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Corn:

March corn lost 8.50 cents on volume of 212,461 contracts. Volume increased from December 4 when the March contract gained 4.50 cents on volume of 204,691 contracts and total open interest declined by 9,548. On December 7, total open interest declined by a massive 17,170 contracts, which relative to volume is approximately 230% above average meaning liquidation was extremely heavy on yesterday’s decline. The December 2015 contract lost 1,568 of open interest, March -11,850, July 2016 -3,316, December 2016 -800.

As this report is being compiled on December 8, the March contract is trading close to unchanged. March corn remains on short and intermediate term sell signals. We have no recommendation.

Soybeans:

January soybeans lost 23.75 cents on heavy volume of 306,935 contracts. Volume was the strongest since November 30 when 284,380 contracts were traded and the January contract gained 5.00 cents and total open interest declined by 8,179 contracts. On December 7, total open interest increased by 2,052 contracts, which relative to volume is approximately 60% below average, but a total open interest increase on yesterday’s sharp decline is bearish.

Adding to the bearish total open interest number was that January lost 10,102 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in January and increase total open interest. 

In summary, short-sellers were driving prices lower. There were total open interest increases on December 3 (+5468) and on December 4 (+4806), and this should have resulted in total open interest decline on December 7. This means there are longs who entered the market recently and have not liquidated. This will add selling pressure as prices move lower.

As this report is being compiled on December 8, the January contract is trading 7.00 cents lower and has made a daily low of 8.73, which is the lowest print since 8.70 1/4 made on November 30. 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 8 of 8.69 3/4. We have no recommendation.

Soybean oil:

January soybean oil lost 83 points on volume of 190,511 contracts. Volume fell from December 4 when the January contract gained 1.21 cents on volume of 226,580 contracts and total open interest increased by 992. On December 7, total open interest declined by 5,819 contracts, which relative to volume is approximately 10% above average. The December 2015 contract lost 296 of open interest, January 2016 -7,634.

As this report is being compiled on December 8, the January contract is trading close to unchanged on the day and has made a daily low of 30.80, which is the lowest print since 30.70 made on December 4. January soybean oil remains on short and intermediate term buy signals. We have no recommendation.

WTI crude oil:

January WTI crude oil lost $2.32 on huge volume of 1,371,460 contracts. Volume was the strongest since August 31, 2015 when 1,385,866 contracts were traded and the January 2015 contract closed at $51.63. On December 7, total open interest increased only 7,041 contracts, which relative to volume is approximately 75% below average. However, keep in mind the January contract lost 68,508 of open interest, which means there were sufficient open interest increases in the forward months to offset the substantial loss in the January contract and increase total open interest. In summary, the price and open interest action in yesterday’s trading was bearish.

Yesterday, the January contract made a new contract low of $37.50 and this has been taken out in trading on December 8 with another contract low of 36.64, which is the lowest print since $33.55 made during the month of February 2009. January WTI remains on short and intermediate term sell signals. We have no recommendation.

Dollar index:

The December dollar index advanced 32.6 points on volume of 41,737 contracts. Total open interest increased by a massive 2,790 contracts, which relative to volume is approximately 160% above average meaning huge numbers of new buyers were entering the market and driving prices higher (98.905). The December contract lost 4,341 of open interest, which means there were sufficient open interest increases in the forward months to massively increase total open interest and offset the decline in December.

As this report is being compiled on December 8, the December contract is trading 24.4 points lower and has made a daily low of 98.355. For the rally to resume, the low of the day must be above OIA’s pivot point of 98.565. A short-term sell signal will be generated if the daily high is below OIA’s key pivot point for December 8 of 97.865. We have no recommendation.

Euro:

The December euro lost 28 pips on volume of 293,853 contracts. Total open interest increased by 2,418, which relative to volume is approximately 55% below average, however, the December contract lost 39,498 of open interest, which means there were sufficient open interest increases in the forward months to offset the large decline in December and increase total open interest. As this report is being compiled on December 8, the December contract is trading 45 pips above yesterday’s close and has made a daily high of 1.0903, which is above yesterday’s print of 1.0889.

For the euro to resume its advance, it must make a daily low above OIA’s key pivot point of 1.0941, which would generate a short term buy signal. The downtrend will resume if the daily high is below OIA’s key pivot point for December 8 of 1.0836.

One of our concerns about initiating new bearish positions is when the euro rallied 3.55 cents on December 3, total open interest declined only 1,479 contracts. We know managed money is heavily net short the euro, and are concerned there is more liquidation to come on the part of short-sellers. We would not be surprised to see a short-term buy signal in the euro and a rally up to the 1.11 area. The December euro remains on short and intermediate term sell signals.

Australian dollar:

The December Australian dollar lost 77 pips on volume of 97,918 contracts. Total open interest increased by 1,866 contracts, which relative to volume is approximately 20% below average. However, the December contract lost 12,703 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.

In summary, yesterday’s action was bearish. As this report is being compiled on December 8, the December contract is trading lower again, this time by 50 pips and has made a daily low of 71.84, which is the lowest print since 71.65 made on November 30. For the December contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for December 8 of 71.38. We have no recommendation.

S&P 500 E-mini:

The December S&P 500 E-mini lost 7.50 points on volume of 1,762,639 contracts. Total open interest increased just 2,588 contracts. However, the December contract lost 25,534 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 slightly. Short sellers were pressuring the E-mini lower

As this report is being compiled on December 8, the December contract is trading 22.75 points lower and has made a daily low of 2050.25, which is above yesterday’s print of 2064.50, and the December 4 low of 2046.75. For the December contract to generate a short-term sell signal, the high of the day must be below OIA’s key pivot point for December 8 of 2062.65 and the rally will resume (which we think is highly doubtful) if the daily low is above OIA’s pivot point for December 8 of 2089.35. As we have pointed out in prior reports, the E-mini has been unable to make a daily low above the pivot point.

In the November 30 report, written on December 1, we recommended shorting out of the money calls in the December 2015 S&P 500 E-mini contract and this trade has worked splendidly. Continue to hold this position.