March soybeans gained 14.50 cents on volume of 167,399 contracts. Open interest increased by 3,107 contracts, which in relation to volume is approximately 10% below average. The March contract lost 5,902 of open interest. From January 18 through February 4, open interest has increased by 65,759 contracts, while March soybeans have advanced 58.50 cents. Soybeans made a new high for the move at $14.98, which is the highest price since December 17, 2012 when March soybeans made a high of $15.0 1 1/4. The bean complex looks healthy, and setbacks in soybeans should be used to implement bullish positions. Sell stops should be placed at or slightly below 14.55.
March soybean meal gained $6.10 on volume of 63,578 contracts. Open interest increased by a massive 4,571 contracts, which in relation to volume is approximately 185% above average, meaning that new longs were entering the market in heavy numbers and pushing prices higher. Note the difference between soybeans, soybean meal regarding the percentage of open interest relative to volume. From January 14 through February 4, open interest has increased 48,882 contracts while March soybean meal has advanced $30.00.
March soybean oil gained 12 points on volume of 77,802 contracts. Open interest declined by 2,616 contracts, which in relation to volume is approximately 25% above average. Soybean oil is the only commodity in the soybean complex that is on a short and intermediate term buy signal.
March corn lost 1.75 cents on volume of 185,054 contracts. Open interest increased by 5,492 contracts, which in relation to volume is approximately 5% above average. Ever since generating a short-term buy signal on January 22, corn has been a major disappointment, and as this report is being compiled, March corn is trading 8.50 cents lower. Corn is trading near its 50 day moving average, and could generate a short-term sell signal any day.
March wheat lost 2 cents on volume of 74,348 contracts. Open interest increased by 3,678 contracts, which in relation to volume is approximately 85% above average. Although weather conditions for the winter wheat crop are abysmal, the spread between wheat and corn continue to narrow. We suspect in the not-too-distant future, wheat will be a terrific buy, but for now it remains on a short and intermediate term sell signal. Clients should stand aside.
March crude oil lost $1.60 on volume of 443,143 contracts. Volume was the lowest since January 28 when 393,687 contracts were traded and open interest increased by 714 contracts while March crude oil gained 56 cents. On February 4, open interest declined by a minuscule 2,413 contracts, which in relation to volume is approximately 75% below average. It is somewhat surprising that open interest declined by such a minor amount considering the move lower was the larger than January 23, when crude oil declined $1.45 on volume of 950,824 contracts and open interest increased by 15,463 contracts. In short, the price, volume and open interest action on February 4 was extremely positive, however, we remain concerned about oil’s overbought status relative to its 50 and 200 day moving averages and the long to short ratio of over 9:1. We continue to recommend a stand aside position.
March copper lost 1.60 cents on volume of 55,004 contracts. Open interest increased by 710 contracts, which in relation to volume is approximately 45% less than average. During the past 5 days, open interest has increased every day bringing the total to 16,862 contracts while copper has advanced 10.70 cents. This is bullish congruent price and open interest action. As we have said before, it remains to be seen whether copper has the momentum to move significantly above resistance of $3.84. It is important to note that copper has been rallying with equities, and if a major correction develops, we expect copper to follow equities lower.
April gold advanced $5.80 on very low volume of 121,512 contracts. Volume was the lowest since December 31 when 96,449 contracts were traded and April gold closed at $1678.00. On February 4, April gold closed at 1676.40. Also on February 4, open interest declined by 332 contracts, which is minuscule and dramatically below average. During the past 2 sessions, gold has advanced $14.60 while open interest has declined 868 contracts. This is bearish.
From the February 1 gold report: “We want to point out that during the most recent three-day advances: January 29 + $9.80 (open interest -8200), January 30 + $18.90 (open interest +419) and February 1 + $8.80 (open interest -537) total open interest has declined by 8,318 contracts.”
In short, we are seeing a consistent pattern of negative open interest action relative to price advances in gold. Gold remains on a short and intermediate term sell signal.
April platinum gained $10.40 on volume of 13,406 contracts. Volume was higher than January 28 when 13,140 contracts were traded and platinum declined by $32.70 while open interest increased by 280 contracts
From the February 1 report: “Since generating a short and intermediate term buy signal on January 11, open interest has increased on 13 days with only 2 days of declining open interest (January 22 and January 29).”
February 4 makes it 14 days that open interest has increased since platinum generated a short and intermediate term buy signal on January 11. We continue to caution clients to stand aside because of the overbought situation on a price basis and the stratospheric long to short ratio.
March silver lost 24.2 cents on volume of 39,516 contracts. Open interest increased by 1,995 contracts, which in relation to volume is approximately 85% above average meaning that new shorts were entering the market in fairly heavy numbers and driving prices lower. March silver generated a short-term buy signal on January 23, and has pulled back which is typical after generating a buy signal, but has not had much upside momentum. If the low of $31.62 holds on February 5, silver would have had 4 consecutive days of higher lows, but has not had higher highs in this period. If silver reverses down to $30.50, a retest of the low of $29.24 made on January 4 is highly probable. Silver remains on a short-term buy signal.
The March euro declined by 1.42 cents on volume of 279,341 contracts. Volume declined by approximately 126,000 contracts from February 1 when the euro gained 87 points and open interest increased by 1,506 contracts. On February 4, open interest declined a surprising 104 contracts which is minuscule and dramatically below average. Remarkably, the decline on February 4 was the largest of the past 4-5 months, yet open interest was essentially unchanged relative to volume. Although the market has bounced back on February 5, after making a low of 1.3462, we tend to think the correction has more to go. We continue to like the euro, but perhaps more work needs to be done, before it can take another leg higher. The euro remains on a short and intermediate term buy signal.
S&P 500 E mini:
The S&P 500 E mini lost 13.25 points on volume of 1,773,741 contracts. Like crude oil, and the euro, open interest declined by a minuscule amount despite the E mini having its largest setback of 2013. As we said in yesterday’s report, we expected the market to retest the high of 1510.50 made on February 1, but clients should not be long the E mini at current levels. It is preferable to be long stocks and etfs in strong sectors that have pulled back close to their 50 day moving averages. Sell stops should be in place for all positions.