Soybeans:
March soybeans lost 29.50 cents on volume of 273,989 contracts. Even though March soybeans made a new low for the move at $14.26 1/4, volume shrank by approximately 550 contracts from December 18 when soybeans decline 27.75 cents and open interest declined by 5,321 contracts. On December 19, open interest declined by 7,558 contracts, which in relation to volume is average. On Thursday, the USDA released its export sales for the recent reporting week and sales totaled 619,450 tons. This is slightly below expectations of 700-750 thousand tons. Reports that the Brazilian crop is getting larger is weighing on the price of U.S. soybeans. As this report is being compiled on December 20, March soybeans are trading 24.25 cents lower, and has made a new low for the move at 13.97 3/4. It is likely the market is going to retest the low of $13.56 made on November 16. Stand aside.
Soybean meal:
March soybean meal lost $8.60 on heavy volume of 94,253 contracts. Volume increased by approximately 7,000 contracts from December 18, when soybean meal declined $9.20 and open interest declined by 442 contracts. Additionally, volume was the highest since November 28 when 99,575 contracts were traded and soybean meal declined 70 cents, while open interest declined 1,599 contracts. On December 19, open interest declined by a whopping 6,326 contracts, which in relation to volume is approximately 160% above average, meaning that liquidation was unusually heavy. Export sales in the latest USDA report were spectacular at 390,760 tons, which is the second highest number since the beginning of the season on October 1. As of the latest report, 76% of USDA projected comittments have already been fulfilled. As this report is being compiled on December 20, March soybean meal is trading $9.10 lower, and has made a new low for the move at 423.50. It appears likely the market will test its November 20 low of $405.50. Stand aside.
Corn:
March corn lost 17 cents on volume of 240,703 contracts. Volume increased by approximately 115,000 contracts from December 18, when corn lost 4 cents and open interest declined by 4,960 contracts. On December 19, open interest increased by 7,285 contracts, which in relation to volume is approximately 20% above average, meaning that new shorts were piling in at a rate that was above average and were helping to drive prices lower. Corn made a new low for the move at $7.01 1/2, which took out the low of $7.08 3/4 in the March contract on September 28, and also took out the continuation low of 7.05 made by the December contract on the 28th . Export sales for the recent reporting week were disappointing at 114,400 tons. In order to meet the USDA export projection, sales need to average approximately 4 times the current rate of sales. It appears likely that export sales will be cut in the January supply demand report. As this report is being compiled on December 20, corn is trading 6.25 cents lower and has made a new low for the move at $6.87 1/2. Stand aside.
Wheat:
March wheat lost 5.50 cents on light volume of 87,608 contracts. Open interest increased by 3500 contracts, which in relation to volume is approximately 50% above average export sales for the recent reporting week was the 3rd highest of the season at 651,100 tons. However, sales have to stay at a rapid pace in order to meet the USDA projection. As this report is being compiled on December 20 March wheat is trading 14.50 cents lower and has made a new low for the move at $7.82 1/2. Stand aside.
Crude oil:
February crude oil gained $1.58 on volume of 507,852 contracts. Although volume picked up by approximately 68,000 contracts from December 18, when crude advanced 73 cents and open interest declined by 18,095 contracts, it was still below the average volume year to date of 566,555 contracts. Additionally crude oil volume on December 19 was below November’s daily average volume of 526,439 contracts. The reason this is significant is because the advance in crude on December 19 was the largest since November 29 when crude advanced $1.58 on volume of 532,550, contracts, while open interest declined by 7,756 contracts. The lack of enthusiasm for crude was manifested by tepid volume that was below the November 29 advance and the average daily volume for November and year to date.
Open interest action was just as dismal as volume and it declined by 10,961 contracts, which in relation to volume is approximately 5% below average. During the past 4 sessions, crude oil has advanced $3.57 while open interest has declined by 68,997 contracts. This is bearish open interest action relative to price. Although it would be easy to get bearish based upon price and open interest action, there is a seasonal tendency for crude oil to advance during the later part of December into early January. On this basis, we continue to recommend a stand aside position. Crude oil remains on a short and intermediate term sell signal.
