For Bloomberg access:{OIAR<GO>}

Corn:

December corn lost 0.25 cents on heavy volume of 549,368 contracts. Volume fell from November 11 when the December contract gained 3.25 cents on volume of 627,699 contracts and total open interest increased by 14,651. On November 12, total open interest increased again, this time by 6,950, which relative to volume is approximately 40% below average, and it appears that a battle ensued between buyers and sellers in yesterday’s trading and sellers were able to edge the market slightly lower.

For the past three days beginning on November 10, total open interest has increased each day for a cumulative increase of 50,633 contracts while the December contract lost 4.75 cents in this time frame. This is a very large build of open interest considering the minor decline of 4.75 cents.

Although it is premature, if open interest increases accompanied by muted declines, we may be looking at a market that trades in a sideways to slightly lower pattern, until there is a catalyst to send prices higher. The COT report will be released this afternoon and though it will only capture activity through November 10, we suspect that managed money will have assumed a net short position. The most recent report released last Friday showed that managed money was long by ratio of 1.11:1. December corn remains on short and intermediate term sell signals. No recommendation.

Soybeans:

January soybeans advanced 2.25 cents on volume of 162,165 contracts. Total open interest declined by 2,998 contracts, which relative to volume is approximately 25% below average. There were four delivery months that lost a total of 4,536 of open interest. As this report is being compiled on November 13, the January contract is trading 6.25 cents lower and has made a daily low of 8.54 1/2, which is above the contract low of 8.50 made on November 10. January soybeans remain on short and intermediate term sell signals. No recommendation.

Cocoa:

March cocoa advanced $15.00 on volume of 61,109 contracts. Total open interest increased just 50 contracts, however, the December contract lost 7,571 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. We consider yesterday’s action to be bullish and this confirms the uptrend in the cocoa market.

As this report is being compiled on November 13, the March contract is trading $36.00 higher and has made a new high for the move of 3,365, which is the highest price since the March contract made its contract high of $3,368 on July 15 . Of the commodities we follow, only cocoa is in  bull market. On October 30, December and March cocoa generated short and intermediate term buy signals. We have no recommendation.

WTI crude oil:

December WTI crude oil lost $1.18 on huge volume of 1,042,873 contracts.Volume was the strongest since October 13 when 1,048,608 contracts were traded and the December contract closed at $47.15. On November 12, total open interest increased by a strong number for the second day in a row, this time by 24,118 contracts, which relative to volume is approximately 10% below average, but the December contract lost 37,857 of open interest, which means there was more than enough open interest increases in the forward months to offset the decline in December and increase total open interest substantially.

As we alluded to earlier, November 12 was the second day in a row in which total open interest increased substantially. On November 11, total open interest increased by 25,495 contracts when the December contract lost $1.28.As this report is being compiled on November 13, the December contract is trading sharply lower, down $1.17, or -2.83% and has made a new low for the move of $40.36, which is the lowest print since 40.10 made on August 26.

On October 21, OIA announced that December WTI generated a short-term sell signal and the market has been on an intermediate term sell signal for a number of months. As we pointed out in last weekend’s report, the bear spread has been widening and this reflects seasonal weakness and near term pressure on oil. December contract is headed for a test of the contract low of 39.22 made on August 24. We have no recommendation.

From the November 8 Weekend Wrap:

“On Friday, November 6, the December 2015-March 2016 spread widened to a new high of $2.80 premium to March 2016, which is the highest the spread has traded going back one year. The recent low occurred on September 15 when the December 2015 contracts traded at a $1.86 discount to March 2016. The closing price on September 15 for the December contract was $45.53 and the closing price on Friday was $44.29. In summary, the December contract’s discount to March 2016 and the back months has widened, which indicates near-term pressure on the market. This is a typical seasonal behavior, and may last until January or February.”

Gasoline: On November 12, December and January gasoline generated short-term sell signals, and remain on intermediate term sell signals.

December gasoline lost 5.63 cents on volume of 190,222 contracts. Total open interest declined by 1,060 contracts, which relative to volume is approximately 70% below average. As this report is being compiled on November 13, the December contract is trading 2.61 cents lower, or -1.97% and has made a new low for the move of 1.2421, which is the lowest print since 1.1976 made on August 27. The December contract appears to be headed to a test of its contract low of 1.1756 made on August 26. We have no recommendation.

Dollar index:

The December dollar index lost 44.6 points on heavy volume of 46,043 contracts. Total open interest increased by 1,527 contracts, which relative to volume is approximately 15% above average meaning that new short-sellers were entering the market in fairly substantial numbers and driving prices to a new low for the move of 98.500.

However, as this report is being compiled on November 13, the dollar index has reversed sharply and  is trading 50.8 points higher, or +0.51% and made a daily high of 99.300, which is below the high for the move of 99.600 made on November 10. The dollar index remains on short and intermediate term buy signals. We have no recommendation.

S&P 500 E-mini: The December S&P 500 E-mini will generate a short term sell signal on November 13, but remains on an intermediate term buy signal.

The December S&P 500 E-mini lost 28.50 points on heavy volume of 1,814,989 contracts. Surprisingly, total open interest declined just 2,377 contracts. As this report is being compiled on November 13, the December contract is trading 12.25 points lower, or -0.61% and has made a new low for the move of 2021.25, which is the lowest print since 2008.50 made on October 22.

We recommend waiting for a counter trend rally before initiating bearish positions. It is apparent the global economy is weakening and this is reflected in ever lower commodity prices. We think that equity assets will be the next investment class to be hit by massive selling.