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Soybeans:

March soybeans advanced 8.00 cents on total volume of 227,050 contracts.Total open interest declined by a massive 11,906 contracts, which relative to volume is approximately 110% above average meaning that liquidation was extremely heavy. The January contract lost 12,604 of open interest and March 2015 shed 2.324. The open interest action relative to the price advance on December 18 was decidedly bearish.

Additionally, it confirms a bearish pattern of open interest action going back to December 16. On December 16, soybeans declined by 16.00 cents while open interest increased by 2,325 contracts. On December 17, soybeans advanced 3.50  cents and total open interest declined by 9,013 contracts. This pattern of behavior suggests that market participants are liquidating on advances and initiating short positions on declines.

Although March soybeans remain on a short-term buy signal, we think that clients should begin to think about the bearish side of this market. A confirmed short term sell signal will occur if the daily high is below OIA’s key pivot point for December 19 of 10.26 5/8. In order for the rally to resume, the low the day must be above OIA’s key pivot point for December 19 of 10.49. Yesterday’s high was exactly 10.49, but the daily low must be above this for the rally to continue. We think is unlikely.

Soybean meal:

March soybean meal advanced $4.20 on total volume of 77,893 contracts. Total open interest increased by 1,066 contracts, which relative to volume is approximately 45% below average. The January contract accounted for loss of 4,495 of open interest, which makes the total open interest increase more impressive (bullish). This is the first open interest increase since December 11 when soybean meal advanced $2.40 on volume of 91,796 contracts and total open interest increased by 3,735 contracts. The open interest increase in yesterday’s trading tells us there are some market participants who may hold out hope the bull market in soybean meal is intact. In order for a confirmed sell signal to occur, the high of the day must be below OIA’s key pivot point for December 19 of $348.20. The rally would resume if the low the day is above OIA’s key pivot point for December 19 of 358.10. March soybean meal remains on a short and intermediate term buy signal.

Corn:

March corn advanced 2.75 cents on volume of 188,713 contracts. Total open interest increased by a massive 9,341 contracts, which relative to volume is approximately 100% above average meaning that a battle occurred between longs and shorts and longs were able to move the market fractionally higher. Yesterday’s buy side action was met by strong selling, which is why open interest increased as much as it did.Most unusual: open interest increased in all the front month contracts: from March 2015 through May 2016. Yesterday, March corn made a new high for the move at 4.14, which is the highest print since 4.15 3/4 made on July 9.March corn remains on a short and intermediate term buy signal. We have no recommendation.

Chicago wheat:

March Chicago wheat advanced 6.75 cents on very heavy volume of 170,618 contracts. Volume increased substantially from December 17 when March Chicago wheat advanced 25.25 cents on volume of 146,417 contracts and total open interest declined by 2671 contracts. Additionally, volume traded on December 18 is the highest of the recent bull move and is the strongest since November 13 when 226,277 contracts were traded and March Chicago wheat closed at 5.56.

On December 18 uncharacteristically, total open interest increased by 2,143 contracts, which relative to volume is approximately 45% below average, but this is the first open interest increase on a price advance since December 15 when March Chicago wheat advanced 12.50 cents on volume of 89,405 contracts and total open interest increased by 1,452 contracts.

Based upon very heavy volume, the increase of total open interest, combined with the parabolic move that resulted in a spike high at 6.77, we think there is a good chance the top was made yesterday.We view the open interest increase in yesterday’s trading as Johnny-come-lately’s entering the market worried they were going to miss the move. By the way, the high of 6.77 was made between the hours of 3:15 – 3:30 a.m. Central standard time December 18. Since making the high, the market has steadily moved lower. March Chicago wheat remains on a short and intermediate term buy signal. Stand aside.

Live cattle:

February live cattle advanced 2.70 cents on volume of 59,108 contracts. Total open interest declined by a massive 9,622 contracts, which relative to volume is approximately 440% above average meaning that liquidation was off the charts heavy on the advance. Open interest declined in the December 2014 through December 2015 contracts. This comes as no surprise to OIA and we told clients to expect liquidation on rallies and that this would keep a lid on advances.

As this report is being compiled on December 19, February live cattle is trading 80 points higher and has made a daily high of 1.60775. On December 3, February cattle generated a short-term sell signal and an intermediate term sell signal on December 15. However, we think there is a strong likelihood the bull move in cattle is not over, and there is a seasonal tendency for cattle prices to top in February.

WTI crude oil:

February WTI crude oil lost $2.11 on heavy volume of 899,531 contracts. Total open interest declined by 15,463 contracts , which relative to volume is approximately 25% below average. The January contract accounted for loss of 34,421 of open interest. As this report is being compiled, February WTI is rallying, up $2.10, which is long overdue considering the deeply oversold condition of oil. We will be monitoring the market and advise when we think timely bearish positions can be initiated.

Natural gas:

January natural gas lost 6.0 cents on volume of 330,773 contracts. Total open interest increased by 1,324, which relative to volume is approximately 75% below average, but an open interest increase on a price decline is bearish.The January contract accounted for loss of 13,673, which makes the minor increase of open interest more impressive (bearish). As this report is being compiled on December 19, January natural gas has plunged 4.28%, down 15.6 cents and has made a new contract low of 3.464.On December 1, January natural gas generated a short and intermediate term sell signal. Stand aside.

Gold:

February gold advanced 30 cents on volume of 146,373 contracts. Total open interest declined by 981 contracts, which relative to volume is approximately 65% below average. As this report is being compiled on February 19, February gold is trading $1.00 higher on the day and has made a daily low of 1193.20, which is above yesterday’s low of 1188.50. The high on December 19 is 1201.50, which is below yesterday’s high of 1213.90. February gold remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Silver:

March silver lost 6 ticks on volume of 35,168 contracts. Total open interest declined by 374 contracts, which relative to volume is approximately 50% below average. As this report is being compiled on December 19, March silver is trading 6.6 cents higher and has made a daily high of 16.095, and a low of 15.830.On December 11, March silver generated a short-term buy signal, and has not yet generated a short-term sell signal.For a short-term sell signal to be generated, the high of the day must be below OIA’s key pivot point for December 19 of $15.962.. Stand aside.

Cocoa:

March cocoa advanced $50.00 on heavy volume of 30,993 contracts. Volume was the strongest since November 13 when March cocoa closed at $2,821. On December 18, total open interest increased by a massive 1,490 contracts, which relative to volume is approximately 85% above average meaning that new buyers were entering the market aggressively in heavy numbers and driving prices to a new high for the move ($2,968).As this report is being compiled on December 19, March cocoa has made another new high at 2,990 and has closed at 2,980, up $15.00 and the highest close since 3,035 made on October 24. On December 8, March cocoa generated a short-term buy signal and for and intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for December 19 of 2,993. Maintain bullish positions.

Coffee:

March coffee advanced 2.50 cents on volume of 13,240 contracts. Total open interest increased by 139 contracts, which relative to volume is approximately 50% below average. However, the March contract lost 846 of open interest, which makes the total open interest increase more impressive (bullish). As this report is being compiled on December 19, March coffee has closed at 1.7470, up 35 ticks. March coffee remains on a short and intermediate term sell signal. Stand aside.