on 48, 947 contracts. Open interest increased by 898 contracts. Stand aside.
The March euro closed 29 points lower on low volume of 280,208 contracts. Open interest declined 2076 contracts. Stand aside.
S&P 500 E mini:
The March S&P 500 E mini closed unchanged on extremely low volume of 1,197,654 contracts. Open interest declined by 6804 contracts. I find it troubling that such low volume would be manifested when the market is at the very high end of its move. As I’ve said many times before, long put protection should be in place.
10 Year March Treasury Notes:
March 10 year treasury notes closed 11 points higher on very low volume of 723,269 contracts. Open interest increased by a minuscule 1182 contracts. The trading dynamic in notes is similar to that of copper. Both are at the very high end range and the good money has already been made for the most part. There is no reason to be involved in notes at this juncture.