On November 19, all commodities are trading higher on a half percent decline in the dollar index and are trading in a highly correlated fashion. Additionally, due to the Thanksgiving day holiday, trading for the week will be on the slow side.

Soybeans:

January soybeans lost 18.75 cents on volume of 170,094 contracts. Open interest declined by 3,054 contracts, which in relation to volume is approximately 15% below average. The January contract was responsible for losing 4,876 contracts of open interest. Soybeans made a new low for the move at $13.72 1/4, which is the lowest price since June 20 when soybeans made a low of 13.70 1/4. As this report is being compiled on November 19, soybeans are trading 11.25 cents higher and has made a high of 14.02 3/4. The market has more work to do at the lower end of its trading range, and will need more time to repair itself. If export sales continue at a rapid pace, we believe soybeans will turn around, but as mentioned in the Weekend Wrap of November 18, we must look at the soybean market based upon the price parameters in the Weekend Wrap and the mid-December timeframe. Stand aside.

Soybean meal:

December soybean meal lost $5.90 on heavier than normal volume of 79,809 contracts. Volume was higher than November 13 when 79,497 contracts were traded and open interest declined by 3,362 contracts while December meal advanced 1.70. On November 16, open interest increased by a whopping 3,995 contracts, which in relation to volume is approximately 100% above average, meaning that aggressive buyers and sellers were entering new positions, and that shorts were in control. What makes the open interest increase even more significant is that the December contract lost 2,674 contracts. The action of November 16 contrasts with November 15 when December soybean meal was down by 5.50, nearly the same as the 16th, but instead open interest declined by 1,216 contracts on volume of 55,910 contracts. We will not know until this Friday whether or not the increase of open interest is the result of new speculative shorts entering the market. Stand aside.

Corn:

December corn advanced 5.75 cents on volume of 314,697 contracts. Total open interest declined by 2,825 contracts, which in relation to volume is approximately 50% less than average. The December contract lost 22,593 contracts, and this will continue at a rapid pace because first notice day is approaching. On September 11, corn generated a short-term sell signal and on November 13 generated an intermediate term sell signal. As this report is being compiled on November 19, December corn is trading 10.25 higher and has reached a high of 7.41 1/4. Stand aside.

Wheat: On November 16, December wheat generated an intermediate term sell signal

December wheat lost 7.50 cents on heavy volume of 161,429 contracts. Volume was the highest since November 12 when 186,268 contracts were traded and December wheat declined by 28.75 while open interest declined by 10,187 contracts. On November 16, open interest declined by 3,101 contracts, which in relation to volume is approximately 10% less than average. Wheat made a new low for the move at 8.29 1/2, and is the lowest price for wheat since July 11 when it made a low of 8.16 1/4. Wheat is likely to trade in a lackluster fashion until such time that export demand returns. Stand aside.

Crude oil:

January crude oil gained $1.05 on volume of 570,824 contracts. Volume was the lightest since November 12 when 548,296 contracts were traded and crude oil declined by 50 cents while open interest declined by 6,450 contracts. On November 16, crude oil saw another massive decline of open interest of 21,665 contracts, which in relation to volume is approximately 55% above average, meaning that liquidation was fairly heavy. During the past 6 trading sessions, open interest has declined by 118,631 contracts while crude oil has advanced by $1.83. As indicated in the Weekend Wrap of November 18, most of the liquidation was by commercial interests according to the COT report.

In the recent past, we had recommended that clients implement long puts in the $92-93 area, and that they liquidate these positions at the $85-86 level. We have recommended a stand aside position ever since. We saw that the market was finding support in the low $84 level, and that the long to short ratio by managed money was getting down to extraordinarily low levels. As this report is being compiled on November 19, January crude oil is trading $2.63 higher, with the reason being the war between Israel and the Palestinians is worsening. The oil market was overdue for a bounce and we could see the rally extend to the $91 area. It will be interesting to see the open interest and volume stats for November 19.

Heating oil:

January heating oil gained 1.26 cents on light volume of 118,869 contracts. Open interest declined by 3,206 contracts, which in relation to volume is average. As this report is being compiled on November 19, January heating oil has advanced 9.83 cents. Stand aside.

Natural gas:

December natural gas advanced 8.7 cents on volume of 309,232 contracts. Open interest increased by 2,665 contracts, which in relation to volume is approximately 50% less than average. As this report is being compiled on November 19, natural gas is one of the very few commodities that is trading lower. During the past 3 days natural gas has not been able to trade above 3.83, and on November 19 has made a high of 3.835. It appears the market has a problem trading above 3.83. Stand aside.

Copper:

December copper lost 1.10 cents on volume of 55,074 contracts. Open interest increased by 953 contracts, which in relation to volume is approximately 25% less than average. As this report is being compiled on November 19, December copper is trading 7.80 higher, and has made a new high for the move at $3.5405. We think the rally will peter out at the 200 day moving average of 3.60. Stand aside.

Gold:

December gold gained 90 cents on volume of 165,881 contracts. Open interest declined by a whopping 7,554 contracts, which in relation to volume is approximately 85% above average, meaning that liquidation was heavy. On November 15, gold declined by $16.30 while open interest increased by 1,182 contracts on volume of 215,088. It is apparent the market has found support in the low $1700 area. For example on November 7 the low was 1703, November 15 the low was 1704.50. On November 16, gold made made a low of 1705. As this report is being compiled on November 19, gold is trading $19.10 higher. On October 22, December gold generated a short-term sell signal, but has not generated an intermediate term sell signal. Continue to stand aside.

Silver:

December silver lost 30.4 cents on volume of 59,909 contracts. Open interest declined by 975 contracts, which in relation to volume is approximately 30% less than average. As this report is being compiled on November 19, silver is trading 83.5 cents higher. Since November 9, silver has traded in the low $32 area, but has not been able to break below $32.00. On October 19, December silver generated a short-term sell signal, but has not generated an intermediate term sell signal. Continue to stand aside.

Euro:

The December euro lost 47 points on volume of 254,944 contracts. Open interest increased by a massive 7,693 contracts, which in relation to volume is approximately 20% above average, but a large number nonetheless. Apparently, new longs and shorts were piling into the market and the shorts were clearly in control. However, on November 19, it’s a completely different story with the euro trading 76 points higher having reached 1.2824, which is 3 ticks above its 200 day moving average of 1.2821. If the rally continues, we expect it to run into resistance around the 1.2900 level. Stand aside.

S&P 500 E mini:

The December S&P 500 E mini closed 8.50 points higher on fairly heavy volume of 2,615,494 contracts. Open interest declined by 11,921 contracts, which in relation to volume is approximately 75% less than average. The market made a new low for the move at 1340.25, and then began to rally on the hope of a deal being struck regarding the fiscal cliff. As indicated in the Weekend Wrap of November 18, a short-term rally is to be expected due to the massively oversold condition of the index. Although it is possible that a deal could be struck between now and the end of the year, we are essentially in the first inning of the game, and there will be much drama associated with the making of this legislation. Although long puts should be maintained, clients should look at their equity to determine their profit position in the trade. At the very least, we expect a retest of Friday’s low.