Soybeans:

January soybeans advanced 10.25 and March +11.50 cents on volume of 197,650 contracts. Total open interest increased by 6,152 contracts, which relative to volume is approximately 20% above average, meaning that new longs were entering the market at a higher than normal rates and pushing prices higher. The January contract lost 7,386 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on December 17, January soybeans are trading 12.25 higher and March beans +12.50 and making new highs for the move. We mentioned in yesterday’s report, for those clients who have been short soybean calls to cover positions when losses approach 3-4 cents per contract. However, we would amend this on December 17 by advising to cover positions immediately due to the very positive open interest on December 16 and the power of the rally on December 17. Soybeans remain on a short and intermediate term buy signal, and January beans should be able to take out the high of $13.53 1/2 made on December 10.

Soybean meal:

January soybean meal advanced $6.40 while March increased 6.60 on total volume of 91,134 contracts. Total open interest increased by 3,207 contracts, which relative to volume is approximately 40% above average meaning that new longs were aggressively entering the market and driving soybean meal prices higher. The January contract lost 8,750 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on December 17, January soybean meal is trading $8.30 higher while March is +6.50. We have no recommendation for soybean meal. Stand aside.

Corn:

March corn lost 2.25 cents on volume of 180,153 contracts. Total open interest increased by 2,350 contracts, which relative to volume is approximately 45% less than average. The March contract accounted for loss of 3,340 of open interest, which makes the total open interest increase more impressive (bearish). As this report is being compiled on December 17, March corn is trading 4.50 cents higher, and has not taken out yesterday’s low of 4.21 1/2. Corn remains on a short and intermediate term sell signal.

Chicago wheat:

March Chicago wheat lost 7.00 cents on volume of 66,322 contracts. Total open interest declined by 771 contracts, which relative to volume is approximately 45% less than average. On December 16, March wheat made a new low for the move at $6.21, and on December 17 has traded fractionally lower at 6.20 1/4. As we said in yesterday’s report, we think wheat will continue to drift lower until the WASDE report is released during the 1st week of January. Do not short wheat. We recommend a stand aside posture.

Cotton:

March cotton gained 16 points on very light volume of 12,188 contracts. Total open interest increased by a massive 2,158 contracts, which relative to volume is approximately 360% above average meaning that both longs and shorts engaged in a battle, and longs were only able to move prices fractionally higher. Although the total open interest increase on December 16 was off the charts, we are becoming concerned about cotton’s inability to continue to move significantly higher from here. For example, the high on December 13 was 83.42 and this was the high on December 16. On December 17, cotton has made a another new high for the move at 83.72, but is trading 14 points lower on the day. For the past 3 days beginning on December 12, open interest has increased 4,222 contracts while March cotton has advanced only 89 points, or 11 points short of 1.00 cent. The massive open interest increase during this three-day period is not moving prices to major new highs you as it should if the market rally is for real. Additionally, cotton has been unable to maintain a daily low above the key pivot point of 82.95, which is another potential danger sign. On December 9, we recommended the initiation of bullish positions when March cotton generated a short-term buy signal. As of this writing, positions are profitable, but we think a defensive measures are required. We strongly advise writing out of the money calls on futures contracts and tightening up sell stops in the event cotton reverses. Do not enter new long positions at this juncture.

Coffee:

March coffee advanced 5 points on heavy volume of 26,399 contracts. Volume was the highest since November 19 when 40,671 contracts were traded. On December 16, total open interest declined by 1,247 contracts, which relative to volume is approximately 75% above average meaning that both longs and shorts were heavily liquidating their positions. For the past 2 days, March coffee has advanced approximately 4.00 cents and open interest has declined 3,717 contracts. This is bearish open interest action relative to the price advance. When coffee generated a short-term buy signal on December 12, we recommended the initiation of bullish positions and the positions are profitable as of December 17. However, on December 16, March coffee made a high of 1.1725 but closed significantly off the high. Additionally, March coffee’s daily low has not traded above the key pivot point of 1.1470. Like cotton, the current rally is likely to be nothing more than technical in nature and therefore advise writing out of the money calls and tightening up sell stops on futures positions.

Live cattle:

February live cattle advanced 65 points on volume of 35,100 contracts. Total open interest increased by 2,149 contracts, which relative to volume is approximately 140% above average meaning that new longs were aggressively entering the market and pushing prices higher. The December contract lost 1,225 of open interest, which makes the total open interest increased more impressive (bullish). As this report is being compiled on December 17, February cattle is trading 40 points lower. February cattle remains on a short-term sell signal, but an intermediate term buy signal. Stand aside.

