March soybeans gained 44.75 cents on heavier than normal volume of 230,161 contracts. Volume shrank by approximately 23,000 contracts from January 11, when soybeans declined by 6.50 cents and open interest increased by 1,669 contracts. On January 14, total open interest declined by 679 contracts, which is minuscule and dramatically below average. The March 2013 through August 2013 contracts lost open interest. The rally gave previous longs and shorts an opportunity to exit the market, and they were doing so in droves. The advance on January 14 was the largest since September 12, when soybeans gained 44.25 on volume of 248,828 contracts, while open interest increased by 4,804 contracts. Soybeans need to do more backing and filling before getting close to generating a short and/or intermediate term buy signal. Stand aside.
March soybean meal gained $13.20 on fairly heavy volume of 99,718 contracts. Volume declined nearly 4,000 contracts from the previous day when soybean meal lost $1.30 and open interest increased by a mere 33 contracts. On January 14, open interest increased by a massive 4,680 contracts, which in relation to volume is approximately 75% above average, meaning that new longs were entering the market and pushing prices higher. Like soybeans, soybean meal has more work to do before it gets close to generating a short and/or intermediate term buy signal. Stand aside.
March soybean oil gained 1.21 cents on volume of 129,958 contracts. Open interest increased by 855 contracts, which in relation to volume is approximately 65% less than average. The January and March contracts accounted for loss of 1,683 contracts of open interest, but there was sufficient buying in the back months to bring the total open interest number positive. Surprisingly, the performance of soybean oil has been outstanding in 3 different time frames. First, on a year-to-date basis soybean oil has advanced + 1.51% versus soybeans at +0.60% and soybean meal -0.45%. Since the complex stopped out on September 4, 2012, March soybean oil has lost 14.01% soybeans -17.17% and soybean meal -17.64%. Since November 12, when soybean oil made a major low, through January 14, it has gained 4.62% versus soybeans +2.16% and soybean meal +0.14%. It is highly likely that March soybean oil will generate a short-term buy signal on January 15, but will not generate an intermediate term buy signal. As of the latest COT report released last Friday, managed money is short soybean oil by a ratio of 1.90:1. This is good news for anyone long soybean oil.
March corn gained 15.25 cents on fairly heavy volume of 312,838 contracts. The market made a new high for the move the $7.26 3/4, which was 3 cents above the high of January 11. On January 14, total open interest declined by 1,637 contracts, which in relation to volume is approximately 75% less than average. The March contract alone lost 12,606 contracts of open interest, but there was sufficient buying in the back months to bring the number down to a minor decline. We are friendly to corn, but do not see the market in a rip roaring bull market at this juncture. Corn will need to do some backing and filling in order to get close to generating a short and/or intermediate term buy signal. Although corn has not generated a buy signal, we suggest that clients refrain from the short side. Stand aside
March wheat gained 12.25 cents on heavy volume of 133,462 contracts. Wheat made a new high for the move at $7.77, which took out the high on January 11 of 7.73. Volume declined approximately 57,000 contracts from January 11, when wheat advanced 10.25 and open interest declined by 7,620. On January 14, total open interest increased 100 contracts. As this report is being compiled on January 15, wheat is the star mover having gained 20.75 cents and also making a new high at 7.89 3/4, which took out the January 2 high of 7.88. Like many in the grain complex, wheat is going to have backing and filling to do before it gets close to generating a short and/or intermediate term buy signal. Stand aside.
February crude oil gained 58 cents on volume of 580,792 contracts. Open interest increased by 4,533 contracts, which in relation to volume is approximately 60% less than average. From January 8 through January 14 open interest has increased by 29,778 contracts while February crude oil has gained 95 cents. The open interest action relative to price is positive, but barely so. The market does not seem to generate much enthusiasm on the upside, however it is steady and setbacks are shallow. We think that clients should continue to stand aside, even though crude is on a short and intermediate term buy signal. The 50 day moving average for February crude is $89.03, and the market never pulled back once the short and intermediate term buy signals were generated.
February natural gas gained 4.6 cents on volume of 364,834 contracts. Open interest increased by 8,603 contracts, which in relation to volume is average. The action on January 14 was the opposite of January 11 when natural gas gained 13.4 cents and open interest declined by 18,386 contracts. As this report is being compiled on January 15, February natural gas has advanced 8.4 cents. Stand aside.
