The USDA will release its world supply and demand report on March 8 at 11:00 cst.
May soybeans gained 4.50 cents on volume of 176,284 contracts. Interestingly, volume increased by 20,000 contracts from March 4 when soybeans gained 18.50 cents and open interest increased 2,729 contracts. On March 5, open interest declined 5,548 contracts, which in relation to volume is approximately 20% above average. Soybeans made a new high for the move at $14.81 3/4, which is the highest since February 22 when $14.97 was the high. During the past 2 days, soybeans have advanced 23 cents and open interest has declined 2,819 contracts. This is bearish open interest action relative to the price advance. Soybeans appear to be struggling when it trades in the $14.80 zone. Soybeans remain on a short-term buy signal, but an intermediate term sell signal. Clients should stand aside until after the USDA report is released on March 8.
May soybean meal gained $2.20 on volume of 72,197 contracts. Open interest increased by 2,532 contracts, which in relation to volume is approximately 40% above average. For the past 4 days, open interest has been acting in a bullish congruent manner relative to soybean meal prices. In short, the open interest action in soybean meal has been more favorable than soybeans, and the year to date price performance for soybean meal exceeds that of soybeans. We remain friendly to soybean meal and those clients with long call positions should stay with them. For clients looking to get long futures, we think it is wise to wait until after the March 8 USDA report.
May soybean oil lost 13 points on volume of 81,458 contracts. Open interest declined 556 contracts, which in relation to volume is approximately 60% less than average. Wait for a rally to the 51-51.50 area before implementing bearish positions.
Wheat: We will report on wheat when we see a trading opportunity or when something interesting happens in the market.
April crude oil advanced 70 cents on volume of 483,681 contracts. Open interest increased by a massive 35,824 contracts, which in relation to volume is approximately 190% above average, meaning that new longs were heavily entering the market and pushing prices higher. For the past 8 days, there has been only been 1 day when volume was above the 500,000 level (March 1). As this report is being compiled, April crude is trading 98 cents lower, but has not taken out the low of $89.33 made on March 4. The mammoth increase of open interest on March 5 was unable to move crude oil much above a normal trading gain. This was met by heavy selling, and the inability of crude to have a 2-3 dollar rally is testament to its weakness. For clients who implemented long crude oil put options at significantly higher levels should stay with these positions. Do not enter new positions at current levels.
April natural gas closed unchanged on heavier than normal volume of 386,674 contracts. Average daily volume from January 1 through February 28 was 355,993 contracts. Open interest increased 5,048 contracts, which in relation to volume is approximately 45% below average. The market has been trading with a firm undertone despite the sharply lower move in crude oil and products. On March 7, the EIA will release its report on natural gas stocks, and this will be the chief driver of the market on Thursday. On March 1, natural gas generated a short-term buy signal, but has not had the strength to generate an intermediate term buy signal. We view setbacks as opportunities to establish bullish positions. The market has been finding support at the 50 day moving average of $3.40. However, there is approximately a 1 cent gap between the high on February 21 and the low of February 25. Conceivably the market could dip to this level and fill the gap, but it should rebound in short order. Conservative traders can write out of the money puts on any pullback, or purchase long calls.
May copper gained 1.35 cents on light volume of 50,318 contracts. Open interest increased 468 contracts, which in relation to volume is approximately 50% less than average. Copper remains on a short and intermediate term sell signal, but we suggest that clients wait for a rally to the $3.60 area before implementing bearish positions.
April gold gained $2.50 on volume of 177,385 contracts. Open interest declined 2,030 contracts, which in relation to volume is approximately 50% less than average. Stand aside.
April platinum gained $19.50 on volume of 13,133 contracts. Open interest declined 248 contracts, which in relation to volume is approximately 25% less than average. Stand aside.
May silver gained 10.8 cents on light volume of 37,182 contracts. Open interest increased by 798 contracts, which in relation to volume is approximately 20% less than average. Stand aside.
The March euro gained 17 points on light volume of 217,002 contracts. Open interest increased 337 contracts, which is minuscule and dramatically below average. On February 26, the euro generated a short-term sell signal, but remains on an intermediate term buy signal. Wait for a rally to the 1.32 area before implementing bearish positions. The market is oversold and there is no reason to chase the euro at current levels.
S&P 500 E mini:
The S&P 500 E mini gained 11.25 points on volume of 2,678,254 contracts. Open interest increased by 53,503 contracts, which in relation to volume is approximately 25% below average. As readers of this report know, our concern about the broad indices has been the dismal performance of NYSE stocks that are trading above their 50 day moving average. Yesterday’s market action did nothing to allay our concern that the market of stocks are not participating in the rally.
For example, on March 4, the total number of NYSE stocks above their 50 day moving average totaled 1513. However, on March 5 when the market rallied 11.25 points, the number of stocks above their 50 day moving average rose to 1624, or 111 stocks more than on March 4.
It is important to keep in mind that the number of stocks trading above their 50 day moving average made their high on January 22 at 2115. From January 22 through March 5, the E mini has advanced 47.50 points, and yet the number of stocks trading above their 50 day moving average is nearly 500 lower than it was on January 22. We continue to recommend writing out of the money calls on the E mini.