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The Federal Reserve will announce whether they will hike interest rates today at 2:00 p.m. Eastern standard Time. We recommend a stand aside posture, and new positions should not be entered prior to the announcement.

Soybeans:

January soybeans lost 7.00 cents on volume of 232,157 contracts. Total open interest declined by 2,713 contracts, which relative to volume is approximately 45% below average. The January contract accounted for loss of 10,603 of open interest. As this report is being compiled on December 16, the January contract is trading 9.00 cents lower and has made a new low for the move of 8.56, which is the lowest print since 8.44 1/4 made on November 23. The January contract is headed towards a short-term sell signal, and this will occur if the daily high is below OIA’s key pivot point for December 16 of 8.69 1/2. We have no recommendation.

WTI crude oil:

January WTI crude oil advanced $1.04 on volume of 1,088,570 contracts. Total open interest declined by 29,094 contracts, which relative to volume is average. The January contract accounted for loss of 50,453 of open interest. Yesterday’s action was clearly bearish, and this confirms the activity on December 16 as the January contract is trading $1.51 lower and has made a daily low of 35.62, which is above the contract low of 34.53 made on December 14. We have no recommendation

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.8 million barrels from the previous week. At 490.7 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.7 million barrels last week, and are in the upper half the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.6 million barrels last week and are in the upper half of the average range for this time of year. Propane/propylene inventories fell 1.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 5.0 million barrels last week.

Dollar index:

The March dollar index advanced 63.5 points on light volume of 25,399 contracts. Total open interest declined by a massive 21,100 contracts and this was due to the expiration of the December contract, which lost 21,348. As this report is being compiled on December 16, the March contract is trading fractionally lower, down 0.05%. On December 14, the March dollar index generated a short-term sell signal, and remains on an intermediate term buy signal. We have no recommendation except to say that clients should stand aside until after the release of the announcement by the Federal Reserve.

Euro:

The March euro lost 81 pips on volume of 221,183 contracts. Total open interest declined by 3,246 contracts, which relative to volume is approximately 40% below average, and the open interest decline came from the March forward contracts because the December contract was unchanged. The euro continues to display all the characteristics of bullish price and open interest action, and we recommend a stand aside posture at least until after the release of the Federal Reserve announcement on December 16. On December 14, the March euro generated a short-term buy signal, but remains on an intermediate term sell signal.

Australian dollar:

The March Australian dollar lost 53 pips on volume of 77,240 contracts. Total open interest increased by a massive 4,536 contracts, which relative to volume is approximately 135% above average meaning aggressive new short-sellers were entering the market in substantial numbers and driving prices lower (71.27). The December contract had no change of open interest.

The Australian dollar has been displaying bearish price and open interest action for the past couple of days. On December 14, the March contract advanced 59 pips on volume of 79,894 contracts and total open interest declined by 528, indicating that short sellers were powering the market higher, not new buying. Furthermore on December 11, the Australian dollar lost 98 pips on volume of 106,179 contracts and total open interest increased by 1,230 indicating that short sellers were driving prices lower.

On November 25, the March Australian dollar generated short and intermediate term buy signals, and it appears the Australian dollar is headed towards a short term sell signal. The March contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for December 16 of 71.15. The rally will resume if the daily low is above OIA’s pivot point for December 16 of 71.92. We have no recommendation except that no new positions should be entered prior to the Federal Reserve announcement. 

Yen:

The March yen lost 64 pips on volume of 115,541 contracts. Total open interest declined by 1,851 contracts, which relative to volume is approximately 35% below average. On December 14, the March yen generated a short-term buy signal and it remains on an intermediate term sell signal. The pullback in yesterday’s trading was the first since the generation of the buy signal and the yen is trading lower again on December 16. This is typical behavior. The March contract will generate a short-term sell signal if the daily high is below OIA’s key pivot point for December 16 of .8203. Do not enter new positions prior to the Federal Reserve announcement.

S&P 500 E-mini:

The March S&P 500 E-mini advanced 27.50 points on heavy volume of 3,200,561 contracts. Total open interest increased by 68,095 contracts, which relative to volume is approximately 15% below average, but yesterday’s open interest increase on the price advance was the second in a row. On December 14, the E-mini advanced 8.75 points on volume of 3,922,791 and total open interest increased by 30,029.

On December 11, the March E-mini generated a short-term sell signal, and as is usual after the generation of a sell signal the market has had counter trend rallies for the past two days. This is typical behavior, and has not nullified the short term sell signal.

As this report is being compiled on December 16, the March contract is trading 1.75 points higher and has made a new high for the move of 2052.25, which is above yesterday’s print of 2045.75, however after making its high in the first half hour of trading in the cash market, the market has been drifting lower.

In the November 30 report written on December 1, we recommended the initiation of short call positions in the December S&P 500 E-mini contract and this trade continues to be profitable. Hold the position into December 18 expiration. Do not enter new positions prior to the announcement by the Federal Reserve.