March soybeans advanced 5.75 cents on volume of 299,132 contracts. Open interest skyrocketed again, up 27,459 contracts, which relative to volume is approximately 300% above average meaning aggressive new buyers were entering the market in large numbers and driving prices to a new high for the move of 10.80. The March 2017 through November 2017 contracts all gained open interest.
As this report is being compiled on January 19, the March contract is trading 1.50 cents lower and has not taken out yesterday’s high. As we have said before, wait for the pullback before initiating bullish positions. The market is substantially overbought and corrections may accelerate due to new longs looking to contain potential losses.
March soybean meal gained $2.30 on volume of 150,342 contracts. Like soybeans, total open interest in soybean meal skyrocketed, this time by 11,346 contracts, which relative to volume is approximately 200% above average and this indicated that new buyers continue to flood into soybean meal and drive it to a new high for the move of $353.70. As this report is being compiled on January 19, the March contract is trading $1.50 lower on the day. Like soybeans, wait for a pullback before considering bullish positions.
The March dollar index advanced 59.8 points on volume of 40,184 contracts. Total open interest declined by 1,626 contracts, which relative to volume is approximately 55% above average. The March dollar index generated a short term sell signal on January 12 and remains on an intermediate term buy signal. For a new short term buy signal to occur the low of the day must be above OIA’s key pivot point for January 19 of 102.635. Stand aside.
10 Year Treasury Note:
The March 10 year treasury note lost 16.5 points on volume of 1,293,571 contracts. Total open interest increased by 26,172 contracts, which relative to volume is approximately 20% below average. Yesterday’s total open interest increase on the sharp decline in the treasury note indicates that new short-sellers were entering the market in substantial numbers.
According to the COT report released last Friday leverage funds were short by ratio of 1.35:1, which is in exactly the same as the previous week, but down somewhat from the ratio two weeks ago of 1.45:1. It appears that the March contract is headed towards a reversal of the short term buy signal generated on January 5. For this to occur, the daily high must be below OIA’s key pivot point for January 19 of 123-255. Stand aside.
WTI crude oil:
March WTI crude oil lost $1.40 on volume of 1,146,028 contracts. Total open interest declined by 25,438 contracts, which relative to volume is approximately 10% below average. The February contract accounted for a loss of 33,612 open interest. As this report is being compiled on January 19, the March contract is trading 28 cents above yesterday’s close and has made a daily high of 52.67 which is substantially below yesterday’s print of 53.61. The March contract is getting close to generating a short term sell signal and this will occur if the daily high is below OIA’s key pivot point for January 19 of $52.34. Stand aside.
S&P 500 E-mini:
The March S&P 500 E-mini gained 3.75 points on light volume of 1,113,892 contracts. Total open interest declined by 625. Ever since the March contract made its initial all-time high of 2273.00 on December 13, the market has been trading in a sideways pattern and made a fractional new high of 2277.00 on January 6.
The earnings season is half over and the market has not been able to make substantial headway despite all the promises made by the new administration. We think the E-mini market is becoming increasingly vulnerable to a sharp downside thrust. Clients should keep in mind that markets top, not necessarily because of smart sellers but because new buying dries up at the high end of the range.
For a short term sell signal to occur, the high of the day must be below OIA’s key pivot point for January 19 of 2253.02. With volatility continuing to be low, clients may want to consider purchases of out of the money puts to protect portfolios.