March soybeans lost 26.25 cents on heavy volume of 299,585 contracts. Volume was the highest since October 11 when March soybeans closed at $15.20 3/4. On December 20, total open interest declined by 11,799 contracts, which in relation to volume is approximately 50% above average, meaning that liquidation was fairly heavy. The January contract accounted for loss of 15,209 contracts of open interest. March soybeans made a new low for the move at $13.97 3/4, which is the lowest price since November 21 when they reached 13.84 3/4. As this report is being compiled on December 21, March soybeans are trading 20.50 cents higher despite the sharply higher dollar, sharply lower stock market, and the petroleum complex which is trading lower as well. Stand aside.
March soybean meal lost $9.10 on volume of 87,136 contracts. Total open interest declined by a massive 7,739 contracts, which in relation to volume is approximately 250% above average, meaning that liquidation was extraordinarily heavy. The liquidation in the January contract was 4,127 and March and May lost open interest as well . Soybean meal made a new low for the move at $423.20, which is the lowest price since November 30 when it reached $422.80. As this report is being compiled on December 21, March soybean meal is trading $4.70 higher. Stand aside.
March corn lost 6.50 cents on volume of 261,311 contracts. Volume increased approximately 20,000 contracts from December 19 when corn lost 17 cents and open interest increased by 7,285 contracts. Additionally, volume was the highest since December 7, when 265,088 contracts were traded and corn declined by 14.25 cents while open interest declined by 13,116 contracts. On December 21, open interest declined by 4,800 contracts, which in relation to volume is approximately 15% below average. March corn made a new low for the move at $6.87 1/2, which is the lowest price since July 3 when March corn reached $6.68 1/2. There remains a gap between yesterday’s low and the July 3 high of 6.83 1/2, and likely will be filled soon. Stand aside.
March wheat lost 15.25 cents on volume of 84,967 contracts. Open interest declined by 212 contracts which is minuscule and dramatically below average. Surprisingly, volume was approximately 2,500 contracts less than December 19 when wheat declined by 5.50 and open interest increased by 3,500 contracts. The low of December 19 was 8.02, and on December 20 was $7.82 1/2, which is the lowest price for March wheat since June 29 when it reached $7.74 1/2. Although one day’s price, volume and open interest action is not determinative, conceivably wheat may be getting close to making a bottom. With average daily volume year to date of 111,330 contracts, it would have been expected that wheat would have a higher volume day after plunging to multi month lows. Additionally, a much larger decline of open interest would be expected, or at least, an open interest build. From November 29, when the decline in wheat began in earnest through December 20, open interest declined by a total of 11,251 contracts, while March wheat declined $1.12 1/2. In a very bearish scenario, it would be likely that aggregate open interest would have increased during the November 29-December 2o time frame. Stand aside.
February crude oil gained 15 cents on light volume of 367,913 contracts. Volume was the lowest since November 27, when 358,626 contracts were traded, and crude oil closed at $87.81. On December 20, open interest declined by 3,826 contracts, which in relation to volume is approximately 50% less than average. During the past 5 consecutive trading days, open interest has declined by 72,823 contracts, while crude oil has advanced by $3.72. This is bearish open interest action relative to price, and the consistency of the pattern indicates a bearish set up. As we said in yesterday’s report, our reluctance to recommend bearish positions in crude oil is based upon the seasonal tendency of crude to advance through early January. However, the market looks weak. As this report is being compiled on December 21, crude oil is trading 1.61 lower on light pre-holiday trading. Stand aside.
February natural gas advanced 12.9 cents on volume of 373,543 contracts. Open interest increased by 7,372 contracts, which in relation to volume is approximately 5% less than average. We expect that natural gas will re-test its low made on December 14 of $3.316, and possibly the low on December 14 of $3.261 for the January contract. Stand aside.
Copper: On December 20, March copper generated a short-term sell signal.
March copper declined by 6.95 cents on volume of 55,137 contracts. Open interest declined by 2,734 contracts, which in relation to volume is approximately 120% above average, meaning that liquidation was heavy. During the past 2 sessions, copper has lost a total of 11.75 cents while open interest has declined by 3,719 contracts. As this report is being compiled on December 21, March copper has rallied 3.20 cents, and will not generate an intermediate term sell signal on Friday. Stand aside.
February gold lost $21.80 on volume of 200,791 contracts. Open interest declined by 7,242 contracts, which in relation to volume is approximately 40% above average, meaning that liquidation was fairly heavy. Gold made a new low for the move at $1636.00, which is the lowest price for gold since August 21 when February gold reached $1623.40. We thought gold would generate an intermediate term sell signal on December 20, but it is a certainty this will occur on the 21st. Stand aside.
March silver lost $1.438 on heavy volume of 95,560 contracts. Volume was the highest since November 28, when 163,326 contracts were traded and March silver closed at $33.77. On December 20, open interest increased by 1,755 contracts, which in relation to volume is approximately 10% less than average. Thursday was one of the few days since the decline in silver began in earnest on November 30 that open interest increased on a major price decline. As this report is being compiled on December 21, March silver is currently trading 49.7 cents higher. It is highly likely that March silver will generate an intermediate term sell signal on December 21. Stand aside.
The March British pound gained 24 points on volume of 96,457 contracts. Open interest increased by 5,752 contracts, which in relation to volume is approximately 140% above average. Aside from December 19, when open interest decline massively due to the expiration the December contract, open interest has been building at a rapid pace. The British pound is overbought by any standard and with large numbers of new speculative longs in the market, the pound is vulnerable to a further setback. As this report is being compiled on December 21, the pound is trading 1.17 cents lower, and has made a new low for the move at 1.6148. Stand aside.
The March euro lost 7 points on volume of 204,958 contracts. Open interest increased by 4,223 contracts, which in relation to volume is approximately 5% below average. The euro has pulled back from the high it made on December 19 of 1.3321, and made a low of 1.3212 on December 20. As this report is being compiled on December 21, the March euro is trading 61 points lower and has made a new low for the move at 1.3170. The euro is going through a normal pullback, and based upon its 50 day moving average of 1.2955 and our proprietary numbers, the March euro could correct to the 1.3100- 1.3145 area. In any event, we expect the euro to maintain its strength against the British pound, Canadian dollar and the Australian dollar. Money management is key at this juncture, and clients should closely monitor their profit position, and the risk to those profits on a further setback. We continue to think the euro will be a terrific trade during the 1st quarter of 2013.
S&P 500 E mini:
The S&P 500 E mini gained 7.50 points on volume of 1,991,837 contracts. Open interest increased by 10,183 contracts, which in relation to volume is approximately 65% below average. As this report is being compiled, the E mini is trading 17.25 points lower and made a spike low during the evening session of December 20 at 1391.25. The market had a highly negative reaction to the lack of a deal with respect to the fiscal cliff. The surprising part is that it was well-known there was a good possibility an agreement would not be reached by the end of December. The reaction to the news seems to be a bit over done, especially since damage to the economy will be minor unless an impasse continues beyond the first week or two in January. Stand aside.