Lean hogs:

February lean hogs lost 55 points on very low volume of 23,507 contracts. Total open interest increased by a hefty 1,202 contracts, which relative to volume is approximately 100% above average. The February contract accounted for loss of 853 of open interest, which makes the total open interest increase much more impressive (bearish). This is the 2nd day in a row that prices have declined and open interest has increased. This confirms the bearish trend and as this report is being compiled on December 17, February hogs are trading 70 points lower and have made a new low at 85.850. Over a week ago, we recommended the initiation of bearish positions, and these have proven to be highly profitable. The hog market is weak, and it is apparent speculative longs are refusing to liquidate, which augurs for lower prices in the short-term. Stay with bearish positions.

WTI crude oil: 

January WTI crude oil advanced 88 cents on very low volume of 430,396 contracts. Volume was the lightest since post Thanksgiving holiday trading on November 29 when 243,641 contracts exchanged hands. On December 16, total open interest declined by 9,699 contracts, which relative to volume is approximately 15% below average but a fairly strong number. Volume and open interest action on December 16 was decidedly bearish considering the price advance. The January contract lost 29,269 of open interest. The market is trading in a lackluster fashion, even though it remains on a short and intermediate term buy signal. We think it is imminent that a short-term sell signal will be generated. Stand aside.

Brent crude oil:

February Brent crude oil advanced $1.09 on low volume of 463,654 contracts. Like WTI, volume was the lowest since November 29 when 338,394 contracts were traded. On December 16, total open interest declined by 7,649 contracts, which relative to volume is approximately 30% below average. The January contract lost 12,566 of open interest. Like WTI, we think it is just a matter of time before Brent generates a short-term sell signal. Brent remains on a short and intermediate term buy signal. Stand aside.

Natural gas:

January natural gas lost 7.2 cents on volume of 441,278 contracts. Total open interest declined by 7,759 contracts, which relative to volume is approximately 25% below average. The January contract accounted for loss of 24,952 of open interest. On December 16, the market pulled back and made a new low 4.203, and this low has been violated (4.195) on December 17, but January natural gas is trading unchanged on the day. The market continues to be massively overbought and it may take a bearish natural gas storage report before we see a greater setback. If not already involved on the long side of natural gas from significantly lower levels, do not enter new long positions and do not short natural gas.

Copper: On December 16, March copper generated an intermediate term buy signal and generated a short-term buy signal on December 11.

March copper advanced 1.75 cents on volume of 46,318 contracts. Total open interest increased by 713 contracts, which relative to volume is approximately 40% less than average. March copper made a new high for the move at 3.3320 and has made another new high on December 17 of 3.3355. The 50 week moving average of 3.3300 should provide considerable resistance for a further move to the upside, and copper on a weekly basis has not traded above the weekly moving average since late February- early March 2013. The market is overbought relative to its 50 day moving average of 3.2576, and a setback should be expected at this juncture. The long March-short July-September-December spread has been profitable, but under no circumstances should clients allow the spread to become a loser. Liquidate at break even.

Euro:

The March euro advanced 4 pips on light volume of 160,346 contracts. Total open interest declined by 3,170 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on December 17, the March euro is trading 6 pips higher, but made a new low for the move earlier in the session at 1.3721, which took out yesterdays low of 1.3734. The euro remains on a short and intermediate term buy signal. Stand aside.

British pound:

The March British pound lost one pip on very light volume of 78,955 contracts. Total open interest increased by 593 contracts, which relative to volume is approximately 60% below average. As this report is being compiled on December 17, the March British pound has made a new low for the move at 1.6203. We expect sterling to continue moving lower  and test the 50 day moving average of 1.6136. On December 13, GBP/EUR generated a short-term sell signal and if this cross closes below 1.1798, an intermediate term sell signal will likely be generated.

S&P 500 E mini:

The S&P 500 E mini gained 11.75 points on heavy volume of 2,662,913 contracts. Total open interest increased by 154,730 contracts. The heavy volume and open interest increase was due to the impending expiration of the December contract. On December 16, the March E mini made a new low for the move at 1754.00, but rallied to close higher on the day. As this report is being compiled on December 17, the March E mini is trading 6.50 lower on very low volume. Beginning today and tomorrow, the Federal Reserve will be meeting and making an announcement of policy in the afternoon. This will drive market action for the rest of the week. We strongly advise the initiation or maintenance of long put protection.