Natural gas:
February natural gas lost 8.9 cents on light volume of 324,983 contracts. Open interest declined by 4,166 contracts, which in relation to volume is approximately 45% less than average. As this report is being compiled, natural gas is trading 10.5 cents higher on colder US temperatures and an 82 billion cubic feet draw in the report released on Thursday by the Energy Information Administration. The draw was the largest going back to early October. Continue to stand aside.
Copper:
March copper lost 4.80 cents on volume of 59,802 contracts. Volume was the highest since November 13 when 72,832 contracts were traded and March copper closed at $3.6500. Although volume accelerated on the decline, the loss of open interest was relatively minor. On December 19, open interest declined by 985 contracts, which in relation to volume is approximately 30% below average, which indicates that market participants were liquidating at a modest pace. As this report is being compiled on December 20, March copper is trading 6.55 cents lower, and has made a new low for the move at $3.5230. Our readers know that we have not been bullish on copper even though it has been on a short and intermediate term buy signal. However, it is highly likely that a short-term sell signal will be generated on December 20, but not an intermediate term sell signal. It is likely that an intermediate term sell signal will be generated on December 21. For more on copper, please see the Weekend Wrap of December 16. Stand aside.
Gold:
February gold lost $3.00 on volume of 175,453 contracts. Volume shrank approximately 21,000 contracts from December 18, when gold lost $27.50 and open interest increased by 4,009 contracts. On December 19, open interest increased by 1,942 contracts, which in relation to volume is approximately 50% less than average. During the past 3 trading sessions, gold has lost $29.30 and open interest has increased by 6,696 contracts. This is bearish open interest action relative to price. As this report is being compiled on December 20, February gold is trading $22.30 lower and has made a new low for the move at 1636.00. Gold has been on a short-term sell signal since October 22, and it appears likely that an intermediate term sell signal will be generated on December 21. Stand aside.
Silver:
March silver lost 55.3 cents on volume of 50,118 contracts. Volume increased by approximately 3,000 contracts from December 18 when silver declined by 61.1 cents and open interest declined by 594 contracts. On December 19, open interest declined by a minuscule 281 contracts, which in relation to volume is approximately 70% below average. It is remarkable that in 2 days, silver has declined by $1.164, yet total open interest has declined by only 875 contracts. Based upon the Commitment of Traders Report, we know that managed money is long silver by a ratio of 10.42:1, which is a fairly high reading. Therefore, it is safe to say that more liquidation is in store. As this report is being compiled on December 20, March silver is trading $1.271, and has made a new low for the move at $29.635. On December 14, silver generated a short-term sell signal, and will most likely generate an intermediate term sell signal on December 21. Stand aside.
British pound:
The March British pound gained 11 points on volume of 93,488 contracts. Volume increased by approximately 10,000 contracts from December 18 when the pound advanced 45 points and open interest increased by 5,262 contracts. On December 19, open interest declined by 64,834 contracts, which represented the bulk of open interest left in the December contract. Open interest in the March contract declined by 493 contracts, even though the pound reached 1.6304, which is the highest price since September 21 when the December pound made a high of 1.6304. Due to the large number of new longs that have rushed into the market since the rally began in earnest on December 10, we suggest that clients stand aside.
Euro:
The March euro gained 28 points on volume of 228,658 contracts. Volume increased by approximately 47,000 contracts from December 18 when the euro advanced 59 points and open interest increased by 8,368 contracts. On December 19, open interest declined by 58,192 contracts, which is due to the the expiration of the December contract. However, open interest increased by 4625 in the March contract. The euro is showing major strength against heretofore strong currencies. For example, the Euro/Canadian dollar cross is the strongest since April. The Euro/Australian dollar cross is at its highest level since late October. Also the Euro/British pound cross is the highest since April. We think the euro has much farther to go on the upside. Longs should move stops to levels based upon sound money management.
S&P 500 E mini:
The S&P 500 E mini lost 8.00 points on volume of 2,519,571 contracts. Open interest increased by 90,138 contracts, which in relation to volume is approximately 40% above average. As we’ve said before, volume and open interest stats tend to be distorted when the E mini contract nears its expiration. The E mini made a new high for the move at 1446.00, which is the highest price since October 18 when the March E mini made a high of 1452.50. Stand aside.
