On November 23, the dollar index is sharply lower caused primarily by the sharp jump in the euro. This is creating a risk on environment, and most commodities are trading on the plus side.
Soybeans:
January soybeans lost 4.50 cents on light holiday volume of 109,591 contracts. Total open interest increased by 2,781 contracts, which in relation to volume is average. The January contract saw liquidation of 85 contracts and January soybeans made a high of $14.24, which is the highest price since November 15 when they reached 14.27 3/4. On November 23, the USDA released its export sales numbers for soybeans and for the2012-2013 season, sales were 543,600 tons, which is approximately twice weekly sales required to reach the USDA export target. As this report is being compiled on November 23, January soybeans reached a high of 14.27, and has pulled back to trade 12.50 cents higher on the day. The rally looks extremely weak, and we expect a retest of the November 16 low of 13.72 1/4. Stand aside.
Soybean meal:
December soybean meal lost $1.70 on heavier than normal volume of 72,807 contracts. Interestingly, volume on the day before Thanksgiving was higher than November 19 and 20. On November 20, soybean meal advanced $5.00 while open interest increased by 1,926 contracts. On November 19, soybean meal closed unchanged, while open interest declined by 2,559 contracts. On November 21, total open interest declined by 468 contracts, which in relation to volume is approximately 70% less than average. 6,520 contracts were liquidated in the December contract. Weekly export sales had another terrific week with total sales of 197,804 for 2012-2013. Like soybeans, we expect a retest of the lows, which in the case of December soybean meal would be at the $420 level. Stand aside.
Corn:
December corn lost 2.25 cents on volume of 231,789 contracts. Open interest increased by 3,890 contracts, which in relation to volume is approximately 30% less than average. 18,294 contracts were liquidated in the December contract. The market made a high of $7.47, which nearly matched the high on November 20 of 7.47 1/4. The high thus far on November 23 is 7.49. Corn had its best week of export sales since the season began and totaled 769,800 tons while 188,800 tons were for the 2013-2014 season. Despite one week of terrific sales, corn exports are lagging significantly. Despite this, corn is showing an amazing amount of buoyancy. At this juncture, it appears that the $7.05 low may be near the bottom of the market. Stand aside.
Wheat:
December wheat gained 0.25 cents on volume of 111,243 contracts. Total open interest declined by 3,457 contracts, which in relation to volume is approximately 20% above average, meaning that liquidation was heavy. Relative to volume, this is the second day in a row that liquidation has been significantly above average. Export sales totaled 635,500 tons for the 2012-2013 season and 22,000 tons for the 2013-2014 season. This was the highest total export number since August 5. Stand aside.
Crude oil:
January crude oil gained 63 cents on light holiday volume of 392,684 contracts. Open interest increased by 4,253 contracts, which in relation to volume is approximately 50% less than average. Although the dollar is sharply lower, due primarily to the sharp increase in the euro, January crude oil is trading only 78 cents higher and has been unable to match the high made on January 19 of $89.80. With a sharply lower dollar, crude should have been able to rally significantly higher, especially since other markets are trading higher as well. The market looks like it’s going to struggle between the 88.50 and $90.00 area. We will be examining crude oil in the Weekend Wrap and discuss the possibility of reinstating short positions. Stand aside.
Heating oil:
January heating oil gained 3.29 cents on light holiday volume of 127,110 contracts. Open interest increased by 3,079 contracts, which in relation to volume is average. November 21 was the 3rd day in a row that price and open interest action has been acting in a bullish congruent fashion.Stand aside.
Natural gas:
December natural gas gained 7.1 cents on volume of 343,491 contracts. Volume was the highest since November 14 when 409,902 contracts were traded and open interest increased by 10,127 contracts while December natural gas advanced 2.1 cents. On November 21, open interest increased by a whopping 13,063 contracts, which in relation to volume is approximately 55% above average, meaning that new buyers were entering the market en masse and pushing prices higher. Additionally, natural gas made a new high for the move at $3.91. What we want to see is the daily low in natural gas trade above its 200 week moving average of $3.84. The market is massively overbought relative to its 50 day moving average, and clients should wait for a pullback before implementing bullish positions. Stand aside.
Gold:
December gold advanced $4.60 on heavier than normal volume of 170,359 contracts. To put the volume of trading on November 21 in perspective, volume was the highest since November 15 when 215,088 contracts were traded and December gold declined by $16.30, while open interest increased by 1,182 contracts. Additionally, pre holiday volume on November 21 exceeded the average daily volume for the month of October of 136,827 contracts, and came close to the average daily volume year to date of 173,942 contracts. This is bullish. On November 21, open interest increased by a hefty 5,010 contracts, which in relation to volume is approximately 20% above average. In short, on the day before a major holiday, participation was heavy and new buyers were entering the market to push gold prices higher. From November 5 through November 21 open interest has increased by 28,606 contracts while December gold has advanced by $48.20. This is bullish congruent price and open interest action. As this report is being compiled on November 23, December gold is trading $24.10 higher, and has broken above its 50 day moving average of 1743.50. Despite the move on November 23, December gold remains on a short-term sell signal, which was generated on October 22, but is getting close to reversing. Gold remains on an intermediate term buy signal. Stand aside.
Silver:
December silver gained 42 cents on volume of 55,777 contracts. Open interest increased by 619 contracts, which in relation to volume is approximately 50% less than average. From November 5 through November 21, open interest has increased by 11,651 contracts while December silver has advanced by $2.431. Price and open interest is acting in a bullish congruent fashion. For the first time since October 18, silver closed above its 50 day moving average of $33.24. Although on November 23, silver is trading 76 cents higher, a short-term buy signal will not be generated to reverse the short term sell signal generated on October 19. Stand aside.
Australian dollar:
The Australian dollar lost 7 points on light holiday volume of 78,202 contracts. Open interest declined by 3,457 contracts, which in relation to volume is approximately 75% above average meaning that liquidation was fairly heavy. This is perfectly normal considering that open interest during November 19 and 20 increased by a total of 14,806 contracts while the Australian dollar advanced 41 points. As this report is being compiled on November 23, the Australian dollar is trading 92 points higher. Stand aside.
Euro:
The December euro lost 20 points on volume of 239,768 contracts. Open interest declined by 1,121 contracts, which in relation to volume is approximately 75% below average. As this report is being compiled on November 23, the December euro is trading 1.54 cents higher and hasis reached a new high for the move at 1.2994, which is the highest price since October 31 when the December euro reached 1.3027. Despite the sharp move higher on November 23, the December euro will not reverse the short term sell signal generated on November 5. The euro remains on an intermediate term buy signal. Stand aside.
S&P 500 E mini:
The S&P 500 E mini closed 3.00 points higher on light holiday volume of 1,072,819 contracts. Open interest increased by a mere 1,299 contracts, which in relation to volume is approximately 97% less than average, which in essence is an unchanged number, meaning that new longs and shorts were replacing old longs and shorts, who were liquidating. As this report is being compiled on November 23, the S&P 500 E mini is trading 16.50 points higher. During the course the rally, which began by a reversal on November 16 from the low of 1340.25, open interest action has been abysmal. The rally on November 23 was likely inspired by a risk on environment created by a sharply lower dollar, and the seasonal tendency for the market to rally at this time of year. The 50 day moving average is at 1426, which means we could see a rally up to this level. Keep in mind, the rally will likely be met by investors who wish to sell before the end of 2012 due to the risk of rising capital gains taxes in 2013. The maintenance of long put position should be based upon your risk tolerance, and the amount of profit or loss in the position. If long puts were entered when they were first recommended, clients should have profits.
