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On December 10, the USDA will release its World Agriculture Supply Demand report (WASDE) at noon Eastern standard time. Do not enter new positions prior to the report. If positions show a loss prior to the report, we recommend liquidating. If positions are profitable, be sure to employ rigorous risk management.

Soybeans:

January soybeans advanced 7.75 cents on volume of 248,354 contracts. Volume shrank from December 5 when January soybeans advanced 25.50 cents on volume of 259,369 contracts and total open interest declined by 4,977 contracts. On December 8, total open interest increased by 545 contracts, which relative to volume is approximately 85% below average. However, the January contract lost 12,011 of open interest, which makes the total open interest increase more impressive (bullish).

As this report is being compiled on December 9, January soybeans are trading 4.25 cents higher on the day. On December 3, January soybeans generated a short-term sell signal, but it appears that this sell signal will be reversed on December 9.In order for this to occur today, the low of the day must be above OIA’s key pivot point for December 9 of 10.34 1/2. Remarkably, January soybeans has been unable to generate an intermediate term buy signal, and this will occur if the low the day is above OIA’s key pivot point for December 9 of 10.45 1/4. For the past 2 days, the price and open interest action in soybeans has been more favorable than in soybean meal, which is a definite change. January soybeans remain on a short and intermediate term sell signal

Soybean meal:

January soybean meal advanced $3.70 on volume of 75,373 contracts. Total open interest declined by 3,438 contracts, which relative to volume is approximately 75% above average meaning that liquidation was heavy on the modest advance. On December 5, January soybean meal advanced $8.60 on volume of 85,823 contracts and total open interest declined by 3,885 contracts, which is approximately 75% above average. In short, for the past 2 trading sessions, January soybean meal has advanced, yet open interest has declined dramatically, which is a marked change from past performance. As this report is being compiled on December 9, January soybean meal is trading $3.10 higher while the December contract is trading 7.60 higher.If today’s low of $369.00 holds, it would be above OIA’s key pivot point for December 9 of 368.30, which means higher prices are likely in the very short-term. January soybean meal remains on a short and intermediate term buy signal.

From the December 5 report:

“The strength in soybean meal can be attributed to the action in the December contract, and once it goes off the board, we think soybean meal will resume its downtrend.In order for January soybean meal to resume its uptrend, the low the day must be above OIA’s key pivot point for December 8 of $368.10. The low on December 8 as far has been 364.00, considerably below the pivot point. January soybean meal remains on a short and intermediate term buy signal.”

Corn:

March corn lost 4.75 cents on volume of 214,992 contracts. Total open interest declined by 1,885 contracts, which relative to volume is approximately 45% below average. The December contract lost 3,470 of open interest, March 2015 -1294, July 2015 -796. In short there was liquidation across the board, which is healthy when prices decline. On December 5, March corn advanced 5.25 cents, however total open interest declined by 1,510 contracts.

In short, March corn is sending mixed signals, but it appears the path of least resistance is higher for now. Yesterday, March corn made a new high for the move at 3.99 3/4. This is the highest print since $4.01 1/4 made on November 13. In order for the rally to continue, March corn must make a low above OIA’s key pivot point for December 8 of 4.03. If it is unable to accomplish this, March corn will trade in a sideways pattern and likely resume its downtrend.March corn remains on a short and intermediate term buy signal.

Chicago wheat:

March Chicago wheat advanced 4.00 cents on volume of 80,429 contracts. Total open interest declined by 1,242 contracts, which relative to volume is approximately 40% below average. The December contract lost 96 of open interest, March 2015 -1,279, May 2015-738. This is the 2nd day in a row in which wheat prices advanced and open interest declined. On December 5, March Chicago wheat advanced 4.25 cents and total open interest declined by 2,073 contracts.

Yesterday, March Chicago wheat made a high of 6.05 3/4, which was below the December 3 high of 6.06 1/2 and the high for the move of 6.11 3/4 made on December 2. In short, March Chicago wheat is revealing in internal weakness based upon the negative open interest action during the past 2 days. Additionally, the market does not have the strength to take out the December 2 high. As this report is being compiled on December 9, March Chicago wheat is trading 13.00 cents lower and has made a daily low of 5.83 1/2, which is the lowest print since December 5 (5.82). As we have said in prior reports, the move higher in wheat is all about Russia and whether they will reduce exports.US wheat fundamentals are abysmal and the world is awash in wheat. March Chicago wheat remains on a short and intermediate term buy signal

Live cattle:

February live cattle lost 3.00 cents (the daily limit) on volume of 58,770 contracts. Total open interest declined by 1,589 contracts, which relative to volume is average. The December contract lost 1,506 of open interest, February 2015 -1,044. Interestingly, the open interest decline on December 8 was the smallest of the 2 other major declines: on December 5, February live cattle lost 2.10 cents while total open interest declined by 10,155 contracts and on December 3 February live cattle lost 1.925 cents and total open interest declined by 10,350 contracts.

