Volume and open interest analysis for September 19, 2012

Soybeans: 

November soybeans closed. 29.50 cents higher on light volume of 168,880 contracts. Volume was the lightest since September 11, when 161,182 contracts were traded and soybeans declined by 17.25 while open interest declined 544 contracts. On September 19, open interest increased by only 6 contracts. It is interesting to note that open interest in the November contract declined by 4,203 contracts, which confirms that longs and shorts were liquidating as the market moved higher. The lack of upside volume accompanied by an unchanged open interest number is confirmation the market is not ready to move higher in the short term. Export sales released by the USDA on September 20 showed that soybeans had another terrific week and sales for the 2012-2013 season totaled 712,300 metric tons. At this juncture, total sales for the 2012-2013 season are well over 70%. For the moment, soybeans are focusing on the possible expansion of yield and the pressure of new supply coming into the market. Speculators should continue to stand aside

Soybean Meal:

October soybean meal gained $8.30 on light volume of 55,987 contracts. Volume was the lightest since September 11 when 53,502 contracts were traded and soybean meal declined by $3.10 while open interest declined by 1,809 contracts. On September 19, open interest declined by a whopping 2,064 contracts, which in relation to volume is approximately 30% above average. On September 20, the USDA reported export sales of 234,300 metric tons, which is an outstanding number. In order to show the relatively high open interest decline of meal compared to soybeans, consider the performance during the last three sessions. During the past three days, meal open interest has declined by 7,127 contracts while soybean open interest has declined by 5,707 contracts. Keep in mind the open interest decline in soybean meal is major compared to soybeans because soybeans trade approximately 250-300% more volume than soybean meal. Despite this, meal open interest has declined by a 25% greater margin than soybeans. As indicated in yesterday’s report, we see this as a major positive because the market is shaking out speculators who were long at higher prices. Once distress sellers have been driven out of the market,  soybean meal will begin the bottooming process, which will set the stage for a terrific buying opportunity.

Corn:

December corn gained 16.50 cents on light volume of 213,319 contracts. Volume was the lowest since September 14, when 192,202 contracts were traded and corn advanced 8.25, while open interest increased by 1,044 contracts. On September 19, open interest increased by 2,671 contracts, which in relation to volume is approximately 60% less than average. Open interest in the December contract declined by 1,263 contracts, but there was enough buying in the forward months to offset this decline. USDA export sales for corn released on September 20 were an abysmal 69,000 metric tons against expectations of 350,000 metric tons. US corn prices are selling at a premium compared to South American corn. Corn will move with the rest of the grains and in our view, this is lower. Stand aside.

Wheat:

December wheat gained 18.00 cents on light volume of 62,740 contracts. Volume declined approximately 22,000 contracts from September 18, when wheat declined 14.50 cents and open interest declined by 4,884 contracts. On September 19, open interest increased by 122 contracts. Like corn, US wheat is selling at a premium to many other origins, and until the Black Sea region decreases its exports, the demand for US wheat may be muted. Going forward over the next couple of months, we believe US wheat will be far more competitive than it is currently. The export sales report released by the USDA showed that sales were 489,000 metric tons, which is above expectations of 350,000 metric tons. Stand aside.

Crude oil:

November crude oil lost $3.32 on very heavy volume of 807,916 contracts. Volume was the highest since September 14 when 828,091 contracts were traded and crude made its high for the move at $100.42 and closed 69.00 cents higher, while open interest increased by 26,640 contracts. On September 19, open interest declined by 13,827 contracts, which in relation to volume is approximately 60% less than average. As we have said before, there is no reason to be involved in crude oil. Keep in mind that the 50 day moving average is still below the 200 day moving average, despite the major move higher, which began in early July. We have been telling our readers to stand aside and believe that the spike high on September 14 will remain in place for quite a while. The market is coming to grips with the fact that China is clearly having major economic problems, and these will not be cured by monetary stimulus.

Heating oil:

November heating oil closed 8.40 cents higher on heavier than normal volume of 164,416 contracts. Volume was the highest since September 13 when 167,442 contracts were traded and heating oil lost .0039, while open interest declined by 6,703 contracts. On September 19, open interest declined by 3,490 contracts, which in relation to volume is approximately 10% less than average. Heating oil is approaching its critical support level of $3.00, which is the 200 day moving average. If the market breaks significantly below this level, the next area of support is the $2.80 level. The 50 day moving average of heating oil on the continuation chart recently crossed above the 200 day moving average, which is a bullish development. Stand aside.

Gasoline:

November gasoline lost 8.19 cents on volume of 156,487 contracts. Volume increased approximately 25,000 contracts from September 18, when gasoline lost 5.04 cents and open interest increased by 937 contracts. On September 19, open interest increased by 952 contracts, which is not a significant increase. During the past two days, gasoline has fallen 13.23 cents while open interest has increased by 1,889 contracts. Although the slight increase in open interest is somewhat bearish, it indicates that shorts are reluctant to commit to positions as the market is moving lower. On September 19, gasoline reached the lowest price since August 8, when November gasoline made a low of $2.6948. Is important to remember, despite the major move higher that began on June 21, gasoline’s 50 day moving average remains below its 200 day moving average. Stand aside.

Copper:

December copper gained 2.70 cents on volume of 51,753 contracts. Open interest increased by 785 contracts, which in relation to volume is approximately 40% below average. We have been troubled by the economic scenario in China and the recent purchasing managers index (PMI) shows that it remains under the critical area of 50. Additionally, the Shanghai Composite Index made a new closing low on September 20 of 2024.84 down 2.08%. In previous reports, we noted that the Shanghai Composite Index did not rally with the other global markets. The close into new low territory takes the index back to January-February 2009 lows. Additionally, it appears that inventories of copper held at the London Metal Exchange, and the Commodity Exchange of New York have stabilized. Also Shanghai stocks appear to be climbing. Stand aside.

Gold:

December gold gained 50.00 cents on volume of 180,051 contracts. Open interest increased by 3,390 contracts, which in relation to volume is approximately 25% below average. During the past two sessions, open interest has increased by 8,421 contracts, while gold prices have advanced only $1.10. To put this in perspective, consider that on September 13, gold advanced by $38.40 on volume of 283,369 contracts, but open interest increased only 5,594 contracts, which was approximately 20% below average. In other words, open interest is going up, but relative to volume and price, it leaves a lot to be desired. Gold made a new high for the move on September 19 of 1781.80, which is only fractionally higher than the high made on September 14 of $1780.20. The market remains massively overbought, and speculators should stand aside waiting for a correction.

Silver:

December silver lost 13.00 cents on volume of 45,882 contracts. Open interest declined by 1,024 contracts. The market is massively overbought and speculators should stand aside and wait for a correction.

Euro:

The December euro gained 26 points on volume of 264,878 contracts. Open interest declined by 131,181 contracts. The massive decrease in open interest was due to the September contract going off the board. Stand aside. 

S&P 500 E mini:

The December. S&P 500 E mini gained 1.00 points on volume of 2,118,109 contracts. Open interest increased by 43,969 contracts, which in relation to volume is approximately 50% less than average. We continue to recommend long put protection, even though, the market is likely to rally through September 30. Those clients who are long Apple Computer should have sell stops in place to protect profits.