Soybeans:

January soybeans advanced 8.75 and March +9.50 cents on fairly heavy volume of 238,841 contracts. Volume was the highest since December 12 when 295,952 contracts were traded and January soybeans lost 20.25 and March -17.00 cents while total open interest declined 2,117 contracts. On December 17, total open interest increased by 5,995 contracts, which relative to volume is average. The January contract lost 10,101 of open interest, which makes the total open interest increased much more impressive (bullish). January soybeans made a high of 13.50 and was unable to take out the high of 13.53 1/2 made on December 10. However, the March contract made a new high on December 17 at 13.38 1/2 which took out the high of 13.35 made on December 10. As this report is being compiled on December 18, January soybeans are trading 12.50 lower while March is -12.00 cents. Yesterday, we advised the liquidation of the short call position in soybeans due to the very bullish price, volume and open interest action. It should be noted that on December 18 the 10 year treasury note is making new lows for the move and the last reading on the 10 year note rate of interest is 2.89%, which is only a scant 9 basis points from the high of 2.98%. Higher interest rates are bearish for commodities, and with some exceptions, the entire complex is trading lower on the day. Soybeans remain on a short and intermediate term buy signal. Stand aside.

Soybean meal:

January soybean meal advanced $9.00 while March increased by 6.80 on volume of 106,695 contracts. Volume was higher than December 16 when 91,134 contracts were traded and January meal advanced $6.40 while March traded 6.60 higher and open interest increased by 3,207 contracts. On December 17, total open interest increased by 3,361 contracts, which relative to volume is approximately 25% above average meaning that new longs were entering the market at an above average pace and driving prices higher. January meal made a new high for the move the $449.30, which took out the high of 444.40 made on December 10. Additionally, the March contract made a new high for the move at 438.10 and took out the high of 431.17 made on December 10. Soybean meal remains on a short and intermediate term buy signal, and as this report is being compiled on December 18 January meal is trading down 3.90 while March is -5.60. Stand aside.

Corn:

March corn advanced 3.50 cents on volume of 133,712 contracts. Total open interest declined by 481 contracts, which relative to volume is approximately 80% less than average. The March contract accounted for loss of 3,094 contracts. As this report is being compiled on December 18, March corn is trading 1.75 lower, but has not taken out the low of 4.20 1/2 made on December 16. Corn remains on a short and intermediate term sell signal. Stand aside.

Chicago Wheat:

March Chicago wheat lost 2.00 cents on volume of 62,635 contracts. Total open interest increased by a massive 6,238 contracts, which relative to volume is approximately 300% above average meaning that new shorts were entering the market at an extremely aggressive pace and driving prices lower. Based upon the action since last Wednesday, we expect the short to long ratio of managed money to increase in the upcoming COT report released this Friday. As this report is being compiled on December 18, March Chicago wheat has made another new low at $6.12 1/4. Wheat remains on a short and intermediate term sell signal. Stand aside.

Cotton:

March cotton lost 43 points on light volume of 12,259 contracts. Total open interest declined by 8 contracts. As this report is being compiled on December 18, March cotton is trading 12 points higher and has made a high of 83.20. As we have said in recent reports, the daily low in cotton must be above our key pivot point of 82.95 for cotton to continue moving higher. The longer this takes, the more likely it is that cotton will reverse its current move. As we said in previous reports, continue to hold bullish positions, but tighten up sell stops and write out of the money calls. Cotton remains on a short-term buy signal, but an intermediate term sell signal.

Coffee:

March coffee lost 1.15 cents on light volume of 14,184 contracts. Total open interest declined by 1,306 contracts, which relative to volume is approximately 250% above average meaning that liquidation was off the charts heavy. This is positive open interest action, although we caution clients to be aware that coffee may reverse if the daily low does not trade above 1.1480. As this report is being compiled on December 18, coffee is trading 1.75 cents higher and has made a high for the day of 1.1650, which is short of a high of 1.1725 made on December 16. However, one very positive factor is that March coffee closed yesterday at 1.1415 and the daily low on December 18 has been 1.1420, which indicates decent support despite yesterday’s setback. Continue to hold bullish positions, but tighten sell stops and write out of the money calls.

Live cattle:

February live cattle lost 52.5 points on very light volume of 26,321 contracts. Total open interest increased by 507 contracts, which relative to volume is approximately 20% below average. However, this is the 1st time since December 3 that cattle prices declined and total open interest increased. On that day, February cattle declined 17.5 points while open interest increased by 551 contracts on total volume of 43,809 contracts. As this report is being compiled on December 18, February cattle is trading 35 points lower and is making new lows as this report is being written. February live cattle remain on a short-term sell signal but an intermediate term buy signal. Stand aside.

