May Chicago corn closed 9 1/2 cents lower on extremely light volume of 212,940 contracts. Open interest declined by 6,492 contracts. The market made a fractional new high at $6.75 1/4 per bushel, and then reversed to make the daily low at 6.62. The lack of volume on the reversal is surprising and was lower than the previous day’s volume of 231,992 contracts, which was the lowest volume for the year. This tells me that speculators are not convinced the market is going lower. However, the long side of corn is a very crowded trade. As I’m writing this on March 20, corn is currently $.12 lower. Corn is on a buy signal, but I suggest speculators stand aside.
May Chicago soybeans closed 7 1/2 cents lower on extremely light volume of 145,195 contracts. Open interest increased by 12,651 contracts. The market made a fractionally new high at $13.78 per bushel, which was 1/2 cent higher than the previous day. The light volume is surprising considering that the trading range was 25 1/2 cents, which is significantly above its 21 day average true range of 17 7/8 cents. As a matter of fact, volume on March 19 was the lowest since January 27, 2012 when volume reached 101,330 contracts. Like corn, this tells me speculators are not convinced the market is going much lower. In my March 18 weekend wrap, I described the market action in soybeans in March of 2008, and showed how markets can fall very quickly when speculators perceive that prices could fall further than they thought. I’m not saying the rally is over, but in my opinion one should not be long at current levels. Soybeans are a very crowded trade on the long side. As I’m writing this on March 20 soybeans are down 18 cents.
May New York sugar closed 25 points higher on fairly light volume of 97,257 contracts. Open interest increased a whopping 8,945 contracts. The market made a new high for the move at 25.71 cents per pound, which is shy of the high made on February 27, 2012 (25.81 cents per pound). The low volume tells me participation in the market was limited, but those that participated felt very strongly about the direction of sugar. As of last Thursday, March 15 sugar has been on a buy signal. As I have said before, wait for setbacks before entering long positions. Sell stops should be placed based upon risk tolerance and sound money management principles.
May New York crude oil closed $1.50 higher on light volume of 576,077 contracts. Open interest declined by 10,239 contracts. The market made a high of $108.70, which was only fractionally higher than the high of $108.65 made on March 9, 2012. The high of the move occurred on February 27, 2012 when crude reached $110.26. Since that time, the market has essentially been trading sideways to lower. My concern about crude is its price action combined with the low volume that is occurring on rallies. Looking at Friday’s action on March 16 and the action of March 19, crude oil has advanced a total of $3.45, but the net increase in open interest for those two days has been only 4,800 contracts. Stand aside.
April New York gasoline closed higher by 1.09 cents on volume of 143,601 contracts. Open interest increased by 1,320 contracts. The market rallied up near the old high made on March 1 of $3.3868 per gallon, but couldn’t hold its gains and closed about two cents lower off its high of 3.3846. It has become obvious that the market struggles when it gets up to the higher end of the range. Stand aside and wait for lower prices.
April gold closed higher by $11.50 on volume of the 164,753 contracts. Open interest declined on the rally by 3,964 contracts. The market is on a sell signal and savvy speculators should be determining at what price they wish to acquire gold. The gold market looks very tired and appears to want to go lower. Therefore, speculators should keep this idea front and center to avoid entering the market prematurely. Gold is clearly in its value area, but this doesn’t mean the market cannot go lower. A retest of the late December 2011 low of $1523.00 per ounce is likely if April gold breaks down to $1630 per ounce.
May silver closed $.35 higher on very light volume of 36,062 contracts. Open interest increased by 959 contracts. The light volume on the rally is telling me there is little enthusiasm for silver at these levels. As I mentioned yesterday, the daily low in silver needs to be above the key pivot point of $32.88 per ounce for a buy signal to be generated. Stand aside.
The June Euro closed 66 points higher on very light volume of 230,678 contracts. Open interest declined by 4,020 contracts. Volume dropped off a cliff on March 19 compared to the two previous days (316,551 and 353,949 contracts) when the Euro rallied. The market made a high for the move at 1.3272, which is the highest price since March 9. As mentioned before, the March 8 high of 1.3299 should be used to exit all bearish positions.
S&P 500 E mini:
The June S&P 500 E mini closed 5.50 points higher on volume of 1,526,372 contracts. Open interest declined by 676,329 contracts. The reason for the massive open interest decline was that the March contract went off the board. Protective long puts should be in place.
The June 10 year note closed 21 points lower on volume of 1,236,144 contracts. Open interest increased by 7,562 contracts. The note market continues to look extremely weak, and rallies are nonexistent. The market went on a sell signal last week, but unfortunately there have not been rallies to put on positions. Wait for a rally to the 128-28 area before implementing bearish positions.