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Soybeans: On December 28, March soybeans generated a short-term sell signal, which reversed the December 1 short-term buy signal. March soybeans remain on an intermediate term sell signal.

March soybeans lost 11.75 cents on volume of 184,604 contracts. Total open interest declined by 11,999 contracts, which relative to volume is approximately 150% above average meaning liquidation was extremely heavy on yesterday’s decline. The January contract accounted for loss of 16,313 of open interest. As this report is being compiled on December 29, the March contract is trading 1.50 cents above yesterday’s close and has not taken out yesterday’s low of 8.60 1/2. We have no recommendation.

Sugar:

March sugar lost 30 points on light holiday volume of 38,538 contracts. Total open interest declined by 4,154 contracts, which relative to volume is approximately 320% above average meaning liquidation was extremely heavy on yesterday’s decline. As this report is being compiled on December 29, the March contract is trading unchanged on the day. The March contract will generate a short-term sell signal, if the daily high is below OIA’s key pivot point for December 29 of 14.80. We have no recommendation.

WTI crude oil:

February WTI crude oil lost $1.29 on light holiday volume of 350,208 contracts. Total open interest declined by 4,165 contracts, which relative to volume is approximately 45% below average. The February contract lost 5,811 of open interest. As this report is being compiled on December 29, the February contract is trading 89 cents above yesterday’s close and has made a daily high of 37.88, which is below yesterday’s print of 38.09 and has made a daily low of 36.66, which is above yesterday’s print of 36.60. The February contract remains on short and intermediate term sell signals. We have no recommendation.

Natural gas: February natural gas will generate a short-term buy signal on December 29 provided the daily low remains above OIA’s key pivot point for December 29 of $2.236. The February contract will remain on an intermediate term sell signal.

February natural gas advanced 17.7 cents on volume of 398,594 contracts. Total open interest declined by 4,727 contracts, which relative to volume is approximately 45% below average. The January contract lost 16,299 of open interest, which means there were insufficient open interest increases in the forward months to offset the decline in January. The sharp move higher in yesterday’s trading was the result of heavy short covering, which is not a surprise considering the magnitude of the move, which began on December 18.

As this report is being compiled on December 29, the February contract is trading sharply higher again, up 10.2 cents or + 4.48% and has made a new high for the move of $2.386, which is the highest print since 2.395 made on November 25. There is no doubt that short sellers are in the world of pain and at best have lost huge profits, and no doubt many others are experiencing significant losses.

The latest COT report, which was compiled on December 22 shows that managed money is short natural gas by a ratio of 2.05:1, which is the highest ratio in at least three weeks. This means there are huge numbers of speculative short-sellers that have yet to cover, and though fundamentals do not merit a substantial move higher, this cannot be ruled out when taking into account the technical setup. Natural gas has a history of making large out sized moves when least expected. We recommend a stand aside posture.

Dollar index: On December 28, the March dollar index generated a short-term sell signal, which reverses the December 17 short-term buy signal. The March contract remains on an intermediate term buy signal.

The March dollar index lost 6.6 points on volume of 10,825 contracts. Total open interest declined by a massive 1,163, which relative to volume is approximately 320% above average meaning liquidation was extremely heavy on the modest decline. As this report is being compiled on December 29, the March contract is trading 37.5 points higher, which is typical after the generation of a sell signal. Usually, markets that have generated sell signals have counter trend rallies lasting 1-3 days before resuming their downtrends. We have no recommendation.

Euro: On December 28, the March euro generated a short-term buy signal, but remains on an intermediate term sell signal.

The March euro advanced 23 pips on volume of 71,729 contracts. Total open interest decreased by a substantial 2,032 contracts, which relative to volume is average. According to the latest COT report, managed money is short the euro by a ratio of 4.35:1, which means there is plenty of firepower to send the euro sharply higher now that it is on a short-term buy signal.

As this report is being compiled on December 29, the March contract is pulling back, down 53 pips after making a daily high of 1.1014, which is slightly below yesterday’s print of 1.1016. Usually, after the generation of buy signals, markets have a tendency to pullback from 1-3 days before resuming their uptrends.

In the month of December, the March euro generated a short-term buy signal on December 14, then on December 17 generated a short-term sell signal and now a new buy signal on the 28th. In summary, it appears market participants are unable to make up their minds about the immediate term direction of the euro. With managed money heavily net short, we tend to think the path of least resistance is going to be higher, which will come as a surprise to many who are predicting parity with the US dollar. We have no recommendation.

Yen: The March yen will generate an intermediate term buy signal on December 29 provided the daily low remains above OIA’s key pivot point for December 29 of .8308. The March contract generated a short-term buy signal on December 21. 

The March yen lost 2 pips on volume of 49,900 contracts. Total open interest declined by 1,395 contracts, which relative to volume is average As this report is being compiled on December 29, the March contract is trading 10 pips lower, or -0.11% and has made a daily low of .8310, which is above OIA’s key pivot point for December 29 of .8308 for the generation of an intermediate term buy signal.

Remarkably, the yen has been incredibly firm ever since it generated a short-term buy signal on December 21 and from December 22 through December 28 the March yen has advanced 32 pips. The yen has not had its typical corrective activity since the generation of the buy signal. However, the yen has more work to do on the downside before it begins its ascent in earnest. We are looking for a pullback to the .8250 area and may recommend short out of the money put positions in the March contract. For now, stand aside.

S&P 500 E-mini:

The March S&P 500 E-mini lost 2.50 points on volume of 697,755 contracts. Total open interest increased by 887 contracts, which is minuscule and substantially below average. As this report is being compiled on December 29, the E-mini is rocketing higher, up 21.00 points and has made a new high for the move of 2070.00, which is the highest print since December 17 of 2072.75.

The March contract will generate a short-term buy signal if the daily low is above OIA’s key pivot point for December 29 of 2060.35 and the low on December 29 has been substantially below this at 2047.50. As we have pointed out in prior reports over the past week, we were expecting a continuation of the Santa Claus rally, which typically occurs throughout the month of December and into the last week of the month.

The real test will be tomorrow and whether the March contract can make a low above the key pivot point, which would generate a short-term buy signal. We will continue to monitor the E-mini to determine whether it makes sense to short out of the money calls. At this juncture, stand aside.