March copper lost 2.00 cents on heavy volume of 61,895 contracts. Volume was the highest since November 30 when 72,832 contracts were traded and March copper closed at $3.6500, after making a low of 3.5920. On January 14, open interest increased on the decline by 1,064 contracts, which in relation to volume is approximately 15% below average. As we have mentioned before on a number of occasions, a large volume increased on a move higher or lower, very often signifies a top, either longer-term or temporarary. In the case of copper on January 14, it made a low of $3.6330, which was the lowest price since December 31 when it made a low of 3.5815. However, the low of January 14 has been taken out by a new low of 3.6060 on January 15, which means that more downside maybe likely. We see no reason to be involved in copper at this juncture, despite it is on a short and intermediate term buy signal.
February gold gained 8.80 on volume of 161,039 contracts. Open interest declined by 4,709 contracts, which in relation to volume is approximately 20% above average, meaning that liquidation was fairly substantial on the modest advance. Gold has more work to do in order to form a base from which a bull move can occur. Stand aside.
April platinum gained $27.00 on volume of 15,723 contracts. Open interest increased by 1,233 contracts, which in relation to volume is approximately 210% above average meaning that new buyers were very aggressive and moving prices sharply higher. On January 14, the December 12 high of 1650.50 was taken out, and as this report is being compiled on January 15, April platinum has made a new high for the move at 1706.80 and has advanced by $28.90. The news that rocketed the market higher beginning in the overnight session was the closure of the Anglo American platinum mine. As we discussed in the Weekend Wrap of January 13, the economics of platinum mining have been deteriorating for quite some time. The strike by South African miners a couple of months ago has halted production for platinum and gold. On January 11, platinum generated a short and intermediate term buy signal. Platinum is extremely overbought, and clients should wait for a good-sized pullback before contemplating long positions.
March silver gained 70.2 cents on volume of 46,910 contracts. Volume declined by approximately 6,000 contracts from January 11 when 52,787 contracts were traded and silver declined by 51 cents, while open interest declined by 1,486 contracts. On January 14, open interest increased by 619 contracts, which in relation to volume is approximately 45% below average. For the past 3 days, open interest action relative to price has been acting in a bullish fashion, meaning that open interest increases when prices advance and decline as silver prices decline. The market has more work to do before getting close to generating a short term buy signal, but it looks increasingly likely that an intermediate term buy signal will be generated soon.
The March British pound lost 35 points on volume of 101,236 contracts. Open interest declined by 1,022 contracts, which in relation to volume is approximately 50% less than average. Stand aside.
The March euro gained 39 points on volume of 225,357 contracts. The euro made a new high for the move at 1.3413, which took out the January 11 high of 1.3373, however volume dramatically declined from January 11 when 308,519 contracts were traded and the euro advanced 87 points, while open interest increased by 3,890 contracts. On January 14, open interest increased by 5,006 contracts, which in relation to volume is average. In yesterday’s action, we saw the March Swiss franc weakened considerably against the euro. For example, the March Swiss was down 1.06 cents (106 points) versus the euro gaining 39 points. This is a major change in the relationship between the 2 currencies, and in our view signals the solidity of the euro bull market. In yesterday’s report, we warned clients that new positions should not be entered because the market was over bought and due for a setback. As this report is being written on January 15, the euro is trading 91 points lower and has made a new low for the move at 1.3270. We view this as a normal pullback within an ongoing bull market, however clients should have sell stops in place. The March Swiss franc is trading 1.22 lower.
S&P 500 E mini:
The S&P 500 E mini lost 3.00 points on very light volume of 1,168,875 contracts. Open interest increased by 21,883 contracts, which in relation to volume is approximately 10% less than average, but a fairly large number nonetheless. It is important to note the only days when open interest increases have been close to average has been when the E mini declined. For example, on January 8, the E mini lost 3.50 points on volume of 1,367,565 contracts, while open interest increased 24,802 contracts. On January 7 the E mini declined 2.00 points on volume of 1,201,407 contracts and open interest increased 10,321 contracts. In short, open interest increases dramatically when price declines by even a minor amount, yet when the market rallies, open interest either declines or increases by a minucule amount that is far less than average.
The performance of Apple Computer has been abysmal with intermittent, but tepid rallies. We think there is much more selling to go and Apple remains a very crowded trade on the long side. Apple will report its earnings after the close on January 23. A major negative surprise will likely have the effect of sending Apple significantly lower, which could drive the major indices lower. However, it is quite possible that between now and January 23, the indices could move higher, and if Apple earnings surprise positively, the indices could take out the September 14 high.