Volume and open interest analysis for December 7, 2012

Soybeans:

January soybeans lost 19 cents on heavy volume of 254,942 contracts. Volume was the highest since November 9 when 259,926 contracts were traded and January soybeans reached a high of $14.99, only to reverse and close at 14.50 1/4. On December 7, soybeans made a high for the move at 14.98 1/4, and just like November 9, reversed to close at 14.72 1/4. On December 7, total open interest declined by 941 contracts, which is minuscule and dramatically below average. The January contract lost 16,367 of open interest and March gained 13,497 contracts. The rally from the November 16 lows has been characterized by aggregate declining open interest, and lackluster upside volume. As this report is being compiled on December 10, January soybeans are trading 3.50 lower, and have made a low of 14.53. The USDA report will be released at 8:30 a.m. EST tomorrow  and it is anticipated that stocks will be cut due to the high crushing of beans. Stand aside.

Soybean meal: 

January soybean meal lost $7.80 on volume of 63,093 contracts. Volume was the highest since November 29 when 76,743 contracts were traded and soybean meal gained $3.10, while open interest increased by 2,168 contracts. On December 7, total open interest increased by 751 contracts, which in relation to volume is approximately 50% less than average. The January contract made a new high for the move at $452.90, which is the highest price since November 9 when soybean meal made a high of 460.30, and closed at 445.40. December and January contracts accounted for a loss of open interest of 945 and 1,235 contracts respectively. Stand aside.

Soybean oil:

January soybean oil lost 7 points on volume of 115,825 contracts. Open interest increased by 7,194 contracts, which in relation to volume is approximately 150% above average, meaning that new longs and shorts were aggressively taking positions, but were unable to move the market significantly one way or the other. January soybean oil made a new high for the move at 51.38, which was the highest price for January soybean oil since October 26, when it made a high of 51.85. Stand aside.

Corn:

March corn lost 14.25 cents on volume of 265,088 contracts. Volume was the highest since December 4 when March corn lost 2.75 on volume of 272,346 contracts, while open interest declined by 11,542 contracts. It is surprising that volume did not pick up significantly on the largest decline since November 12 when corn lost 20.75 cents on volume of 462,640 contracts and open interest increased by 8,053 contracts. Corn made a new low for the move at $7.35, which was the lowest price since November 19 when it reached a low of 7.30. On December 7, open interest declined by 13,116 contracts, which in relation to volume is approximately 100% above average, meaning that liquidation was heavy. As this report is being compiled on December 10, March corn is trading 5.25 lower and has made a new low for the move at 7.25 1/4. Due to poor export sales, it is probable that carryout will be increased in tomorrow’s USDA report. Stand aside.

 Wheat:

March wheat lost 1 cent on light volume of 81,489 contracts. Open interest declined by 2,114 contracts, which in relation to volume is  average. As this report is being compiled on December 10 wheat is trading 11.75 cents lower, and has made a new low for the move at $8.46 3/4. Stand aside.

Crude oil:

January crude oil lost 33 cents on volume of 494,081 contracts. Open interest declined by 8,877 contracts, which in relation to volume is approximately 20% less than average. From now, until early to mid-February crude will likely trade in a sideways to lower pattern, punctuated by occasional rallies. Stand aside.

Heating oil: We will cease reporting on heating oil until we see a new opportunity.

January heating oil lost 2.79 cents on volume of 141,933 contracts. Open interest increased by 2,006 contracts on the price decline, which in relation to volume is approximately 35% less than average. For the past 4 days, open interest has increased on price declines and now totals 16,350 contracts while heating oil prices declined by 14.09 cents. Stand aside.

Natural gas:

January natural gas lost 11.5 cents on volume of 386,743 contracts. Open interest declined by 11,359 contracts, which in relation to volume is approximately 20% above average. As this report is being compiled on December 10, January natural gas is trading 10.6 cents lower and has made a new low for the move at $3.415, and has traded below the 200 day moving average of 3.52. Stand aside.

Copper:

March copper gained 1.85 cents on volume of 46,476 contracts. Open interest increased by 2,577 contracts, which in relation to volume is 120% above average, meaning there was aggressive buying that pushed prices higher. As this report is being compiled on December 10, March copper is trading 4.15 higher on positive economic news from China. Copper is on an intermediate term buy signal, but will not generate a short-term buy signal on December 10. Stand aside.

Gold: 

February gold gained $3.70 on volume of 152,999 contracts. Open interest declined by 1,508 contracts, which in relation to volume is approximately 50% less than average. During the past 2 sessions gold has advanced $11.70 while open interest has declined by 1318 contracts, which is bearish open interest action relative to price. On December 7, gold made a new low for the move at $1684.10, which occurred after the release of the employment report. This took out the low of 1,686 made on December 5. Lately, there  have not been aggressive buyers, and gold seems to have a problem making headway on the upside. Gold remains on a short-term sell signal and an intermediate term buy signal, which means clients should stand aside.

Silver:

March silver gained 1.7cents on volume of 44,344 contracts. Open interest declined by 479 contracts, which in relation to volume is approximately 45% less than average. During the past 2 days, silver has advanced 17.4 cents while open interest has increased by 573 contracts  which is bullish open interest action relative to price. Like gold, silver made a low of $32.68 on the news of the employment report, but did not take out the low of 32.60 made on December 6, nor did it break the low of 32.585 made on December 5. As clients know, we are far more bullish on silver than gold because on a continuous basis, silver is outperforming gold. As mentioned before, the period just ahead is one of seasonal strength, but we want to see how silver performs on a day when equities are sharply lower, and/or the dollar is sharply higher.

Euro:

The December euro lost 35 points on volume of 283,824 contracts. Volume was approximately 13,000 contracts above the average daily volume on a year to date basis. Open interest increased by 4704 contracts, which in relation to volume is approximately 25% less than average. During the past 3 trading sessions, the December euro has lost 1.72 cents while open interest has increased by 17,090 contracts. This is bearish open interest action relative to price. As we indicated in the Weekend Wrap, if long the euro use the December 7 low of 1.2877 as an exit point. The majority of traders are very bearish on the euro, and this is understandable, however it is important to keep in mind that the euro’s 50 day moving average is above its 200 day moving average, which is anything but bearish. Also, the euro is trading at its 50 day moving average, therefore it is not overbought nor oversold. On December 12, the Federal Reserve will report on its meeting of the Federal Open Market Committee, and this could have a major impact on the dollar. The euro remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini gained 3.00 points on volume of 1,839,963 contracts. Open interest declined by 8,410 contracts, which in relation to volume is approximately 80% below average. For the past 3 trading sessions, the S&P has advanced 10.50 points while open interest has declined by 4,324 contracts. This is bearish open interest action relative to price. The S&P made its high of 1424.00 on December 3, and the market has not been able surpass this despite 3 higher closes during the past 3 days. The Federal Reserve announcement on Wednesday will likely drive the direction of the market for the remainder of the week. Maintain long puts.