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Most commodity markets are being hit hard on the downside by the massive collapse in the petroleum complex due to OPEC maintaining current production levels. The violent downside reaction in the petroleum complex is somewhat surprising considering it was fairly well-known that OPEC would not likely cut production. Adding further pressure is the dollar index, which is trading sharply higher.

Soybeans:

January soybeans lost 4.00 cents on volume of 117,342 contracts. Total open interest declined by 3,953 contracts, which relative to volume is approximately 35% above average. The January contract accounted for loss of 4,683 of open interest, March 2015 -155. On November 26, January soybeans made a high of 10.54 3/4, which was slightly above the November 25 high 10.54. On November 28, as this report is being compiled, the high for the day has been 10.51 1/2, and January soybeans are 18.75 cents lower and trading on the lows of the day.

As we indicated in the November 25 report we have been skeptical of soybean’s ability to continue a sustained move higher. Although January soybeans made a low above the November 26 key pivot point of 10.35 3/8, it has been unable to make a low above 10.46 1/4, which would trigger an intermediate term buy signal.Periodic rallies are to be expected until the bottleneck of soybeans shipped to crushers is relieved. Ultimately though, we consider the soybean rally like the rally in the rest of the grains as a bear market bounce. January soybeans remain on a short-term buy signal, but an intermediate term sell signal. 

From the November 25 report:

“In short, the advance yesterday was solid, and as this report is being compiled on November 26, January soybeans are trading 7.00 cents lower and have made a daily low of 10.38 1/2, which is above OIA’s key pivot point for November 26 of 10.35 3/8. This increases the likelihood that January soybeans will finally generate an intermediate term buy signal. This will occur if the low the day is above OIA’s key pivot point for November 26 of 10.46 1/4.Despite the impressive performance, we remain skeptical of January soybeans’ ability to advance beyond the November 12 high of 10.86 1/4. As we have said before, new longs must be willing to enter the market at ever higher prices to keep the rally going and shorts need to continue to cover their positions. Much of the positive price action in soybeans is a result of a strong meal market and the demand for beans to meet crushing needs. There is a bottleneck transporting beans to crushers, but this will pass shortly.”

Soybean meal:

January soybean meal advanced $1.90 on volume of 94,045 contracts. Total open interest declined by 10,043 contracts, which relative to volume is approximately 320% above average meaning that liquidation was extremely heavy on the modest advance. The December contract accounted for loss of 11,381 of open interest, January 2015 -1170. As this report is being compiled on November 28, January soybean meal is trading $7.60 lower.January soybean meal remains on a short and intermediate term buy signal.

Corn:

March corn advanced 4.25 cents on volume of 402,004 contracts. Volume increased slightly from November 25 when March corn advanced 7.00 cents on volume of 391,855 contracts and total open interest declined by 26,549 contracts. On November 26, total open interest declined by 17,091 contracts , and this was due to the liquidation of 47,910 in the December contract as it  enters 1st notice day on November 28.As this report is being compiled on November 28, March corn is trading 6.00 cents lower after making a daily high of 3.93 3/4, which is below the high for the move of 3.94 1/4 made on November 21.As we indicated in the November 25 report, it appears likely that corn might continue to move higher however, we also stated that we did not think it was sustainable.

From the November 25 report:

“March corn has made a daily low of 3.86 1/2, which is the key pivot point for March corn on November 26. In short, it appears that corn also is headed higher along with the soybean complex and wheat. However, we do not think the move higher in corn is sustainable. If the market can move to the 4.03 level, conceivably it could touch 4.21 5/8. In summary, the extent of the rally may be another 30 cents at most. March corn remains on a short and intermediate term buy signal.”

Chicago wheat:

March Chicago wheat advanced 5.00 cents on volume of 94,641 contracts. Total open interest declined by 7,539 contracts, which relative to volume is approximately 220% above average meaning liquidation was extremely heavy on the modest advance. The December contract accounted for loss of 11,397 of open interest. As this report is being compiled on November 28, March Chicago wheat is trading 7.75 cents higher and has made a new high for the move at 5.81, which is the highest print since 5.84 made on September 2. The reason for the move is that Russian officials are indicating that the 2015 grain crop may drop 18 million tons. March Chicago wheat remains on a short and intermediate term buy signal.

