January soybeans lost 8.25 cents on very light volume of 127,856 contracts. Total open interest declined by 4,834 contracts, which in relation to volume is approximately 50% above average. Open interest declined in the November contract (-1354), January (- 1170), March (-2449). During the past 4 days, total open interest has declined by 19,121 contracts and January soybeans lost 53 cents. The export sales report was released this morning and soybean exports for 2012-2013 was 186,400 tons and 5,500 tons for 2013-2014. The reason for the low number was that there wasn’t total export cancellation of 545,000 tons. Although this was the lowest export number in 3 to 4 months it is only slightly below the weekly average needed to meet USDA export projections. Regardless, export cancellations are not what we want to see at this juncture. The question is will there be further cancellations.
There has been a substantial amount of liquidation on the decline and it appears this will continue until at least November 9 when the USDA releases its report. There is a gap on the chart going back to July 3-July 5 between 14 74 1/4 and 14 89 1/2. At this juncture, it appears likely that this gap will be filled. The market has been acting poorly from a price point of view, but open interest has been acting congruently with price, which is positive. If clients have losses on current positions, they should consider liquidating prior to November 9, rather than risk additional losses due to a surprise bearish report. If the report is bullish, there will be plenty of time to get back in.
December soybean meal lost 3.20 on volume of 63,616 contracts. Total open interest increased by 154 contracts, which is minuscule and significantly below average. The December contract lost 3,413 of open interest, and we attribute some of this to participants rolling positions into March. Export sales for soybean meal were terrific and for 2012-2013 totaled 194,500, and 100 tons for 2013-2014. Last week, export sales were approximately 72,000 tons, which was one of the lowest weekly export sales numbers for many months. Despite this, last week’s sale was still above the weekly export sales projected by the USDA for 2012-2013. Like soybeans, if speculators have losses on positions, they should consider liquidating prior to the report, rather than hold a position and risk additional losses.
December corn gained 3.25 cents on big volume of 324,832 contracts. Total open interest increased by 4,194 contracts, which in relation to volume is approximately 50% less than average. The December contract lost 20,682 contracts, which is in part attributable to speculators who were rolling positions over into the March contract. Corn rallied to make a high of $7.51 3/4, but couldn’t hold the gains and closed at 7.44 1/4. Corn was following wheat all day, but did not exhibit any of the strength of wheat. Export sales totaled 157,600 tons for the 2012-2013 season and 51,800 tons for the 2013-2014 season. Weekly sales are significantly below the export projection by the USDA. Corn is overpriced current levels, and is not competitive on the world market. Stand aside.
December wheat advanced 17 cents on very heavy volume of 158,214 contracts. Volume was the highest since September 28 when wheat traded 164,789 contracts and advanced 47 cents, while open interest increased by 4,294 contracts. On November 7, open interest increased by a massive 16,986 contracts, which in relation to volume is approximately 325% above average, meaning the buying was heavy. A big open interest increase along with large volume is bullish, especially since December wheat closed at $8.94, which is its highest close since September 28 (9.02 1/2). If December wheat trades above 8.85 for the rest of Thursday, a short-term and intermediate term buy signal will be generated. Generally speaking, when a buy signal occurs, whether short or intermediate term, there will be a pullback. The pullback is the buying opportunity. Weekly export sales were disappointing and for 2012-2013 came in at 209,400 tons and for 2013-2014 totaled 11,500 tons. To meet the USDA projections exports must average approximately 520,000 tons per week.
December crude oil lost $4.27 on very heavy volume of 738,743 contracts. Volume was the highest since October 9 when 764,375 contracts were traded and crude oil advanced 3.06 while open interest declined by 14,367 contracts. On November 7, open interest declined by 15,905 contracts, which in relation to volume is approximately 5% below average. It is interesting to note that during November 2, 5 and 7 new lows that were made were only fractionally lower than the previous low. For example, the low on November 2 was $84.66, on November 5 was $84.34 and November 7 $84.05. This indicates the likelihood that new lows will be made in small increments. As has been noted in a previous post the 200 week moving average is $82.99, meaning that this level represents longer-term value. Stand aside.
December heating oil lost 9.08 cents on volume of 166,481 contracts. Open interest increased on the decline by 2,404 contracts, which in relation to volume is approximately 35% below average. Stand aside.
December gasoline lost 11 cents on volume of 152,742 contracts. Open interest increased by 1,624 contracts, which in relation to volume is approximately 50% below average. Stand aside.
December copper lost 6.45 cents on heavy volume of 98,690 contracts. Volume was the highest since June 8 when 101,350 contracts were traded and copper closed at 3.3055. Open interest declined by 3,134 contracts, which in relation to volume is approximately 30% above average. Copper made a new low for the move at 3.4310, which could possibly be a temporary bottom. Stand aside.
December gold lost $1.00 on huge volume of 306,101 contracts. Volume was the highest since June 27 when 335,338 contracts were traded and gold closed at $1622.70. Despite the heavy volume, open interest increased only 3,239 contracts, which in relation to volume is approximately 50% less than average. Volume increased by approximately 92,000 contracts from November 6, when gold advanced $31.80 and open interest increased by 5,210 contracts. December gold made a high of 1733, which was the highest price for December gold since October 19 when it reached 1744.70. Despite the sharp move higher, the market pulled back to close at 1714.00. Stand aside.
December silver lost 37.3 cents on heavy volume of 78,154 contracts. Volume increased from 58,205 contracts traded on November 6, when December silver gained 90.6 cents. On November 7, open interest declined by 1,487 contracts, which in relation to volume is approximately 50% less than average. Stand aside.
The December euro lost 48 points on heavy volume of 362,078 contracts. Volume was the highest since September 14 when 439,133 contracts were traded and the December euro closed at 1.3128. Open interest increased by 2,071 contracts, which is approximately 65% less than average. Stand aside
S&P 500 E mini:
The S&P 500 E mini lost 36.25 points on very heavy volume of 3,203,842 contracts. Volume was the highest since September 14 when the S&P 500 E mini made the high for the move (1468) that started in March of 2009. On November 7, open interest increased by a massive 92,489 contracts, which in relation to volume is 15% above average, and is a very large number. This indicates an extreme amount of bearishness. For the first since early June, the Dow Jones Industrial Average closed under its 200 day moving average for only second time during 2012. Additionally, the Russell 2000 closed below its 200 day moving average. The S&P 500 cash index has not accomplished this yet, but we expect it to occur shortly. Maintain long puts.