Open interest market action was very interesting for January 3. There were a couple of markets that had abnormally large increases in open interest.
Corn:
Corn had an open interest increase of 24,983 contracts. This was the largest open interest increase since November 9. The volume in corn was the largest since December 6. Corn closed up 13 1/2 cents. Prior to December 29, corn open interest was acting terribly. Although corn is above my pivot points, which is positive, seasonal factors should start to impact the grains in the next couple of weeks, which could send them lower.
Crude Oil:
March crude oil open interest increased by 44,701 contracts. I went back to my records to August 2011 and couldn’t find an open interest increase of that magnitude. The volume was the highest since December 14, 2011. On that day, volume was 708,817 and the market closed lower by $5.19. Crude oil is bumping up against the 104 area that has served as resistance in the past. Geopolitical forces are going to be the primary catalyst for any move significantly higher.
S&P 500 E Mini:
Open interest for the March S&P 500 E–mini increased by 49,382 contracts. This was a stunning increase considering that the volume for all contracts totaled only 1,566,134 on January 3. Major increases in open interest in any market at the high end of their trading range can be a sign that they are in a topping phase, or that the market is taking off for a new leg higher. The open interest increase of 49,382 indicates that there are strongly committed longs and strongly committed shorts taking new positions. Although the rally of January 3 was attributed in part to short covering, the real story was that there were new entrants into the market. Since the Santa Claus rally began on December 20 open interest has increased 118,911 contracts. There was only one day since December 20 that open interest went down and that was on December 28 when open interest decreased 396 contracts. Until we see open interest decrease on rallies it appears that the market will move higher.
Gold/Silver:
Both gold and silver saw open interest increases on January 3. Open interest in gold increased 4,104 on volume of 114,084. Open interest and silver increased by 1,432 contracts on volume of 39,246. Much damage has been done to both of these on the charts. In approximately 10 to 15 days the 50 day moving average for gold will cross below the 150 day moving average. By the end of January, the 50 day moving average will move below the 200 day moving average.
Sugar had a major move on January 3 and closed up 1.21 open interest increased by 8644 contracts and volume was 110,933. This is a commodity worth watching but it’s too early to buy.
