March soybeans lost 26.50 cents on surprisingly light volume of 222,974 contracts. Total open interest declined by 9,816 contracts, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy, though volume was rather moderate considering the magnitude of the decline. The March contract accounted for a loss of 12,219 of open interest.
As this report is being compiled on January 31, the March contract is trading nearly unchanged on the day and has not taken out yesterday’s low for the move of 10.19 1//4, which is the lowest print since 10.06 made on January 12. The March contract is getting close to generating short and intermediate term sell signals and short term sell will occur when the daily high is below OIA’s key pivot point for January 31 of 10.26.
The COT report released last Friday and tabulated on January 25 showed that managed money massively increased their net long position and added 46,569 contracts to their long positions and liquidated 2,313 of their short positions. Commercial interests liquidated 277 of their long positions and added 27,486 to their short positions.
This left managed money long by a massive 8.62:1, up sharply from the previous week of 6.13:1 and nearly double the ratio two weeks ago of 4.42:1. In summary there are massive numbers of speculators who are now showing losses and will be forced to liquidate as prices move lower. We think it is likely that a short term sell signal will be generated in the next day or two and this will accelerate the downtrend. Stand aside.
Live cattle: On January 30, April live cattle generated a short term sell signal and remains on an intermediate term buy signal.
April live cattle lost 2.50 cents on volume of 64,291 contracts. Total open interest declined only slightly (1,012) considering the magnitude of the move, which relative to volume is approximately 40% below average. Most of the decline of open interest occurred in the February contract (2,461), which enters first notice day, however the April 2017 contract which comprises the bulk of open interest lost only 323.
This tells us that longs are digging in and refusing to liquidate. The COT report released on Friday revealed that managed money is massively long live cattle and added 7,726 contracts to their long positions and also added 4,366 to their short positions. Commercial interests added 1,264 to their long positions and also added 5,293 to their short positions. As a result, according to the latest report, managed money is long live cattle by ratio of 7.92:1, though this is down sharply from the previous week of 10.41:1 and the ratio two weeks ago of 9.67:1. Call or email for recommendations.
March natural gas lost 12.6 cents on volume of 322,362 contracts. Total open interest increased only 721 contracts, which is dramatically below average. The February contract lost 400 of open interest and March gained 74. As this report is being compiled on January 31, the downtrend the natural gas continues and is trading 9.2 cents lower on the day and has made a daily low of 3.110, which is the lowest print since 3.110 made on January 10.
Natural gas has fallen precipitously after making its high of 3.902 on December 28. On January 4, OIA announced that March natural gas generated short and intermediate term sell signals. Remarkably, the COT report released on Friday showed that managed money remains heavily long natural gas. The report revealed that managed money liquidated 8,553 of their long positions and added 15,298 to their short positions. Commercial interests liquidated 5,285 of their long positions and also liquidated 15,053 of their short positions. This leaves managed money long natural gas by a ratio of 2.24:1, down from the previous week of 2.69:1 but approximately the same as the ratio two weeks ago of 2.23:1.Stand aside.
Dollar index: The March dollar index will generate an intermediate term sell signal on January 31 after generating a short term sell signal on January 12. We will provide a report on today’s activity tomorrow.
Mexican peso: On January 30, the March Mexican peso generated a short term buy signal, but remains on an intermediate term sell signal.
The March Mexican peso advanced 38 pips on volume of 40,503 contracts. Total open interest increased by 1,944 contracts, which relative to volume is approximately 75% above average meaning aggressive new buyers were entering the market and driving prices to a new high for the move .04815, the highest print since .04813 made on December 30.
The COT report revealed that leverage funds are heavily short the peso by a ratio of 3.38:1, which means there are substantial numbers of speculative short-sellers who continue to be bearish near the all-time bottom.
We think the short side of the peso has been played out for now and that the trend will be irregularly higher from here. All the bad news is already in the market and there could be some positive surprises to send the peso sharply higher.
Now that the Mexican peso is on a short term buy signal, it should pullback for the next 1-3 days and this will be the opportunity to enter bullish positions. As this report is being compiled on January 31, the March contract is down 16 pips on the day. Wait for another day or two before initiating bullish positions. We recommend using options for this trade.