Lean hogs:

February hogs lost 97.5 points on very light volume of 30,583 contracts. Total open interest declined by a massive 4,252 contracts, which relative to volume is approximately 320% above average, meaning that liquidation was off the charts heavy. The December contract accounted for loss of 5,017 of open interest. During the past 3 days beginning on December 13, February hogs of lost 2.35 cents while total open interest has declined 2,354 contracts. Also of note, has been the very low volume during the three-day period. The highest volume of the 3 days occurred on December 13 when 31,464 contracts changed hands. This compares to average daily volume in November of 41,688 and 37,457 in October. Year to date, average daily volume is 45,949 contracts. In short, there does not seem to be any panic selling as yet, which leads us to believe that are prices are still headed lower. We will learn much more about managed money positioning when the COT report is released this Friday.

WTI crude oil:

February WTI crude oil lost 30 cents on very light volume of 399,663 contracts. Volume was the lowest since the post Thanksgiving holiday trading on November 29 when 243,641 contracts changed hands. On December 17, total open interest declined by 12,717 contracts, which relative to volume is approximately 25% above average meaning that liquidation was fairly heavy on a modest decline. The January contract accounted for loss of 24,087 of open interest. As this report is being compiled on December 18, February WTI is trading 49 cents higher and has made a high of 98.30 which took out yesterday’s high of 98.15. Though WTI remains on a short and intermediate term buy signal, we see no compelling reason to be involved with it at this juncture.

The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.9 million barrels from the previous week. At 372.3 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.3 million barrels last week,and are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.1 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 2.7 million barrels last week and are well below the lower limit of the average range. Total commercial petroleum inventories decreased by 12.6 million barrels last week

Brent crude oil:

Brent crude oil lost 97 cents on very low volume of 394,751 contracts. Volume was the lightest since November 29 when 338,394 contracts were traded. The interesting part of trading on December 17 was that open interest declined by a massive 35,764 contracts, which relative to volume is approximately 250% above average meaning that liquidation was off the charts heavy. Is important to note that the open interest decline was across the board and not the result of massive liquidation in the front month, which is usually the case when a large total open interest decline occurs. Like WTI, we see no reason to be involved in Brent. Stand aside.

Natural gas:

January natural gas advanced 8 points on volume of 390,438 contracts. Volume was lower than December 13 when 394,769 contracts were traded and total open interest increased by 1,856 contracts and natural gas declined 5.8 cents. On December 17, total open interest declined by 1,895 contracts, which relative to volume is approximately 75% below average. The January contract accounted for loss of 17,595 of open interest. As this report is being compiled on December 18, natural gas is trading unchanged on the day. At this juncture, it appears the market is consolidating its gains and the only question to be answered is whether consolidation is for another leg higher or a leg lower. The weather will determine the course of natural gas and a bearish natural gas storage report tomorrow could send the market lower.

Copper:

March copper lost 80 points on volume of 38,998 contracts. Total open interest increased by 1,161 contracts, which relative to volume is approximately 20% above average. As this report is being compiled on December 18, copper is trading 10 points lower and has not taken out yesterdays high of 3.3355. If the market is to continue to move higher it is going to find considerable resistance at the October 22 high of 3.3600 and the September 19 high of 3.3605. Continue holding the long March-short July-September-December spread, but under no circumstances should this trade be allowed to turn from a gainer into a loser. In short, liquidate at break even.

Euro:

The March euro gained 3 pips on very light volume of 144,805 contracts. Total open interest declined by 107 contracts. As this report is being compiled on December 18, the March euro is trading 8 pips lower on very light volume. The euro remains on a short and intermediate term buy signal. Stand aside.

British pound:

The March British pound lost 36 pips on volume of 83,695 contracts. Total open interest declined by 2,698 contracts, which relative to volume is approximately 30% above average meaning that liquidation was fairly heavy on the decline. The pound made a new low for the move at 1.6203, however it remains on a short and intermediate term buy signal.

S&P 500 E mini:

The S&P 500 E mini lost 7.25 points on heavy volume of 2,574,766 contracts. Total open interest increased by 68,294 contracts. The heavy volume and open interest is due to the December contract expiring this Friday. As this report is being compiled after the release of the minutes by the Federal Reserve, the E mini is trading 21.00, but made a low of 1760.75 before rallying. We continue to advise long put protection for those clients who hold long equity positions.However, it should be kept in mind that from a seasonal standpoint, markets tend to rally into the new year.