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The rally in the soybean complex in yesterday’s trading caused total open interest decline in soybeans, soybean meal and soybean oil. We view the current rally as seasonal in nature and expect hedge pressure to resume once a sufficient number of short-sellers have been blown out.

Corn:

March corn advanced 5.00 cents on volume of 284,380 contracts. Volume increased somewhat from November 27 when the March contract lost 5.50 cents on volume of 267,195 contracts and total open interest increased by 9,532. On November 30, total open interest declined by a sizable 8,179 contracts, which relative to volume is approximately 5% above average meaning short-sellers were powering the market higher and both buyers and sellers were liquidating. The December contract lost 11,719 of open interest and March saw a decline of 1,772.

As this report is being compiled on December 1, the March contract is trading nearly unchanged. The open interest action for the past couple of days confirms the bearish set up for corn. March corn remains on the short and intermediate term sell signal. We have no recommendation.

Soybeans: January soybeans will generate a short-term buy signal if the daily low continues to be above OIA’s key pivot point for December 1 of 8.78 7/8. The January contract remains on an intermediate term sell signal.

January soybeans advanced 8.00 cents on volume of 181,694 contracts. Volume was somewhat stronger than November 25 when the January contract gained 11.50 cents on volume of 175,079 contracts and total open interest declined by 1,571. On November 30, total open interest declined again, this time by 4,663 contracts, which relative to volume is average. The January contract accounted for loss of 6,991 of open interest and there were insufficient open interest increases in the forward months to offset a substantial amount of the loss in the January contract.

The COT report revealed that managed money is heavily net short and the ratio of 1.90:1 is the highest in at least a couple of months. It appears likely that January soybeans will generate a short-term buy signal on December 1, but we do not think this is an actionable trade because of the terrible fundamentals and the chance that the buy signal could be reversed easily under the present circumstances.

Soybean meal:

January soybean meal advanced $1.50 on volume of 73,329 contracts. Total open interest declined by 1,987 contracts, which relative to volume is average. The December 2015 through May 2016 contracts lost a total of 3,514 of open interest. Soybean meal is clearly the laggard in the complex. For January soybean meal to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for December 1 of $296.30. We have no recommendation.

Soybean oil:

January soybean oil advanced 34 points on disappointing volume of 109,696 contracts. Volume was only slightly above that of November 27 when the January contract lost 13 points on volume of 109,310 contracts and total open interest increased by 376 contracts. On November 30, total open interest declined by 397 contracts, which relative to volume is approximately 85% below average, but a total open interest decline on yesterday’s advance is negative.

The December contract lost 2,439 of open interest and though there were sufficient open interest increases in the forward months to offset most of the decline in December, the performance reflects a bearish sentiment over the soybean complex. On November 27, January and March soybean oil generated short and intermediate term buy signals, but we recommend a stand aside posture.

WTI crude oil:

January WTI crude oil lost 6 cents on volume of 609,547 contracts. Total open interest increased by 5,201 contracts, which relative to volume is approximately 55% below average. The January contract accounted for loss of 8,151 of open interest. As this report is being compiled on December 1, the January contract is trading 11 cents lower and has made a daily low of 41.17, which is the lowest print since 40.41 made on November 23.

Although WTI remains on short and intermediate term sell signals, we are becoming less bearish as time goes by. The reason: the contract low for January was made on August 24 ($39.97) when the equities market had their major shakeout and since then WTI has not been able to penetrate this low. We hypothesize that much of the bearish sentiment is already in the market. We are not advocating bullish positions by any stretch, just a heads up on a market that may be in a potential turnaround situation.

Dollar index:

The December dollar index advanced 13.7 points on volume of 24,796 contracts. Total open interest increased by 177 contracts, which relative to volume is approximately 65% below average. As this report is being compiled on December 1, the December contract is trading 27.5 points lower and has made a daily high of 100.255, which is below yesterday’s high for the move of 100.360. The real test for the dollar index will come this Thursday when the ECB will determine the extent of its money printing program, and we would not be surprised to see the dollar index undergo a sharp pullback because much of the program has likely been discounted. The dollar index remains on short and intermediate term buy signals. We have no recommendation.

Australian dollar:

December Australian dollar advanced 39 pips on volume of 67,974 contracts. Total open interest increased by a healthy 2,824 contracts, which relative to volume is approximately 70% above average meaning that aggressive new buyers were entering the market and driving prices higher (72.45). The December contract gained 2,086 of open interest.

The total open interest increase in yesterday’s trading spells bad news to the large contingent of short-sellers who according to the latest COT report are short by a ratio of 2.28:1, which means there is plenty of firepower left in the market to send the Australian dollar higher. The only fly in the ointment would be if the Reserve Bank of Australia decides to take a more aggressive stance about lowering interest rates.

As this report is being compiled on December 1, the December contract is trading sharply higher, up 85 pips or + 1.18%. On November 25, OIA announced that the December and March Australian dollar generated short and intermediate term buy signals. We have no recommendation.

S&P 500 E-mini:

The December S&P 500 E-mini lost 10.25 points on volume of 1,402,749 contracts. Total open interest increased by 8,121 contracts, which relative to volume is approximately 70% below average, but an open interest increase on yesterday’s price decline is negative. As this report is being compiled on December 1, the December contract is trading 11.75 points higher and has made a daily high of 2097.25 (which was made when the cash market opened at 9:30 a.m. Eastern Standard Time. Since then, the market has been drifting lower.

Today’s high (2097.25), fractionally exceeds yesterday’s print of 2095.00, and the November 27 high of 2096.00, but is below the high made on November 26 of 2098.25. We have been reminding clients that the market has not been able to test the November 3 high of 2110.25, which is below the contract high of 2118.75 made on May 19, 2015.

Additionally, the December contract has been unable to make a low above OIA’s pivot point, which would indicate the rally would resume. For the December contract to continue its advance, the low of the day must be above OIA’s key pivot point for December 1 of 2088.00. At this juncture, we think this is highly unlikely, and that clients should look to initiate short call positions in the December 2015 E-mini. Strikes should be based upon your risk tolerance The December contract remains on short and intermediate term buy signals.