Bloomberg Access:{OIAR<GO>}

Soybeans:

On December 21, March soybeans generated a short term sell signal and remains on an intermediate term buy signal.

March soybeans gained 1.25 cents on volume of 198,750 contracts. Total open interest declined by a massive 14,866 contracts, which relative to volume is approximately 180% above average meaning that liquidation was extremely heavy during yesterday’s narrow range day. The January contract accounted for a loss of 17,136 and will be entering first notice day shortly.

As this report is being compiled on December 22, the March contract is trading lower again, down 8.50 cents and has made a daily low of 10.07 3/4, which is the lowest print since 10.04 1/2 made on November 21. As we pointed out in yesterday’s report, we are waiting for soybeans to undergo a counter trend rally before recommending bearish positions.

Soybean oil: On December 21, March soybean oil generated a short term sell signal and remains on an intermediate term buy signal.

March soybean oil lost 1 point on volume of 141,631 contracts. Total open interest increased by 2,862 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on December 22, the March contract is trading sharply lower, down 79 points or -2.17% versus soybeans trading -0.88%. The March contract has made a low of 35.52 on December 22, which is the lowest print since 34.65 made on November 23.

As we said in yesterday’s report, soybean oil is perhaps the most vulnerable of the complex due to the very heavy net long position of managed money. Before recommending bearish positions, we want to see a counter trend rally.

Corn: March corn will generate short and intermediate term sell signals on December 22.

March corn lost 3.00 cents on volume of 162,955 contracts. Total open interest increased by massive 12,536 contracts, which relative to volume is approximately 210% above average meaning aggressive new short-sellers were entering the corn market in large numbers and driving prices to a new low for the move of 3.46 3/4, which is the lowest print since 3.43 made on December 2. Open interest increased in every delivery month from March 2017 through December 2018.

The COT report released last Friday revealed that managed money liquidated 1,283 of their long positions and added 2,339 to their short positions. Commercial interests liquidated 984 their long positions and also liquidated 1,438 of their short positions. As a result, managed money is short corn by ratio of 1.41:1, up slightly from the previous week of 1.38:1 and the ratio two weeks ago of 1.36:1. Even though corn has been on short and intermediate term buy signals until today, managed money remained net short throughout. As this report is being compiled on December 22, the March contract is trading nearly unchanged on the day. We have no recommendation.

Natural gas:

February natural gas advanced 27.9 cents on strong volume of 522,861 contracts, an impressive number considering the Christmas holiday begins in a couple of days. However, total open interest was a disappointment and increased only 5,273 contracts, which relative to volume is approximately 50% below average. Though the January 2017 contract lost 13,441 of open interest and though there were enough open interest increases in the forward months to offset the decline in January and increase total open interest, the total open interest increase was relatively minor considering the magnitude of the advance.

This is a red flag because if natural gas is unable to attract new buyers on a massive advance, when will it occur? As this report is being compiled on December 22, the February contract is trading nearly unchanged after making a new high for the move of 3.645, which is approximately 11 cents below the December 9 high for the move of 3.758. For the rally to continue, the daily low must be above OIA’s pivot point of 3.538 and the low thus far has been 3.537. We recommend a stand aside posture.

WTI crude oil:

February WTI crude oil lost 81 cents on light pre-holiday volume of 844,605 contracts. Total open interest increased 1,686, which is dramatically below average, but a total open interest increase on yesterday’s decline is negative. The February contract accounted for a loss of 8,123 of open interest. For the past four sessions, total open interest has been acting negatively relative to price advances and declines.

On December 16, crude oil advanced $1.00 on volume of 934,023 contracts and total open interest declined by 5,429. On December 19, crude advanced 11 cents on volume of 895,707 and total open interest declined again this time by 26,103. Finally, on December 20, crude oil gained 24 cents on volume of 746,306 and total open interest declined by 10,998. This is not the kind of action conducive for sustained advances. In summary, potential market participants are sitting on the sidelines and not entering new buy orders even though prices have been moving irregularly higher. Although we think prices are headed higher, it will likely be a rocky road.

Canadian dollar: The March Canadian dollar will generate short and intermediate term sell signals on December 22.