For Bloomberg access:{OIAR<GO>}

Soybeans:

January soybeans advanced 3.50 cents on volume of 205,505 contracts. Total open interest declined by 5,717 contracts, which relative to volume is average. The January contract accounted for loss of 19,486 of open interest. Yesterday’s bearish action follows the bearish action of December 11 when the January contract lost 7.50 cents on volume of 261,397 contracts and total open interest increased by 7,112. On December 10, January soybeans advanced 1.50 cents on volume of 211,399 contracts and total open interest declined by 6,657.

In summary, price and open interest action for the past three days has been acting in a bearish congruent fashion. As this report is being compiled on December 15, the January contract is trading 6.25 cents lower and has made a new low for the move of 8.66 1/2, which is the lowest print since 8.61 1/2 made on November 25. For the January contract to generate a short-term sell signal, which would reverse the short-term buy signal, the high of the day must be below OIA’s key pivot point for December 15 of 8.69 1/2. We have no recommendation.

WTI crude oil:

January WTI crude oil advanced 69 cents on volume of 1,137,110 contracts. Total open interest declined just 772. The January contract accounted for loss of 38,013 of open interest, which means there were almost enough open interest increases in the forward months to offset the decline in January. Yesterday, the January contract made a new contract low of $34.53 and then proceeded to rally for the rest of the session to a high of 36.70.

As this report is being compiled on December 15, the January contract is trading $1.01 higher and has made a daily high of 37.57, which is the highest print since 37.54 made on December 10. January WTI remains on a short and intermediate term sell signal. We have no recommendation.

Dollar index: On December 14, the March dollar index generated a short-term sell signal, but remains on an intermediate term buy signal.

The March dollar index advanced 4.7 points on light volume of 26,949 contracts. Total open interest declined by 615 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on December 15, the March contract is rallying, up 57.7 points or +0.59%, which is typical after the generation of a sell signal. Usually after a sell signal is generated, markets tend to rally from 1-3 days before resuming their downtrend. 

The short term sell signal will reverse and a new short term buy signal will be generated if the daily low is above OIA’s key pivot point for December 14 of 98.676.

Tomorrow, the Federal Reserve will announce a likely quarter point increase in interest rates, and at this juncture it is difficult to ascertain the impact on the dollar index. We recommend a stand aside posture in all currencies until after the announcement. It is a better risk to lose opportunity than risk losing money when the impact of the announcement is unknowable.

Euro: On December 14, the March euro generated a short-term buy signal, but remains on an intermediate term sell signal.

The March euro advanced 7 pips on volume of 238,111 contracts. Total open interest increased by 2,238 contracts, which relative to volume is approximately 50% below average. The December contract accounted for loss of 971 of open interest. Yesterday’s price and open interest action was bullish and continues the pattern a bullish price and open interest action going back to December 8.

As this report is being compiled on December 15, the March euro is pulling back, down 83 pips after making a new high for the move of 1.1088. Usually, after the generation of a buy signal, markets tend to pullback from 1-3 days before resuming the uptrend.

For the short-term buy signal to reverse, and a new short-term sell signal  to occur, the high of the day must be below OIA’s key pivot point for December 15 of 1.0872

Tomorrow is the announcement by the Federal Reserve of a potential interest rate hike, and this will substantially impact trading in the euro. We recommend a stand aside posture until after the announcement, and have no recommendation at this juncture.

Yen: On December 14, the March yen generated a short-term buy signal, but remains on an intermediate term sell signal.

The March yen lost 2 pips on volume of 140,485 contracts. Total open interest increased by 2,339 contracts, which relative to volume is approximately 35% below average. The December contract accounted for loss of 796 of open interest. Yesterday, the March contract made a new high for the move of .8332, and then sold off for the rest of the session. As this report is being compiled on December 15, the March yen is trading lower, down 61 pips, which is typical after the generation of a buy signal.

The Federal Reserve will make its interest rate announcement during tomorrow’s trading and this will have a substantial impact on the yen. We caution clients to remain on the sidelines until after the release of the report and although we have no recommendation at this juncture, we think the path of least resistance for the yen is higher in the immediate future. The 50, 100, and 200 day moving averages are converging, and it appears only a matter of time before the 50 day moving average rises above the 200 day moving average. In any event, do not short the yen. The short term buy signal would be reversed if the March contract makes a daily high below OIA’s key pivot point for December 15 of .8203.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 8.75 points on huge volume of 3,922,791 contracts. Total open interest increased by 30,029 contracts, which relative to volume is approximately 55% below average. The December contract lost 481,567 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in December and increase total open interest. It is difficult to determine whether the total open interest increase was due to the rally because for most of the session, the March contract was trading lower and made a new low for the move of 1983.25, which was the lowest print since 1978.00 made on October 15.

As this report is being compiled on December 15, the March contract has rallied 33.00 points and made a daily high of 2045.75, which is the highest print since 2047.75 made on December 11.On December 11, the March S&P 500 E-mini generated a short-term sell signal and yesterday was the first day of a countertrend rally, which usually occurs after the generation of a sell signal.

Today is the second day, and we think the rally could continue through the evening session on December 15 and possibly into the day session of December 16. However, we think that investors will be using rallies as opportunities to initiate tax selling strategies and re-liquefy, especially if interest rates increase as expected.

Based upon today’s high, the March contract is trading at approximately the 50 day moving average of 2046.38 and the 200 day moving average of 2043.02. First, the March E-mini must make a daily low above those two moving averages for the rally to continue, which we think is unlikely. After this, for a short-term buy signal to occur, the daily low must be above OIA’s key pivot point for December 15 of 2076.48, which we think is unlikely.

In the November 30 report, written on December 1, OIA recommended the initiation of short call positions in the December 2015 S&P 500 E-mini. These continue to be profitable and we recommend holding them into December 18 expiration.