The USDA planting intentions and stocks report will be released on March 28.
May soybeans gained 10.50 cents on very light volume of 108,506 contracts. Volume declined approximately 2,500 contracts from March 25 when May soybeans lost 3.25 cents and open interest declined by 1,271 contracts. Volume on the 25th and 26 was the lowest in a couple of months. On March 26, open interest declined by 2,093 contracts, which in relation to volume is approximately 25% less than average. The May contract accounted for loss of 1,933 of open interest. The spread between May and July continues to widen and is near to the high of 24.75 cents made on March 11. This is bullish spread action. As this report is being compiled, May soybeans are trading 5.25 cents higher and have made a low of $14.43 1/2. Any bearish positions should be liquidated today, especially with the USDA report being released on March 28. Bullish positions should not be implemented until such time that soybeans generate a short-term buy signal. Stand aside.
From Oil World:
Oil World warned investors over the “treacherous” drop in soybean prices as it cut hopes for Argentine and Brazilian crops by a combined 2.2m tonnes, blaming weather setbacks. The influential analysis group urged caution over softness in soybean prices, which have eased some 2% in Chicago this month, reaching levels nearly 20% below last summer’s record high.
Indeed, with Brazil’s shipments being hampered by logistical difficulties, import demand “will be possible only if sufficient Argentine soybeans and products are exported from April onward”, the group said. “But there is a big risk that the soybeans sold by the [Argentine] farmers and delivered to crushers and ports in coming weeks will be less than required by the global market.”
Many observers – although not Macquarie – hold concerns that Argentine growers will hoard soybeans as a, dollar-denominated, hedge against a falling peso, whose long-term decline against the greenback has accelerated over the past year amid concerns over the country’s economic policy. Furthermore, Oil World cautioned that the recent, atypical frosts had caused some crop damage, cutting its estimate for the Argentine soybean harvest by 1.5m tonnes to 48.5m tonnes.
Oil World also trimmed its estimate for the Brazilian harvest by 700,000 tonnes to 81.3m tonnes, citing damage from rains.
The downgrade also follows talk of disappointing yields in much of Mato Grosso, Brazil’s biggest producing state, where early dryness, excessive harvest rains and insect pests hurt results, especially for early maturing varieties, for which the dry spell late in 2012 covered a bigger proportion of the growing season.
May soybean meal gained $2.40 on volume of 53,899 contracts. Open interest increased by 1,761 contracts, which in relation to volume is approximately 35% above average. The May contract accounted for a gain of 827 contracts. Note the disparity in the open interest performance between soybeans and soybean meal. The May meal contract saw an open interest increase, but May soybeans had a decline. The spread action between the May and July contract has been decidedly bearish. Soybean meal will not generate a short or intermediate term buy signal on March 27. However, any bearish positions in soybean meal should be liquidated, especially since the USDA report is being released on March 28.
May soybean oil gained 38 points on volume of 77,011 contracts. Total open interest increased by 738 contracts, which in relation to volume is approximately 50% less than average. The May contract accounted for loss of 1,984 of open interest, which means the total open interest increase relative to the price advance was very positive. Soybean oil remains on a short and intermediate term sell signal. Stand aside.
May corn lost 3 cents on volume of 212,257 contracts. Open interest increased by 2,894 contracts, which in relation to volume is approximately 45% less than average. The May contract accounted for loss of 9,380 of open interest. On March 18, May corn generated a short-term buy signal and on March 19 generated an intermediate term buy signal. As this report is being compiled, May corn is trading 6.25 cents higher and has made a new high for the move at $7.37 3/4. Stay with bullish positions, and as recommended before, consider writing out of the money calls against long positions. Place sell stops at the March 22 low of $7.20.
