March soybeans lost 1 cent on extremely light volume of 119,560 contracts. Volume was the lowest since December 31 when 53,821 contracts were traded. On January 9, open interest declined by 2,020 contracts, which in relation to volume is approximately 30% below average. Export sales reported by the USDA for 2012-2013 were 321,800 tons and 85,000 tons for 2013-2014. Total commitments have reached 1.142 billion bushels against the total export projections of 1.345 for the season which ends August 31. Although sales in the recent reporting period were disappointing, they exceeded the weekly average needed to meet the USDA projection. China imported 58.38 million metric tons for calendar year 2012, which is up 11.2% from 2011. Any open position should be closed prior to the January 11 report.
March soybean meal lost $1.30 on volume of 66,453 contracts. Volume declined by approximately 24,000 contracts from January 8 when 90,669 contracts were traded and soybean meal advanced $2.00, while open interest increased by 9,626 contracts. On January 9, open interest increased by 5,161 contracts, which in relation to volume is approximately 210% above average, meaning that longs and shorts made strong commitments, though participation was at a lower level. During the past 5 trading sessions (January 3-January 9), open interest has increased by a massive 24,321 contracts, but soybean meal has advanced only $3.90. This contrasts with the open interest action of soybeans during the same period with open interest down 11,508 contracts while soybeans have declined by 6.75 cents. The massive build of open interest in soybean meal indicates that a major move is in the offing.
As we said in yesterday’s report, there are a large number of new sellers who are keeping a lid on soybean meal prices and we think this is coming from commercial interests. The export sales report released by the USDA on Thursday showed that in the most recent reporting week, 118,200 tons of meal were sold for the 2012-2012 season. Only 38,420 tons per week are needed to meet the USDA projection for the season, which ends September 30, 2013. Any open position should be closed out prior to the January 11 report.
March corn gained 5.50 cents on volume of 208,618 contracts. Open interest increased by a staggering 14,440 contracts, which in relation to volume is approximately 170% above average, meaning that new longs and shorts were entering the market and longs were moving prices higher. Open interest increased in every contract from March 2013 through December 2016. We reviewed our records to find other days when open interest increased by a comparable amount as January 9. Open interest of January 9 was exceeded by trading on October 11, when December corn advanced 36.50 and total open interest increased by 49,911 contracts on volume of 398,255 contracts. On October 18 open interest increased by 13,119 contracts on volume of 204,342 contracts while December corn advanced 15 1/4. We are using the December contract because its was the lead month as March is now. In short, open interest increases of the magnitude seen on January 9 are rare. Additionally, March corn has advanced for each of the past 3 days (January 7-January 9) and open interest has increased by 21,245 contracts, while March corn has gained an aggregate 14.25 cents. This is bullish open interest action relative to price, and the large build of open interest on January 9 indicates that a major move is imminent.
Export sales for corn in the most recent USDA report were horrible coming in at 12,600 tons for the 2012-2013 season, with a cancellation of 11,600 tons for the 2013-2014 season. This was the lowest weekly sales number since early October. Any open position should be closed prior to the January 11 report.
March wheat lost 5 cents on fairly heavy volume of 105,803 contracts. Volume was the highest since December 12 when 109,550 contracts were traded and December wheat closed at $8.12. In order to compare the performance of wheat with corn, we are using the past 3 days of trading, to show that wheat is trading in a distinctly negative fashion versus corn. For example, from January 7 through January 9, open interest has increased by 7,557 contracts, but March wheat has fallen 1.75 cents.
Export sales for wheat were disappointing at 233,700 tons for the 2012-2013 season, which is the lowest number since late October. Export sales need to average twice the amount of the latest report in order to reach the USDA export projections. Any open position should be closed prior to the January 11 report.
