January soybeans lost 46.25 cents on moderate volume of 214,856 contracts. Although soybeans made a new low for the move at $14.02, volume decreased approximately 45,000 contracts from November 9, when January soybeans lost 44.25 and open interest declined by 11,011 contracts.
What is somewhat surprising is that volume is not picking up dramatically on downside action, the way it is in corn. For example, average daily volume during the month of October 2012 was 229,220 contracts, and year to date average daily volume is 212,890. During the past 4 trading days, average daily volume has been 182,587 contracts while January soybeans declined $1.10 1/2. In short, the market has declined precipitously in 4 days, but the volume average has not matched, let alone exceeded the year to date average daily volume. What this may portend is a major down day with very high volume, which may indicate a final low on speculative capitulation.
On November 12, open interest increased by 2,019 contracts, which in relation to volume is approximately 50% less than average. This is the first time during the decline that open interest has increased. If we begin to see managed money significantly increase their short position as the market continues to decline, soybeans will have the fuel for an eventual move higher. It is rather surprising to see prices back at the level they were in late June when the projected yield for the upcoming crop was 43.9 bushels per acre versus the current projection of 39.3. Additionally, in late June, the drought was not on the horizon, and the rapid pace of exports hadn’t occurred. As this report is being compiled on November 13, January soybeans are trading 12.50 cents lower and has made a new low for the move at 13.91 1/2. Stand aside.
December soybean meal lost $18.30 on heavy volume of 106,586 contracts. Volume was the highest since July 25 when 107,084 contracts were traded and December soybean meal closed at 483.20. Additionally, volume was close to double the average daily volume for October of 54,953 contracts, and nearly 50% above the average daily volume on the year to date basis of 73,191 contracts. Total open interest increased by 1,424 contracts, which is approximately 50% less than average. The December contract lost 4,808 contracts of open interest, which means that new longs and new shorts were entering the market in sufficient numbers to wipe out the open interest loss in the December contract. There is a risk off mind set across most markets, and this will likely take its toll on soybean meal and the grain complex in general. We do believe soybean meal will hit a significant bottom in the next month, and move sharply higher into winter and early spring. Stand aside.
Corn: Corn is likely to generate an intermediate term sell signal today
December corn lost 20.75 cents on huge volume of 462,640 contracts. Volume was just shy of the 470,531 contracts traded on November 9 when corn declined 2.25 and open interest increased by 9,872 contracts. Additionally, volume on November 9 and 12 was more than double October’s average daily volume of 204,416 contracts, and approximately 50% above average daily year to date volume of 299,170 contracts. Total open interest increased by 8,053 contracts, which in relation to volume is approximately 25% less than average. The December contract lost 27,907 contracts of open interest, and the total increase means there were large numbers of new longs and shorts taking up positions to offset the massive decline in the December contract. In our view, it is only a matter of time before corn breaks through the September 28 low of 7.05. The next area support is likely to be the 200 day moving average of 6.90, and if this is broken, there is a gap between 6.76 and 6.85 1/2 made between July 3 and July 5. The decline in corn prices should encourage greater demand, and this will eventually set the stage for new move higher. Stand aside.
December wheat lost 28.75 cents on volume of 186,268 contracts. Although December wheat moved to its lowest level since October 30 when it made a low of $8.52 3/4, volume shrank approximately 44,000 contracts from November 9, when wheat declined 16 cents. Open interest declined by a massive 10,187 contracts, which in relation to volume is approximately 110% above average, meaning that liquidation was heavy. Undoubtedly this was the result of disillusioned longs who piled massively into the market, especially on November 9 when open interest increased by 13,033 contracts, and wheat made a new high for the move at 9.16 1/2, but fell sharply during the rest of the session. On November 8, December wheat generated a short and intermediate term buy signal. As we indicated in previous reports, a countertrend move is often accompanied by new buy signals. However, what we have seen in wheat on November 12 and 13 is out of the ordinary, and unusual with respect to our methodology. As indicated in yesterday’s report, we stated it was rare to see a new buy signal become invalidated immediately by a new sell signal. However, this appears to be the case, and although a short-term sell signal will not be generated on November 13, it is likely that a short and intermediate term sell signal will be generated on November 14. Stand aside.
December crude oil lost 50 cents on volume of 548,296 contracts. Open interest declined by 6,450 contracts, which in relation to volume is approximately 50% less than average. Crude has been meandering around the $84 to $86 area for the past 3 days. We suspect the market is trading in a tight consolidation pattern that will eventually result in another leg down. How much more downside remains is difficult to ascertain. If the global economic picture continues to weaken, the effect will be increased selling. With the gloom that surrounds the global economy, it does not appear that oil could have anything more than a bear market rally. Stand aside.
December heating oil lost .0063 on very light volume of 102,424 contracts. Open interest increased by 484 contracts, which in relation to volume is approximately 75% less than average. Stand aside.
Gasoline: We will not report any further on gasoline unless something meaningful happens in the commodity.
December gasoline lost 2.29 cents on volume of 159,490 contracts. Open interest increased by 1,919 contracts, which in relation to volume is approximately 45% less than average. Stand aside.
December natural gas gained 6.7 cents on light volume of 248,229 contracts. Open interest declined by 9,553 contracts, which in relation to volume is approximately 55% above average. Stand aside.
December copper gained 2.25 cents on volume of 62,267 contracts. Open interest increased by a mere 105 contracts. Stand aside.
December gold closed unchanged on volume of 137,788 contracts. Open interest declined by 3,650 contracts, which in relation to volume is average. Gold does not appear to have the strength at this particular time to move higher. Part of this may be attributed to the strengthening dollar due to euro weakness. Gold has been unable to close above its 50 day moving average since October 22. The problem is this is the strongest period for gold during the year, and yet gold has been unable to close above its 50 day moving average in nearly 3 weeks. Stand aside.
December silver lost 7.7 cents on volume of 41,817 contracts. Open interest declined by 215 contracts. Silver has the same problem as gold, and has not been able to close above its 50 day moving average since October 18. Stand aside.
The December euro gained 10 points on light volume of 148,103 contracts. Open interest declined by 1,189 contracts, which in relation to volume is approximately 60% less than average. On November 5, the December euro generated a short-term sell signal, but has not yet generated in intermediate term sell signal. However, the market looks terrible and has been trading below its 200 day moving average for several days. Stand aside.
S&P 500 E mini:
The December S&P 500 E mini gained 2.50 points on very light volume of 1,139,313 contracts. Open interest declined by 14,368 contracts, which in relation to volume is approximately approximately 45% less than average. Although the market is more than overdue for a decent sized technical rally, there doesn’t seem to be enough strength for the market for a move higher. Maintain long puts.