January soybeans advanced 1.50 on volume of 254,158 contracts. Volume declined approximately 33,000 contracts from December 11, but was above year to date average daily volume. Open interest increased by 4,244 contracts, which in relation to volume is approximately 25% less than average. The January contract lost 12,519 contracts of open interest, therefore there was sufficient new participation to bring the open interest number positive. The export sales number was terrific with 1,319,450 tons, which is one of the largest sales since the beginning of the season on October 1. The market’s tone has improved, but in our view it is premature to get on board the long side. Stand aside.
January soybean meal closed $3.90 higher on heavier than normal volume of 73,671 contracts. Volume was the highest since November 29 when 76,743 contracts were traded and January soybean meal closed at $435.80. On December 12, open interest increased by a massive 4,304 contracts, which in relation to volume is approximately 130% above average, meaning there was aggressive new buying and these participants were clearly in control. What makes the large increase of total open interest even more impressive is that the December contract lost 706 contracts and March lost 3,017 contracts. January soybean meal made a new high for the move at 453.70, and closed at 452.00, which is the highest close since November 8 when soybean meal closed at 459.20. The USDA reported another terrific export sales number at 271,870 tons. Exports only have to average 49,260 tons to reach the USDA export projection. As this report is being compiled on December 13, January soybean meal has made another new high at 458.20. For the past 3 sessions, price and open interest has been acting in a bullish congruent fashion. Despite this, we recommend that clients stand aside.
Soybean oil: We will not report on soybean oil until we see a new opportunity.
March corn lost 2.50 cents on volume of 187,634 contracts. Open interest declined by a massive 17,848 contracts, which in relation to volume is approximately 275% above average, meaning that liquidation was extremely heavy. It is rare to see liquidation in corn this heavy. Corn made a new low for the move at $7.19, which is the lowest price for March corn since November 16 when it reached a low of $7.14 1/2. As this report is being compiled on December 13, March corn is trading 8 cents lower and has made another new low at 7.15. The export sales report was unimpressive as usual at 258,900 tons. Stand aside.
March wheat lost 9.50 cents on volume of 109,550 contracts. Although wheat made a new low for the move at $8.09, volume shrank by approximately 45,000 contracts from December 11 when wheat declined 27.25. On December 12, open interest declined by 3,382 contracts, which in relation to volume is approximately 20% above average. The latest report by the USDA showed that export sales totaled 518,600 tons, which is above the USDA weekly export projection. However, sales need to match this number every single week in order to attain the projected USDA sales for the year. Stand aside.
January crude oil gained 98 cents on extremely heavy volume of 722,130 contracts. Volume was the highest since November 13 when 829,142 contracts were traded and January crude oil closed at $85.84. On December 12, open interest increased by 10,542 contracts, which in relation to volume is approximately 35% less than average, meaning that participation was large but commitments were unimpressive. January crude oil made a high of 87.68, which was the highest price since December 6 the high was 88.23. However, the market closed nearly a dollar off its high at 86.87. Conceivably, the exceptionally heavy volume could be attributed to hedgers on the short side of the trade who were driving prices down from the highs. Stand aside.
January natural gas lost 3 cents on volume of 467,610 contracts. Open interest increased by a massive 12,652 contracts, which in relation to volume is average, but a large number considering the increase is occurring at the very low end of the trading range. In the December 11 report, we stated that new shorts would have to enter the market at the low end of the trading range in order to drive prices lower. This is certainly the case and as this report is being compiled on December 13, January natural gas is down 7.1 cents and has made a new low for the move at $3.293. Stand aside.
March copper gained 2.95 cents on light volume of 44,272 contracts. Volume increased by approximately 6,000 contracts from December 11, but fell short of year to date average daily volume of 65,709, and November’s average daily volume of 69,988 contracts. One issue we have with copper is that during the rally of the past 8 trading sessions, volume has been below average daily volume year to date. To make matters worse, open interest declined by 635 contracts, which in relation to volume is approximately 35% below average, but this indicates that both longs and shorts were liquidating on the advance. On December 11, copper generated a short-term sell signal, which concurs with the intermediate term buy signal and this means that copper should be traded from the long side only. As we mentioned in the report of December 11, after a buy signal is generated, the market is likely to pull back for 1 to 2 days. In yesterday’s report we targeted the pullback area to $3.6330-3.6385. As this report is being compiled on December 13, copper is trading 5.50 cents lower. Stand aside.
