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December gold, January platinum and December copper are making a new contract lows on November 17.

Corn:

December corn advanced 1.75 cents on volume of 284,471 contracts. Total open interest increased by 3,149 contracts, which relative to volume is approximately 45% below average. The December contract lost 18,741 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.

The COT report revealed that managed money added a massive short position and assumed a net short position for the first time in many weeks. Commercials on the other hand added to their long positions and liquidated their short positions. We saw this phenomenon throughout the grain complex. As this report is being compiled on November 17, the December contract is trading unchanged on the day. December corn remains on short and intermediate term sell signals. We have no recommendation.

Soybeans:

January soybeans advanced 4.25 cents on volume of 124,867 contracts. Total open interest increased by 3,019 contracts, which relative to volume is average. The July 2016 contract lost 269 of open interest and January gained 32.The COT report showed that managed money added substantially to their short positions, and commercials added to their long positions and liquidated their short positions.

Additionally, managed money assumed a net short position in soybean meal for the first time in at least one year. Also, managed money assumed a net short position soybean oil. In summary, the setup is bearish for the bean complex going forward, but we recommend against bearish positions at current levels.

As this report is being compiled on November 17, the January contract is trading 2.00 cents above yesterday’s close. Soybeans, soybean meal and soybean oil remain on short and intermediate term sell signals. We have no recommendation.

Cocoa:

March cocoa advanced $14.00 on lighter than normal volume of 23,356 contracts. However, total open interest increased by a massive 2,197 contracts, which relative to volume is approximately 285% above average, meaning that new aggressive buyers were entering the market, but based upon the modest increase, this was met by heavy selling. The December contract accounted for loss of 892 and there were sufficient open interest increases in the forward months to offset this decline and increase total open interest substantially.

Yesterday, the March contract made a new contract high of $3,390, and this has been taken out on November 17 with another new print of 3,395. Although it appears that cocoa is headed higher, we think the market could have a substantial pullback and undergo a period of consolidation before making major new highs. We are bullish, but advise against entering new bullish positions at current levels.

WTI crude oil:

December WTI crude oil advanced $1.00 on very heavy volume of 1,214,622 contracts.Volume slightly exceeded the level of September 2 when 1,212,457 contracts were traded and the December contract closed at $47.52. On November 16, total open interest declined by 8,849 contracts, which relative to volume is approximately 60% below average. The December contract lost 30,565 of open interest, which means there were NOT enough open interest increases in the forward months to offset the decline in December.

We consider the performance on November 16 to be bearish. Yesterday, the December contract made a new low for the move of 40.06, in the early evening session, and then rallied to a high of 42.25 before pulling back before the close. As this report is being compiled on November 17, the December contract is trading 74 cents lower and has made a daily high of 42.03, which means there was no follow-through on yesterday’s advance. This confirms the downtrend and we expect to see new contract lows within the next week. December WTI remains on short and intermediate term sell signals. We have no recommendation.

Dollar index:

The December dollar index advanced 44.1 points on volume of 33,240 contracts. Total open interest increased by just 120 contracts, which relative to volume is approximately 80% below average. However, the December contract lost 275 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.

As this report is being compiled on November 17, the dollar index is trading.16.2 points higher and has made a new high for the move of 99.835, which is the highest print since 99.835 made on April 16. We think the dollar index will take out its contract high of 102.450 by the end of the year. This will continue to pressure the commodity complex and the only way to turn the dollar index lower would be a very sharp rally in the euro, which we think at this juncture is unlikely.

Euro:

The December euro lost 60 pips on volume of 180,546 contracts. Total open interest declined just 30 contracts. The December contract lost 1,956 of open interest, which means there was almost enough open interest increases in the forward months to offset the decline in December. We consider the action on November 16 to be bearish. As this report is being compiled on November 17, the December contract is trading 33 pips lower and has made a new low for the move of 1.0634, which is the lowest print since 1.0618 made on April 15. The euro is headed to the continuation contract low of 1.0520 made on March 13, 2015. We have no recommendation.

S&P 500 E-mini:

The December S&P 500 E-mini advanced 29.50 points on surprisingly light volume of 1,716,362 contracts. Volume was lighter than November 12 and 13 when the December contract lost 28.50 and 22.00 points respectively. In other words, volume increased on declines and contracted on yesterday’s advance. This is negative.

Additionally, on November 16, total open interest declined by 14,809 contracts, which relative to volume approximately is 55% below average, but an open interest decline on yesterday’s strong advance is another negative. On November 13, OIA announced that the December and March S&P 500 E-mini generated short-term sell signals, and on November 17, the E-mini is rallying, trading 6.75 points above yesterday’s close. This is typical countertrend behavior after the generation of a sell signal.

For the December contract to reverse the sell signal and generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for November 17 of 2067.75. As of this writing, the December contract has not been able to make a daily high at the pivot point, let alone make a low above it. 

Clients should consider writing out of the money calls in the December contract. We think advances if they continue will be labored and the impact of time decay on the December contract will be a countervailing force. Strikes selected should be based upon your risk tolerance. As long as the December contract is unable to generate a short-term buy signal, we think this is a low risk trade. If a buy signal was generated, we would recommend liquidating all bearish positions.