March soybeans advanced 23.00 cents on heavy volume of 398,629 contracts. Total open interest exploded higher, up 28,683 contracts, which relative to volume is approximately 185% above average. Yesterday, the March contract made a high of $10.75 1/2 and as this report is being compiled on January 18 this has been taken out slightly and the March contract currently is trading up 7.50 cents on the day. On January 13, March soybeans generated a short term buy signal and the market has not yet had its typical pullback. We continue to recommend a stand aside posture for bullish positions until such time as March corrects for at least 1-3 days.
March soybean meal advanced $14.90 on heavy volume of 247,814 contracts. Total open interest exploded higher, up 11,786 contracts, which relative to volume is approximately 75% above average. The March contract accounted for a loss of 612 open interest. As this report is being compiled on January 18, the March contract is trading 3.40 higher and has only slightly taken out yesterday’s high of 352.40, which is the highest print since July 2016. Like soybeans, meal is massively overbought and those that are inclined to enter bullish positions should wait for a correction lasting 1-3 days.
Chicago wheat: On January 17, March Chicago wheat generated an intermediate term buy signal after generating a short term buy signal on January 5.
March Chicago wheat advanced 7.50 cents on strong volume of 182,639 contracts. Total open interest increased by 607 contracts, a disappointment considering the magnitude of the move and that the March contract made a high of 4.37 1/2, which is the highest print since November 3, 2016. The July 2017 contract accounted for a loss of 1,459 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in July and increase total open interest by a number that was approximately 85% below average.
As we pointed out previously, managed money is heavily short Chicago wheat and according to the report issued last Friday they were short by a ratio of 2.16:1, though this was down from the previous week of 2.40:1 and the ratio two weeks ago of 2.55:1. The danger for short-sellers is that during the past three sessions beginning on January 12, March wheat has advanced 14.75 cents and total open interest increased during each of the three days, which indicates short-sellers are not capitulating. In summary, wheat is trading at the highest level in approximately 2 1/2 months, yet short-sellers are not budging. This means as prices continue to move higher short-sellers will be forced out of positions and send wheat still higher. Call for recommendations.
March corn gained 7.00 cents on heavy volume of 491,173 contracts. Total open interest increased by 10,213 contracts, which relative to volume is approximately 20% below average. The March and July 2017 contracts lost a total of 645 of open interest. Yesterday, corn made a new high for the move of 3.66 1/2 and this has been taken out with another new high of 3.67 3/4 on January 18, which takes out the previous high of 3.64 3/4 made on December 13. Corn currently is trading at the highest level in over three months. On January 5, March corn generated short and intermediate term buy signals and the path of least resistance appears to be higher at this juncture.
February gold advanced $16.70 on very heavy volume of 425,929 contracts. Total open interest increased by 13,513 contracts, which relative to volume is approximately 15% above average. The February contract lost 420 of open interest. Yesterday, the February contract made a high of 1218.90 and this has not been taken out on January 18. The impetus for the move higher in recent days has been the decline in the dollar and gold prices should continue to advance as long as the dollar is weak.
On January 5, OIA announced that February and April 2017 gold generated short term buy signals. However they remain on intermediate term sell signals. For an intermediate buy signal to occur, the low of the day must be above OIA’s key pivot point for January 18 of 1220.10. We recommend a stand aside posture because we think though the dollar is in the corrective mode, it will resume its advance in the near future. This will likely crush gold prices.
The March dollar index lost 86.8 points on volume of 62,610 contracts. Total open interest increased by 513 contracts, which relative to volume is approximately 55% below average, but an open interest increase on yesterday’s decline indicates that new short-sellers were entering the market and driving prices to a new low for the move of 100.235, the lowest print since 99.49 made on December 8.
As this report is being compiled on January 18, the March contract is trading up 58 points. We tend to think the dollar has further to go on the downside and though it is a crowded trade on the long side, this does not preclude a move to new contract highs. On January 12, OIA announced the March dollar index generated a short term sell signal and remains on an intermediate term buy signal. At this juncture, continue to stand aside.
British pound: the March British pound remains on short and intermediate term sell signals.
The March British pound advanced 2.11 cents on heavy volume of 337,240 contracts. It should be noted that volume represented two days of trading activity, which began in the afternoon session on Martin Luther King’s birthday and continued through Tuesday. Though the advance was impressive, the open interest action was distinctly negative, declining 1,200 contracts, which is approximately 80% below average.
Yesterday the pound made a high of 1 2431, which is the highest print since 1.2449 made on January 6, but made a new contract low of 1.2001, which took out the previous contract low made shortly after the Brexit vote. As this report is being compiled on January 18, the pound has reversed course and currently is trading 1.01 cents lower on the day. Continue to stand aside.