January soybeans gained 1.75 cents on light volume of 139,679 contracts. Total open interest increased by 2,254 contracts, which in relation to volume is approximately 30% less than average. The January contract lost 3,827 contracts of open interest, and there were sufficient numbers of new entrants into the market to offset the January decline. There have been a couple of articles on the difficulties facing the harvest of sugar and soybeans in Brazil. Apparently, there is a severe shortage of vehicles to transport sugar and soybeans from the interior of Brazil. Potentially, Brazil may face the irony of having its largest crop on record, with the inability to move product to market in a timely manner.
From Agrimoney.com: ” The record crop estimated for soybeans and near record crops estimated for corn and sugarcane in 2012-2013 will strain already deficient capacities and further increase logistical costs. Many sources confirm that the limiting factor to export this next crop year will be inland transportation deficiencies coupled with inadequate flow at port receiving terminals.”
“The USDA bureau itself acknowledged the threat posed by Brazil’s logistical squeeze in pegging the country’s soybean exports in 2012 2013 at 38.5 tonnes.”
“This figure, while a record and enough to take Brazil above the U.S. among shippers of the oilseed in 2012-2013, is 1.4 tonnes lower than the USDA’s official forecast.”
The soybean market continues to rally, and on December 5 has made a new high for the move at 14.79 3/4. Since making a bottom at $13.72 1/4 on November 16, soybeans have rallied a dollar from the lows. Soybeans are approximately 20 cents below their 200 day moving average of 14.93. Stand aside.
January soybean meal gained $1.70 on light volume of 50,767 contracts. Total open interest declined by 527 contracts, which in relation to volume is approximately 50% less than average. The December contract lost 2,751 contracts of open interest. Stand aside.
January soybean oil lost 15 points on light volume of 104,775 contracts. Open interest declined by 1,019 contracts, which in relation to volume is approximately 50% below average. Stand aside.
March corn lost 2.75 cents on volume of 272,346 contracts. Total open interest declined by 11,542 contracts, which in relation to volume is approximately 60% above average, meaning that liquidation was fairly heavy. There was liquidation the December contract of 3,519 and 9,438 in March. Stand aside.
March wheat lost 4.25 cents on very light volume of 75,297 contracts. Open interest declined by 4,106 contracts, which in relation to volume is approximately 110% above average meaning that liquidation was heavy. Stand aside.
January crude oil lost 59 cents on light volume of 383,918 contracts. Total open interest declined by a minuscule 781 contracts which is dramatically below average. As difficult as it is, we remain neutral to slightly friendly to crude oil despite it being on a short and intermediate term sell signal. One factor to consider is the strength in the euro is going to continue to depress the dollar, which is positive for crude oil and commodities in general. We continue to think that the dollar is headed lower.
January heating oil lost 5.22 cents on volume of 132,898 contracts. Open interest declined by a massive 10,519 contracts, which in relation to volume is approximately 210% above average, meaning that liquidation was dramatically higher than average. Again, we saw price and open interest acting in a bullish congruent fashion. Heating oil dipped to the lowest level since November 28 when it reached 2.9885, but the dominant action was liquidation, not heavy numbers of new short sellers entering the market. As this report is being compiled on December 5, heating oil is trading down 1.12 cents, and has made a new low for the move at 2.9788, which is the lowest price since November 16 when heating oil reached 2.9603. It will be interesting to see what happens to open interest on December 5. Stand aside.
January natural gas lost 5.2 cents on light volume of 236,767 contracts. Open interest declined by 9,070 contracts, which in relation to volume is approximately 50% above average. The market tested its 200 day moving average of 3.52 on December 3 and 4. As this report is being compiled on December 5, January natural gas is trading 17 cents higher. According to the seasonal pattern, natural gas had its late November pullback, and is likely to rally until mid December. According to the seasonal pattern, after peaking around mid-December, it will head lower once more. From a seasonal point of view, the optimum time to buy natural gas is in mid-February. Stand aside.
February gold lost $25.30 on volume of 213,996 contracts. Open interest declined by 6,646 contracts, which in relation to volume is approximately 20% above average, meaning that liquidation was somewhat heavier than normal, but considering the magnitude of the decline, it was fairly light. Remarkably, open interest in gold has declined every day since November 26, or 7 days in a row. During this time open interest has declined by 58,889 contracts while gold has declined by $57.40. This is healthy open interest action relative to the price decline. On December 5, gold is made a new low for the move at $1686, which is gold lowest price since November 5 when it reached 1672.50. Stand aside.
March silver lost 95.1 cents on volume of 52,498 contracts. Open interest declined by 2,674 contracts, which in relation to volume is approximately 100% above average meaning that liquidation was considerably heavier in silver than gold relative to volume traded. However, silver was down by a much greater percentage than was gold. On December 5, silver is made a new low for the move at $32.585, which is the lowest price since November 19 when silver made a low of $32.42. Despite its lower move on December 5, silver remains on a short and intermediate term buy signal. Stand aside.
Australian dollar: Until we see a compelling opportunity in the Australian dollar, we will cease further reports.
The December Australian dollar gained 58 points on volume of 123,816 contracts. Open interest increased by 13,594 contracts, which in relation to volume is approximately 340% above average. Although, the Australian dollar is on a short and intermediate term buy signal, we do not think it is a good candidate for long positions. It is trading approximately 1 cent above its 50 day moving average, and is at the very high end of its range going back one year. Additionally, managed money has piled into the Australian dollar, and the COT report shows that managed money is long by the largest ratio in several weeks. There may be a seasonal opportunity around mid January to implement bearish positions in the Australian dollar. Stand aside.
The December euro gained 42 points on volume of 261,053 contracts. Volume was below its year to date average daily volume of approximately 270,000 contracts. However, open interest jumped substantially on the advance by increasing 7391 contracts, which in relation to volume is approximately 5% above average. We consider this to be a pretty terrific performance considering the number of shorts in the market. It is apparent that spec shorts do not believe in the rally, and are holding on to positions. We, on the other hand, think the euro is going higher, and may be lucrative due to the heavy number of shorts versus the Australian dollar, which is crowded with longs. We are awaiting a setback to the 1.2950 area before recommending bullish positions.
S&P 500 E mini:
The S&P 500 E mini declined by 1.50 points on volume of 1,658,241 contracts. Open interest increased by 26,914 contracts, which in relation to volume is approximately 30% less than average. During the past 2 days open interest has increased by 5 43,120 contracts and the S&P has declined by 9.00 points. This is bearish price and open interest action. Long puts are advised.