February gold gained $8.30 on volume of 172,415 contracts. Volume doubled from December 11 when 86,577 contracts were traded and open interest increased by 3,064 contracts while February gold declined by 4.80. Open interest increased on the rally by 5,175 contracts, which in relation to volume is approximately 20% above average. Gold made a new high for the move at 1725, but couldn’t hold couldn’t hold the high and closed off several dollars from it. Beginning with the late afternoon session on December 12, gold proceeded to sell off and continued to do so through the evening. As this report is being compiled on December 13, gold is trading $20.80 lower. As clients know, we have been highly skeptical of gold’s ability to move higher. The rally on December 11 attracted new commitments, but longs that bought into yesterday’s rally will likely be liquidating on today’s decline. It is probable that gold will retest the December 7 low of 1684.10. Stand aside.
March silver gained 76.5 cents on volume of 50,331 contracts. Volume was the highest since December 4 when silver traded 52,498 contracts and March silver declined by 95.1 while open interest declined 2,674 contracts. On December 12, open interest increased by 1,981 contracts, which in relation to volume is approximately 50% above average. While increasing volume and open interest at a higher than average rate is positive, the market has not shown the consistent bullish price and open interest action that is required for us to recommend long positions at this juncture. Beginning with the late afternoon session on December 11, silver gapped lower by 26.2 cents at $33.52 and this has been the high thus far on December 13. As this report is being compiled on December 13, silver is trading $1.347 lower and has made a new low for the move at new 32.28, which is the lowest price since November 16 when it reached 32.11. Stand aside.
British Pound: The March British Pound generated a short-term buy signal.
The March British Pound gained 47 points on volume of 224,489 contracts. Volume was more than twice the average daily volume year to date of 103,063 contracts. Open interest increased by a massive 26,263 contracts, which in relation to volume is approximately 365% above average, meaning that new buyers were heavily entering the market en masse, and they were in control. The short term buy signal concurs with the intermediate term buy signal and therefore the British pound should be traded from the long side only. The British pound should see a setback to the 1.60 area, which is at the 50 day moving average. Stand aside for now.
Canadian dollar: The March Canadian dollar generated a short-term buy signal.
The Canadian dollar advanced 26 points on volume of 126,537 contracts. Volume was approximately 35,000 contracts above its average daily volume year to date of 91,282 contracts. Open interest increased by a massive 9,782 contracts, which in relation to volume is approximately 210% above average, meaning that new buyers were heavily entering en masse and were in control. The short term buy signal concurs with the intermediate term buy signal, and therefore the Canadian dollar should only be traded from the long side. The Canadian dollar is likely to pullback to the 1.00586-1.00796 area. Stand aside.
The December euro gained 78 points on very heavy volume of 364,979 contracts. Volume was higher than November 7 when 362,078 contracts were traded and the December euro closed at 1.2773. Additionally, volume was approximately 84,000 contracts above its average daily volume year to date. Open interest increased by 7,554 contracts, which in relation to volume is approximately 5% below average. For the past 3 days, the euro has advanced 1.54 cents and open interest has increased by 14,850 contracts. The euro is trading with bullish congruent price and open interest action. Setbacks should be bought.
S&P 500 E mini:
The S&P 500 E mini lost 4.25 points on volume of 2,077,462 contracts. Volume was lackluster on the advance up to the high of 1438.75, but picked up as the market sold off. On December 12, open interest increased by 40,941 contracts, which in relation to volume is approximately 5% less than average, but a healthy number nonetheless. During the past 3 days, the S&P has advanced 11.25 points and open interest has increased by 114,743 contracts.. As we indicated in yesterday’s report, clients should hold long positions based upon their risk tolerance and analysis of the fiscal cliff, debt ceiling and economic issues.