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Corn:

March corn advanced 4.50 cents on volume of 24,691 contracts. Total open interest declined by a massive 9,548 contracts, which relative to volume is approximately 75% above average meaning liquidation was extremely heavy on Friday’s modest advance. The December 2015 through September 2016 contracts lost a total of 10,295 of open interest. On Friday, the March contract made a high of 3.81 3/4 and this has been taken out fractionally on December 7 (3.82).

The massive decline of open interest on the rally, indicates that short sellers were powering the market higher, not new buying. As the COT report confirms, managed money remains substantially net short corn. As this report is being compiled on December 7, the March contract is trading 7.75  cents lower. For the March contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for December 7 of 3.79 1/8. We have no recommendation.

Soybeans:

January soybeans advanced 8.50 cents on volume of 223,304 contracts. Volume increased slightly from December 3 when the January contract gained 5.25 cents on volume of 209,554 contracts and total open interest increased  by 5,963. On December 4, total open interest increased by 4,806 contracts, which relative to volume is approximately 50% below average, and though the total open interest increase on Fridays advance was positive, we think that the Johnny-come-lately crowd decided to get bullish at the top end of the trading range.

We have been warning clients that the market was vulnerable to a pullback after generating a short-term buy signal on December 1 and have advised a sideline stance. As this report is being compiled on December 7, the January contract is trading 19.50 cents below Friday’s close, but made a new high for the move of 9.09 3/4 earlier. January soybeans remain on a short-term buy signal, but an intermediate term sell signal. We have no recommendation.

Soybean oil:

January soybean oil advanced by a strong 1.21 cents on heavy volume of 226,580 contracts. Total volume was the highest since June 15 when 223,015 contracts were traded and the January 2016 contract closed at 33.18. On December 4, total open interest increased by a very disappointing 992 contracts, which relative to volume is approximately 80% below average. The December contract accounted for loss of 540 of open interest, January 2016 -3,883, which means there was barely enough open interest increases in the forward months to offset the decline in the two delivery months and increase total open interest.

In summary, the action on December 4 was disappointing to anyone bullish on soybean oil and as we have been pointing out for the past several sessions, total open interest has been declining on the advance. As this report is being compiled on December 7, the January contract is trading 77 points lower after making a new high for the move of 32.55. January soybean oil remains on short and intermediate term buy signals. We have no recommendation.

WTI crude oil:

January WTI crude oil lost $1.11 on volume of 850,986 contracts. Volume increased from December 3 when the January contract gained 1.14 on volume of 818,279 contracts and total open interest declined by 2,373 contracts. On December 4, total open interest increased by a sizable 24,768 contracts, which relative to volume is approximately 5% above average meaning aggressive new short-sellers were entering the market in fairly substantial numbers and driving prices to a new low for the move (39.60).

As this report is being compiled on December 7, the January contract is trading $2.15 lower and has made a new contract low 37.50, which takes out the continuation low print of 37.75 made on August 24. In summary, the January WTI contract is trading at levels last seen in early 2009. January WTI remains on short and intermediate term sell signals. We have no recommendation.

Coffee:

March coffee advanced 2.10 cents on volume of 21,902 contracts. Total open interest declined by 2,012 contracts, which relative to volume is approximately 250% above average, meaning large numbers of short-sellers were powering the market higher and both longs and shorts were liquidating. The March contract lost 2,157 of open interest. This follows the advance on December 3 when the March contract gained 4.40 cents on volume of 24,888 contracts and total open interest declined by 1,385.

In summary, March coffee has advanced 6.50 cents during the past two sessions and total open interest has declined by 3,397. The COT report revealed that managed money still holds a substantial net short position. For the March contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for December 7 of 1.2590.

This year, coffee has displayed a tendency to generate buy signals only to see them reversed within 1-3 weeks. March coffee remains on short and intermediate term sell signals. We have no recommendation.

Dollar index:

The December dollar index advanced 70.9 points on volume of 65,073 contracts. Total open interest declined by 1,122 contracts, which relative to volume is approximately 25% below average. The December contract accounted for loss of 2.664 of open interest.

As this report is being compiled on December 7, the December contract is trading 29.2 points higher and has made a daily high of 98.905 and low of 98.270. For the December contract to resume its uptrend, the low of the day must be above OIA’s key pivot point for December 7 of 98.565. A short-term sell signal will be generated if the daily high is below OIA’s key pivot point for December 7 of 97.865. We have no recommendation.

Euro:

The December euro lost 99 pips on volume of 477,939 contracts. Total open interest declined by 15,003 contracts, which relative to volume is approximately 10% above average meaning liquidation was substantial on the sharp decline. As this report is being compiled on December 7, the December contract is trading 29 pips lower and has made a daily high of 1.0889, which is below Friday’s high of 1.0959. Additionally, the December contract has made a daily low of 1.0797, which is below Friday’s print of 1.0837.

For the December contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for December 7 of 1.0941. The downtrend will resume if the daily high is below OIA’s pivot point for December 7 of 1.0836. We have no recommendation.

S&P 500 E-mini

The December S&P 500 E-mini advanced by a strong 37.25 points on volume of 2,316,327 contracts. Volume was the strongest since December 3 when the December contract lost 30.25 points on volume of 2,710,421 contracts and total open interest increased by 35,181.

On December 4, total open interest declined by a substantial 65,606 contracts, which relative to volume is average, but a large number nonetheless. It should be noted that volume on the December 3 decline was substantially greater than volume on Friday’s advance. We bring this up because volume tends to expand in the direction of the underlying trend. Price and open interest action on December 3-4 was decidedly bearish.

As this report is being compiled on December 7, the December contract is trading 17.75 points lower and has made a daily low of 2064.50, which is the lowest print since 2040.00 made on December 3. The daily high on December 7 is 2095.50, which is fractionally above Friday’s print of 2093.00.

For the rally in the December contract to resume, the low of the day must be above OIA’s pivot point for December 7 of 2089.70. We have pointed out on a number of occasions that the December contract has been unable to make a low above the pivot point. This is negative.

For a short-term sell signal to occur, the high of the day must be below OIA’s key pivot point for December 7 of 2063.25. In the report of November 30, written on December 1, we recommended the initiation of short call positions in the December 2015 contract. This is currently profitable and the position should be held into expiration unless we see a dramatic change of events.