It appears that selling has exhausted itself, at least for now, and the market is massively oversold and due for a decent rally. On December 3, February live cattle generated a short-term sell signal, but still remains on an intermediate term buy signal. For February live cattle to generate an intermediate term sell signal, the high of the day must be below OIA’s key pivot point for December 9 of 1.62770.Despite the move lower, we do not think the bull move in cattle is over yet. Typically,  live cattle tops out during the month of February.

March feeder cattle will generate a short-term sell signal on December 9.

WTI crude oil:

January WTI crude oil lost $2.79 on heavy volume of 701,564 contracts. Volume was the strongest since December 1 when January WTI advanced $2.85 on volume of 853,819 contracts and total open interest increased by 1,718 contracts. On December 8, total open interest increased by 8,149 contracts, which relative to volume is approximately 45% below average. The January contract accounted for loss of 25,821 of open interest, which makes the total open interest increase more impressive (bearish). Yesterday, January WTI made a new contract low of 62.78 and on December 9 has made another contract low of 62.25. Currently, January crude oil is trading 23 cents higher on the day. Stand aside.

Natural gas

January natural gas lost 20.7 cents on volume of 362,201 contracts. Total open interest declined by 8,818 contracts, which relative to volume is average. The January contract lost 24,583 of open interest. As this report is being compiled on December 9, January natural gas is trading 4.4 cents higher and has made a daily low of 3.608, which is above yesterday’s low of 3.585. On December 1, January natural gas generated a short and intermediate term sell signal. Stand aside.

Gold:

February gold advanced $4.50 on very light volume of 117,879 contracts. Total open interest declined by 1,490 contracts, which relative to volume is approximately 45% below average.

On December 9 gold has skyrocketed to a new high of 1239.00, which is the highest print since 1245.00 made on October 23. Additionally, February gold has closed at 1232.00, which is the highest close 1232.80 made on October 24. The key for gold will be tomorrow’s action and whether it can make a low above OIA’s key pivot point for December 9 of 1204.70. It appears the catalyst for the move higher was the sharply lower dollar, and if the dollar reverses course tomorrow and gold can hold its own, we may be looking at a whole new ballgame in precious metals.

Silver:

March silver advanced 1.8 cents on volume of 28,569 contracts. Total open interest declined by 823 contracts, which relative to volume is average. As this report is being compiled on December 9, silver has advanced sharply to a high of 17.230, which is the highest print since 17.255 made on October 30. For silver to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for December 9 of $16.620.

Cocoa: On December 8, March cocoa generated a short-term buy signal, but remains on an intermediate term sell signal.

March cocoa advanced $13.00 on volume of 13,514 contracts. Total open interest increased by a massive 1,112 contracts, which relative to volume is approximately 230% above average meaning that new longs were aggressively entering the market and driving prices higher (2910). Yesterday was the 3rd day in a row that cocoa prices advanced and open interest increased by a substantial amount.

From December 4 through December 8, March Cocoa has advanced 51.00 and total open interest has increased by 3,135 contracts. This is a solid performance and it continues on December 9: March cocoa has closed at 2952, which is the highest close 2957 made on October 27. December 9 is the 4th consecutive day of advancing cocoa prices, and the market is likely to pullback now that a short-term buy signal has been generated. Once the pullback occurs, this would be the most opportune time to initiate bullish positions. According to the most recent COT report, managed money is long cocoa by a ratio of 3.17:1, which is one of the lowest readings of the past several weeks. In short there is firepower sitting on the sidelines that will likely enter the market as prices move higher.

Coffee:

March coffee declined 2.05 cents on volume of 17,543 contracts. Total open interest increased by 580 contracts, which relative to volume is approximately 35% above average, meaning that new short sellers were entering the market and driving prices to a new low for the move (1.7700). The July 2015 contract lost 572 of open interest, which makes the total open interest increase more impressive (bearish). For the past 2 days, March coffee has declined by 4.40 cents and total open interest has increased by 1,810. This is bearish open interest action relative to the price decline. As we said in yesterday’s report, the increase of open interest means one of two things: either the market is at or near a bottom, or it is ready to take another leg down. March coffee remains on a short and intermediate term sell signal.