May wheat gained 4.25 cents on volume of 95,496 contracts. Volume was the highest since March 15 when 99,631 contracts were traded and May wheat lost 1.75 cents while open interest declined 2,642 contracts. On March 26, open interest declined 1,906 contracts 25% below average. We highly recommend that clients liquidate any bearish positions in wheat. Wheat remains on a short and intermediate term sell signal
May crude oil gained $1.53 on volume of 556,397 contracts. Volume declined approximately 88,000 contracts from March 25 when crude oil advanced $1.10 and open interest increased by 21,630 contracts. On March 26, open interest increased 18,917 contracts, which in relation to volume is approximately 35% above average. On March 25 the open interest increase relative to volume was 40% above average. Crude oil has seen 2 solid days of price and open interest increases accompanied by heavier than normal volume. On March 25, crude oil generated an intermediate term buy signal. If the low on March 27 of $95.58 holds, May crude oil will generate a short-term buy signal. As our readers know, when a buy signal is generated, there tends to be a pullback lasting 1-2 and sometimes 3 days
Our lack of bullish enthusiasm for crude oil is due to the non-confirmation of the most recent buy signal, and the buy signal that may be generated on March 27. For example, Brent crude oil remains on a short and intermediate term sell signal. Gasoline remains on a short-term sell signal and heating oil remains on a short and intermediate term sell signal. On March 27, the Brent crude contract is showing greater strength than WTI. We will be carefully monitoring the spread relationship between the two, and if this spread reverses, we will see a sharp pullback in WTI and an advance in Brent. This would increase the likelihood of buy signals in Brent.
May natural gas gained 10.3 cents on light volume of 347,496 contracts. Volume increased approximately 13,500 contracts from March 25 when natural gas declined 6.2 cents and open interest increased 1,826 contracts. On March 26, open interest increased 7,702 contracts, which in relation to volume is approximately 15% less than average. As this report is being compiled, May natural gas is trading 9.1 cents higher and has made a new high for the move at $4.103. Previously, we advised clients to place stops slightly below the $3.89 level or alternatively, write out of the money calls against bullish positions to offset potential downside risk.
May copper lost .0025 cents on volume of 53,625 contracts. Open interest increased by 2,118 contracts, which in relation to volume is approximately 55% above average.
June gold lost $9.20 on heavy volume of 317,199 contracts. Open interest declined 17,902 contracts, which in relation to volume is approximately 120% above average. The massive increase in volume and decline of open interest can be attributed to the switching out of April into the June contract. Gold remains on a short and intermediate term sell signal. Stand aside.
July platinum lost $17.10 on volume of 30,638 contracts. Open interest declined by 225 contracts, which in relation to volume is approximately 75% below average. Platinum remains on a short and intermediate term sell signal. Stand aside.
May silver lost 13.6 cents on volume of 26,574 contracts. This is the first time that we have witnessed silver trading less volume than platinum. Open interest declined by 7 contracts. Silver remains on a short and intermediate term sell signal. Stand aside.
The Australian dollar gained 32 points on volume of 66,636 contracts. Volume was the lowest since February 11 when 62,503 contracts were traded and the June Australian dollar closed at 1.0159. On March 26, open interest increased again by a massive number of 5,871 contracts, which in relation to volume is approximately 250% above average. For the past 4 days, we’ve seen huge increases of open interest relative to volume, and the low volume on March 26 may be an indication that the Australian dollar has reached a temporary top. As we said in yesterday’s report, expect occasional sharp pullback. The Australian dollar remains on a short and intermediate term buy signal.
The June euro lost 7 points on light volume of 265,775 contracts. Open interest increased by 2,202 contracts. As this report is being compiled, the June euro has made a new low for the move at 1.2758, which is the lowest price since mid-November 2012. The euro remains on a short and intermediate term sell signal.
S&P 500 E mini:
The June S&P 500 E mini gained 10.25 points on light volume of 1,595,213 contracts. Volume was slightly higher than the number of contracts traded on March 22 of 1,580,747 while open interest increased by 12,202 contracts and the E mini advanced 13.00 points. It is important to note that volume on March 22 and 26 was below the average daily volume year to date of 1,667,411 contracts. On March 26, open interest increased by 27,989 contracts, which in relation to volume is approximately 25% less than average. On March 26, stocks trading above their 50 day moving average on the NYSE increased to 1,597 from 1,513 on March 25. Despite the new high close on March 26 of 1557.25, the number of stocks on the NYSE that are trading above their 50 day moving average is dramatically below the 50 day moving average of 1,798 stocks. We continue to advocate writing calls that are significantly out of the money, but would abandon this strategy if the E mini closes above 1560.00.