From the November 25 report:

“Clearly, Chicago wheat is blowing out short sellers, and once this phase of the rally is over, Chicago wheat will need new buyers to pay ever-increasing prices. We do not think this is in the cards. There is formidable resistance between OIA’s key pivot points of 5.80 1/4 and 5.92 3/4. We see the rally in wheat as temporary, and expect a resumption of the downtrend. March Chicago wheat remains on a short and intermediate term buy signal.”

Kansas City wheat: On November 26, March Kansas City wheat generated an intermediate term buy signal after generating a short-term buy signal on November 14.

March Kansas City wheat advanced 4.25 cents on volume of 26,121 contracts. Total open interest declined by 1,571 contracts, which relative to volume is approximately 185% above average. The December contract lost 2,989 of open interest. As this report is being compiled on November 28, March Kansas City wheat is trading 13.75 cents higher and is made a new high for the move at 6.40 3/4, which is the highest print since 6.42 3/4 made on September 2.

WTI crude oil:

January WTI crude oil lost 40 cents on volume of 447,212 contracts. Total open interest increased by 11,190 contracts, which relative to volume is average. The January contract accounted for a gain of 1,363 of open interest. As this report is being compiled on November 28, January WTI crude oil is trading down a massive $6.40 and is making new lows as this report is being written. The surprising aspect of the decline is it was telegraphed that OPEC would not cut production , yet the market’s reaction to the status quo is crushingly bearish. At the current price level, WTI prices are trading at the lowest level since May of 2010.

Natural gas:

January natural gas lost 4.8 cents on volume of 242,954 contracts.Total open interest declined by 496 contracts, which is minuscule and dramatically below average.The December contract lost 838 of open interest. As this report is being compiled on November 28 , January natural gas is trading 20.5  cents lower in sympathy with the rest of the petroleum complex.We have been warning clients to avoid the long side of natural gas and were concerned about the negative open interest action relative to price advances and declines. January natural gas remains on a short and intermediate term buy signal, but will generate a short-term sell signal if the high of the day is below OIA’s key pivot point for November 28 of 4.140.

From the November 25 report:

“We have been unimpressed with the open interest action on rallies and declines, and think it is risky to be long the market. Additionally, another potential danger sign for natural gas is that the heating oil market has been dead in the water and during the cold spell and could barely rally. As the EIA report indicates, distillate fuel inventories are near the lower limit of the average range for this time of year, and yet heating oil prices did not get a boost from cold weather. Although prices can certainly move higher, in our view they can turn on a dime, which makes it extremely risky to trade natural gas.”

The Energy Information Administration announced that working gas in storage was 3,432 Bcf as of Friday, November 21, 2014, according to EIA estimates. This represents a net decline of 162 Bcf from the previous week. Stocks were 346 Bcf less than last year at this time and 400 Bcf below the 5-year average of 3,832 Bcf. In the East Region, stocks were 183 Bcf below the 5-year average following net withdrawals of 89 Bcf. Stocks in the Producing Region were 166 Bcf below the 5-year average of 1,257 Bcf after a net withdrawal of 55 Bcf. Stocks in the West Region were 52 Bcf below the 5-year average after a net drawdown of 18 Bcf. At 3,432 Bcf, total working gas is below the 5-year historical range.

Gold:

February gold lost 30 cents on volume of 208,756 contracts. Total open interest declined by 11,317 contracts, and this was due to the December contract entering 1st notice day on November 28. As this report is being compiled on November 28, February gold is trading sharply lower and has closed at 1175.50, down $22.00. The market never have the strength to generate a short-term buy signal, and the collapse of the energy sector and sharp rise of the dollar index could not stem the flow of money out of gold. February gold remains on a short and intermediate term sell signal.

Coffee:

March coffee lost 80 ticks on light holiday volume of 9,369 contracts. Total open interest declined by 577 contracts, which relative to volume is approximately 185% above average meaning that liquidation was heavy on the modest decline. The December contract accounted for loss of 42 of open interest and will be going off the board shortly. As this report is being compiled on November 28, March coffee has closed at 1.8745, down 6.80 cents. We attribute the decline to the massive liquidation that occurred in most commodity markets, and the fact remains coffee has very bullish fundamentals. We expect it to generate a short-term buy signal, however, the market is at a critical  juncture, and must hold the November 10 low of 1.8540. March coffee remains on a short and intermediate term sell signal.