February crude oil lost 5 cents on volume of 470,459 contracts. Open interest increased by a meager 1,246 contracts, which is dramatically below average. From a price point of view, crude is very firm, but open interest action and volume leave a lot to be desired. Crude seems to be a stealth market in dire need of a correction due to its overbought status. From January 2 through January 9, February crude oil has advanced 1.64% versus February heating oil of +1.15% and February gasoline +0.35%. Though crude is on a short and intermediate term buy signal, we encourage clients to wait for correction rather than chase the market at its current lofty level.
February natural gas lost 10.5 cents on fairly heavy volume of 370,249 contracts. Volume was the highest since December 20, when 373,543 contracts were traded and February natural gas closed at $3.495. Despite the sharp move lower, open interest increased modestly at 1,734 contracts, which in relation to volume is approximately 45% less than average. During the past 2 days, open interest has increased by 2,210 contracts ,while natural gas has fallen 15.3 cents. The low increase may signify that new short sellers and buyers are reluctant to enter the market at the low end of the range. Stand aside.
March copper lost 0015 cents on volume of 49,055 contracts. Open interest declined by 636 contracts, which in relation to volume is approximately 50% less than average. Copper is on a short and intermediate term buy signal and should only be traded from the long side.
February gold lost $6.70 on volume of 157,167 contracts. Open interest declined by 176 contracts, which is minuscule and dramatically below average. As this report is being compiled on January 10, February gold is trading 21.90 higher, and has made a new high for the move at 1678.80, which is the highest price since January 3, when February gold reached $1690.50. The dollar is sharply lower, and this is undoubtedly adding fuel to the upside, though volume is unimpressive. As we said in yesterday’s report, gold will have to do some work at the lower end of the range before we can feel confident a base has been built. Gold remains on a short and intermediate term sell signal.
March silver lost 21.6 cents on volume of 40,031 contracts. Open interest increased by 1,299 contracts, which in relation to volume is approximately 25% above average. Like gold, silver needs to do some work at the lower end of the range before we can feel confident a base has been built. Silver remains on a short and intermediate term sell signal.
The March British pound lost 42 points on volume of 106,887 contracts. Volume increased by approximately 21,000 contracts from January 8, when the pound lost 48 points on volume of 85,886 contracts and open interest increased by 502 contracts. On January 9, open interest fell 1,846 contracts, which in relation to volume is approximately 10% less than average. From January 2 through January 9, open interest has declined by 10,938 contracts while the March pound has declined by 2.28 cents. This is healthy open interest action relative to price. As we said in yesterday’s report we are bullish on the pound, but much prefer the euro. As this report is being compiled on January 10, the pound is trading 1.40 cents higher on healthy volume of nearly 125,000 contracts.
The March euro lost 29 points on volume of 221,388 contracts. Open interest increased by 1,677 contracts, which in relation to volume is approximately 65% less than average. As this report is being compiled, the March euro is trading 2.01 cents higher on nearly 330,000 contracts and has made a new high for the move at 1.3273, which is the highest price since January 2 of 1.3289. As clients know, we have been bullish on the euro ever since our system generated short-term buy signal on December 3, which confirmed the intermediate term buy signal. We have recommended that clients maintain stops near the low of January 7 of 1.3025 and with the move higher on January 10, the stop should be raised to the January 9 low of 1.3044. Although the euro has weakened against the Canadian dollar and Australian dollar during the past week, we expect the euro to outperform both of these as well as the British pound during the next 30 days.
S&P 500 E mini:
The March S&P 500 E mini gained 3.50 points on very low volume of 1,197,550 contracts. Volume was the lowest since December 28 when 1,062,992 contracts were traded and the E mini lost 24.00 points, while open interest increased by 3,560 contracts. On January 9, open interest declined by 8,930 contracts, which in relation to volume is approximately 60% less than average. As this report is being compiled on January 10, the E mini is rallying and has made a new high for the move at 1466.00. Undoubtedly, some of this is due to a risk on environment, sharply lower dollar and optimism about 4th quarter earnings. As we have said before, we like individual stocks, but would steer clear of the E mini or other major indices.