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The USDA will release its grain stocks and World Agriculture Supply Demand report on January 12.

Soybeans: On January 2, March soybeans generated a short term sell signal and remains on an intermediate term sell signal.

March soybeans lost 16.00 cents on volume of 109,475 contracts. Total open interest increased by 7,063 contracts, which relative to volume is approximately 150% above average meaning that new short sellers were entering the market in large numbers and driving prices to a new low for the move of 10.07, which is the lowest print since 9.98 1/4 made on December 4.

Additionally, making the total open interest increase more bearish was the January contract, which accounted for loss of 3,232 of open interest. As this report is being compiled on January 5 , March soybeans are rallying 37.50 cents, which is typical after the generation of a sell signal. Usually, after the generation of a sell signal there tends to be a counter trend rally lasting from 1-3 days and this is the most opportune time to initiate bearish positions.Wait for another day before considering new bearish positions, and keep in mind the January 12 report released by the USDA will likely have a major impact on the market. Stand aside and wait for at least another rally day.For the sell signal to reverse, the low of the day in the March contract must be above OIA’s key pivot point for January 5 of 10.49 1/4.We think this is highly unlikely.

Soybean meal: On January 2, March soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal.

March soybean meal lost $7.20 on volume of 41,975 contracts. Total open interest declined by 2,317 contracts, which relative to volume is approximately 120% above average meaning that liquidation was extremely heavy on the decline. The January contract accounted for loss of 1,176 of open interest, March 2015 -2446. As this report is being compiled on January 5, March soybean meal is having its first┬áday of a counter trend rally after generating the short-term sell signal. Wait for another day before considering bearish positions.For the sell signal to reverse, the low the day must be above OIA’s key pivot point for January 5 of 358.10. We think this is highly unlikely.

Corn:

March corn lost 1.25 cents on volume of 136,905 contracts. Total open interest increased by 1,862 contracts, which relative to volume is approximately 40% less than average, however, the March contract lost 8,154 of open interest, which makes the total open interest increase more impressive (bearish). January 2 was the 3rd day in a row that total open interest increased and prices declined. From December 30 through January 2, March corn has declined 17.00 cents and total open interest has increased 11,282 contracts.

The 3 day consecutive build of open interest on 3 days of price declines spells big trouble for bulls in the market. It shows that longs are not liquidating insufficient numbers, which will add selling pressure as prices continue to move lower.On January 2, March corn made a low of 3.91 1/2, which is the lowest print since 3.89 1/4 made on December 10. Although corn has not yet generated a short-term sell signal, in our view this would appear to be inevitable.For a short-term sell signal to occur, the high of the day must be below OIA’s key pivot point for January 5 of 3.93 3/8. The rally will resume if the low of the day is above OIA’s key pivot point for January 5 of 4.01 7/8. Stand aside.

Chicago wheat: On January 2, March Chicago wheat generated a short-term sell signal, but remains on an intermediate term buy signal.

March Chicago wheat lost 8.50 cents on volume of 52,582 contracts. Total open interest increased by 3,085 contracts, which relative to volume is approximately 140% above average meaning that aggressive new short sellers were entering the market in large numbers and driving prices to a new low for the move (5.74 3/4), which is the lowest print since 5.73 1/2 made on December 11. The March 2015 through July 2015 contracts all gained open interest.

For the past 3 days beginning on December 30, March Chicago wheat has lost 35.25 cents and open interest has increased by 1,141 contracts during the 3 day period. This spells big trouble for wheat bulls as prices begin to move lower, longs will be forced to sell at ever lower prices.According to the most recent COT report, managed money is long Chicago wheat by ratio of 1.34:1, which is the highest since May 27, 2014 when they were long by ratio of 1.44:1. In short managed money has significantly more liquidation ahead.

Kansas City wheat: On January 2, March Kansas City wheat generated a short-term sell signal, but remains on an intermediate term buy signal.

