The highlights of the USDA global supply demand report will be discussed in the upcoming Weekend Wrap.
Soybeans: On March 7, May soybeans generated an intermediate term buy signal.
May soybeans gained 7.50 cents on extremely low volume of 118,990 contracts. The last time volume was this low occurred on January 9 when 119,560 contracts were traded and May soybeans closed at 13.75 1/4, and on December 31 when 90,394 contracts were traded and May soybeans closed at 13.99 1/4. On March 7, open interest declined by 468 contracts, which in relation to volume is approximately 80% less than average. On March 8, May soybeans have made a low of $14.50 1/4, which is not unexpected considering that an intermediate term buy signal was generated the day before. The low was made on heavy volume of 21,100 contracts on the 10 minute chart. Clients should use the low of 14.50 1/4, or slightly below as an exit point for long futures positions. We recommend implementing bullish positions on the current setback.
May soybean meal gained 80 cents on light volume of 48,254 contracts. Volume was the lowest since December 31 when 41,641 contracts were traded and May meal closed at $411.80. On March 7, open interest declined 774 contracts, which in relation to volume is approximately 35% less than average. Considering the previous four-day build of open interest, it would be expected that some liquidation would occur. On March 8, May soybean meal has made a low of $428.60 and on the 10 minute chart at the low 8,685 contracts were traded. Soybean meal remains on a short and intermediate term buy signal. Anyone who is not long can use the March 8 low of 428.60 as an exit point for long futures positions. For those who are long options from the previous recommendation, stay with the position.
May soybean oil gained 35 points on light volume of 66,391 contracts. Volume increased approximately 6,000 contracts from March 6 when soybean oil advanced 13 points and open interest increased 1,752 contracts. Wait for a rally to the 51.50-52.00 area to implement bearish positions.
May wheat gained 11.75 cents on volume of 102,072 contracts. Open interest declined 381 contracts, which is minuscule and dramatically below average. It appears that May wheat may have made a temporary low at $6.81, which was made on March 6 and 6.81 1/2, the low on March 7. As this report is being compiled, wheat is trading unchanged and has made a low for the day at 6.87 1/4. Although it is likely wheat will move lower, it may have found some temporary support. Wheat remains on a short and intermediate term sell signal. Stand aside.
April crude oil gained $1.13 on heavy volume of 681,799 contracts. Volume was the highest since February 15 when 696,518 contracts were traded and April crude oil closed at $96.41. On March 7, open interest increased 8,496 contracts, which in relation to volume is approximately 45% less than average. The rally on Thursday was the largest since February 11 when crude advanced $1.31. Although we are looking for a rally to the 93.00 area, it doesn’t appear that crude oil has the power to move to this level. Although we think crude is headed lower, we think it could rally somewhat more.
April natural gas advanced 11.2 cents on heavy volume of 500,294 contracts. Volume was the highest since February 14 when 531, 547 contracts were traded and natural gas fell 14 cents and closed at $3.231. On March 7, open interest increased 4,725 contracts, which in relation to volume is approximately 50% less than average. The April and May contracts lost 7,160 of open interest. On March 7, natural gas closed at $3.582, which is the highest close since January 23 (3.583). Since generating a short-term buy signal on March 1, natural gas has been trading in a very firm manner. Most likely, natural gas will generate an intermediate term buy signal on March 8. In previous reports we recommended writing out of the money puts or purchase long calls. Stay with these. For long futures positions, we said stops should be placed at $3.40
May copper gained 2.75 cents on volume of 45,135 contracts. Open interest declined 1,073 contracts, which in relation to volume is average. The market continues to trade poorly, however with the equity market heading higher, copper may rally back to the $3.60 level, at which point bearish positions can be implemented.
April gold gained 20 cents on volume of 180,655 contracts. Open interest increased 2,726 contracts, which in relation to volume is approximately 40% less than average. The market continues to trade weakly and looks to head lower. Stand aside.
April platinum gained $15.30 on volume of 10,932 contracts. Open interest declined 377 contracts, which in relation to volume is approximately 50% above average, meaning that heavy liquidation continues. Palladium, is and has been the leader of the two and as this report is being compiled, palladium has made a new high at $788.45, which took out the February 13 high of 779.20. In short, palladium is making new highs for the move while platinum is trading slightly higher on the day. As we’ve said before, liquidity in palladium is not conducive to futures trading. As an alternative, we have suggested a play in Stillwater Mining (SWC).
May silver closed unchanged on volume of 36,666 contracts. Open interest increased by 1,577 contracts, which in relation to volume is approximately 65% above average. Like the rest of the precious metals complex, silver continues to trade weakly and clients should stand aside.
The March euro gained 1.12 cents on heavy volume of 406,880 contracts. Open interest declined 6,030 contracts, which in relation to volume is approximately 40% below average. The euro, like many of the currencies in the dollar index remain massively oversold. However, clients should wait for a rally to the 1.3200-1.3250 area before implementing new bearish positions.
S&P 500 E mini:
The S&P 500 E mini gained 3.75 points on heavy volume of 2,545,674 contracts. Open interest increased by a massive 113,813 contracts. As the March E mini approaches its expiration, volume and open interest numbers are going to be extraordinarily large. We continue to track the number of stocks trading above their 50 day moving average on the NYSE. On March 7, 1,659 stocks closed above their 50 day moving average. This was up 28 stocks from March 6 when the E mini advanced 2.00 points. As this report is being compiled, the June E mini is trading 5.75 points higher and has made a new high for the move at 1547.75. Undoubtedly, the very favorable employment report has much to do with the rally. We continue to recommend writing calls in the E mini that are significantly out of the money.