Live cattle:

February live cattle advanced 2.125 cents on volume of 38,266 contracts. Total open interest increased by a massive 3,747 contracts, which relative to volume is approximately 275% above average. The February 2015 to October 2015 contracts gained open interest. The price and open interest action was bullish, and was the best performing day on the upside in several weeks. As this report is being compiled on January 5, February live cattle is trading 82.5 points higher and has made a daily high of 1.66875, which takes out the previous high of 1.66525 made on December 30.

In order for February live cattle to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for January 5 of 1.66115. It looks like a short-term buy signal is imminent, especially because of the very positive price and open interest action on January 2. Additionally, live cattle prices tend to top in the month of February.The February contract will generate an intermediate term buy signal if the low the day is above OIA’s key pivot point for January 5 of 1.65.790. In summary a short and intermediate term buy signal could be generated as early as tomorrow.

WTI crude oil:

February WTI crude oil lost 58 cents on volume of 446,248 contracts. Total open interest increased by 6,298 contracts, which relative to volume is approximately 40% below average. The February contract accounted for loss of 2,936 of open interest. As this report is being compiled on January 5, February WTI crude oil is trading $2.20 lower and has made a new contract low of 49.95, breaking below $50 for the first time in over 5 1/2 years.Stand aside.

Natural gas:

February natural gas advanced 11.4 cents on volume of 244,951 contracts. Total open interest increased by 3,284 contracts, which relative to volume is approximately 45% less than average. The February contract lost 4,869 of open interest. As this report is being compiled on January 5, February natural gas is trading 2.1 cents lower after making a daily high of 3.176, which is the highest print since 3.178 made on December 30. On December 1 OIA announced that natural gas generated a short and intermediate term sell signal. Stand aside.

Gold:

February gold advanced $2.10 on volume of 128,663 contracts. Total open interest increased by 3,538 contracts, which relative to volume is average. As this report is being compiled on January 5, February gold is trading sharply higher, up $17.40 and has made a daily high of 1204.40, which takes out the high print of 1203.90 made on December 31. As we have said in prior reports, we think the worst for the yellow metal is over and that open interest action has been very positive indicating that higher prices are likely in the short-term.

There has been a considerable amount of chop in prices, but prices always recover after declining for a day or two. On December 11, February gold generated a short-term buy signal, and this signal has never reversed despite intermittent pullbacks.The uptrend will be confirmed when February gold makes a daily low above OIA’s key pivot point for January 5 of 1203.70. Once this occurs, bullish positions can be initiated.

Cocoa:

March cocoa advanced $17.00 on volume of 18,853 contracts. Total open interest increased by 219 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on January 5, March cocoa has closed at 2944, up $17.00. In order for the rally to continue, the low the day must be above OIA’s key pivot point for January 5 of 2956.One factor that could possibly send cocoa significantly higher would be if the Ebola virus spreads into the Ivory Coast and Ghana. On December 31, we recommended that clients exit cocoa, and we continue to advise a sideline stance.

Coffee:

March coffee lost 5.55 cents on volume of 16,931 contracts. Total open interest increased by a massive 1685 contracts, which relative to volume is approximately 300% above average meaning aggressive new short sellers were entering the market in large numbers and driving prices to a new low for the move (1.6020).

We examined our records for the month of December, and could find only one day in which open interest increased greater than January 2. This occurred on December 1 when March coffee advanced 2.95 cents on huge volume of 26,729 contracts and total open interest increased by 6,132 contracts.Keep in mind that coffee was trading in the 1.90 area on December 1. From December 2 through January 2 during the huge slide in prices, the highest open interest increase recorded occurred on January 2.

The reason we bring this up is because we have found that outsized increases/decreases of open interest when prices are making new lows/highs can be indicative of major bottoms/tops. In the case of coffee, the massive increase of open interest represents all the Johnny-come-lately’s getting on board thinking that prices are headed lower.As this report is being compiled on January 5, March coffee has closed sharply higher, up 7.05 cents and has closed near the high of the day.

We are not saying the slide in prices is over yet. We think the market has more work to do on the downside before mounting a sustainable rally. However, the volume on January 5 is very heavy, and if we see a massive increase of open interest, this may confirm the worst of the coffee price decline is for over for the most part. March coffee remains on a short and intermediate term sell signal.