Happy holidays from OIA to our valued clients.

Soybeans:

January beans lost 10.50 and March -11.25 cents on total volume of 148,063 contracts. Total open interest declined by 2,377 contracts, which relative to volume is approximately 35% below average. The January contract lost 8,696 of open interest, and there were open interest increases in the forward months to bring down total open interest below average. As this report is being compiled on December 24, a holiday shortened session, January beans are trading 7.75 higher while March has advanced 6.00 cents. As we said in the report of December 22, adventurous clients can write out of the money calls. Soybeans remain on a short and intermediate term buy signal.

Soybean meal:

January soybean meal lost $2.40 while March declined 3.70 on total volume of 61,073 contracts. Total open interest declined by 321 contracts, which relative to volume is approximately 75% below average. The January contract lost 5,924 of open interest, and there was open interest increases in the forward months which brought down total open interest to a minor number. As this report is being compiled on December 24, January meal is trading $4.30 higher while March has gained 3.70. Soybean meal remains on a short and intermediate term buy signal. Stand aside.

Corn:

March corn gained 1.00 cents on volume of 100,701 contracts. Total open interest declined by 6,550 contracts, which relative to volume is approximately 160% above average. Corn made a new high for the move at 4.36 and as this report is being compiled on December 24, corn has not tested yesterday’s high. It appears that in the short-term, corn wants to move higher, although we do not think it’s going to be much of a rally. We advise standing aside until such time as speculative shorts have reduced their positions.

Chicago wheat:

March Chicago wheat lost 4.00 cents on very light volume of 28,458 contracts. Total open interest increased by 916 contracts, which relative to volume is approximately 25% above average, meaning that new shorts were entering the market and driving prices lower. As this report is being compiled on December 24, March Chicago wheat is trading 2.25 lower and has made a new low for the move at $6.05 3/4. As we’ve said before in previous reports, it appears that wheat will continue to drift lower until the January 10 WASDE report. We are not as bearish as the market appears to be, and think wheat will be a turnaround story in the 1st quarter of 2014.

Cotton: This will be our last report on cotton until such time as we see a trading opportunity or to announce buy and sell signals.

March cotton lost 91 points on volume of 13,519 contracts. Interestingly, open interest did not decline, but instead increased 68 contracts. The March contract lost 710 of open interest, and open interest increases in the July and December contract offset this. In yesterday’s report, we recommended liquidating the bullish positions in cotton if cotton closed below 82.29 and/or 81.81. On December 23, March cotton closed at 82.24. Additionally, we suggested maintaining the short call position, but this should be based upon your individual outlook on cotton and risk tolerance. As this report is being compiled on December 24, March cotton is trading 48 points higher on the day.

Coffee: This will be our last report on coffee until such time as we see a trading opportunity or to announce buy and sell signals.

March coffee advanced 55 points on low holiday volume of 8,340 contracts. Total open interest declined by a massive 1,164 contracts, which relative to volume is approximately 320% above average meaning that liquidation was off the charts heavy. On December 23 coffee made a high of 1.1750, which was just above the previous high of 1.1725 made on December 16. In yesterday’s report, we advised the liquidation of bullish positions and that maintenance of the short call position should be based upon your individual outlook on coffee and risk tolerance.

Live cattle:

February live cattle advanced 5 points on light holiday volume of 25,429 contracts. Total open interest increased by 545 contracts, which relative to volume is approximately 20% below average. The December contract lost 1,197 of open interest, which makes the total open interest increase more impressive (bullish). On December 23, February cattle made a new high for the move at 1.34325, but as this report is being compiled on December 24, this high has not been taken out. February cattle remains on a short-term sell signal, but an intermediate term buy signal.

Lean hogs:

February lean hogs lost 5 points on light volume of 14,419 contracts. Total open interest declined by a hefty 530 contracts, which relative to volume is approximately 40% above average. As this report is being compiled on December 24, February hogs have taken out the low of 85.550 made on December 17 and made another new low of 85.375. The market looks terrible and we recommend to continue holding bearish positions.

WTI crude oil: The petroleum report released by the Energy Information Administration will not be published until December 27.

WTI crude oil lost 41 cents on light holiday volume of 237,553 contracts. Total open interest declined by 5,499 contracts, which relative to volume is approximately 10% less than average. The February contract lost 6,362 of open interest. As this report is being compiled on December 24, February WTI is trading 29 cents higher, but has not taken out the highs of 99.45 made on December 19, 99.40 made on December 20, and 99.31 made on December 23. As we have been saying during the rally, the open interest action and low volumes indicate a lack of enthusiasm for the upside of crude. WTI remains on a short and intermediate term buy signal, but we would stand aside.

Brent crude oil:

February Brent crude lost 5 cents on light holiday volume of 308,831 contracts. Total open interest declined by a massive 21,645 contracts, which relative to volume is approximately 185% above average, meaning that both longs and shorts were massively liquidating, even though prices were steady throughout the session. Again, like WTI, Brent crude is demonstrating through price, volume and open interest action there is a lack of enthusiasm for the upside. Brent remains on a short and intermediate term buy signal. Stand aside.

Natural gas: The natural gas storage report will be released by the Energy Information Administration on December 27.

February natural gas advanced 5.2 cents on light holiday volume of 250,223 contracts. However, open interest action was bearish losing a total of 10,163 contracts of open interest, which relative to volume is approximately 55% above average, meaning that liquidation was very heavy on the advance. The January contract lost 17,473 of open interest. From December 16 through December 23, open interest has declined each day (6 days) and totals 38,611 contracts while February natural gas has advanced 14.0 cents. This is bearish open interest action relative to the advance of the past 6 days. In other words, we are seeing a consistent pattern of bearish open interest action when open interest action should be bullish. This leads us to believe that natural gas may be nearing its end of its several week bull run. Additionally, in the December 22 Weekend Wrap, we wrote about the discount of the January contract to the March contract and this discount widened again on the 23rd.  This is bearish as well. Conceivably, natural gas could have one more thrust higher, which could occur on a bullish natural gas storage report. The report will be released on December 27. We will be looking for a price spike in which natural gas makes a new high for the move on very heavy volume. Do not initiate bullish or bearish positions.

Euro:

The March euro advanced 17 pips on light holiday volume of 80,975 contracts. Total open interest increased by 712 contracts, which relative to volume is approximately 50% below average. The euro remains on a short and intermediate term buy signal. Stand aside.

British pound:

The March British pound advanced 1.6 pips on very light holiday volume of 44,939 contracts. Total open interest declined by 1,220 contracts, which relative to volume is average. The March pound remains on a short and intermediate term buy signal and GBP/EUR remains on a short-term sell signal, but an intermediate term buy signal. Stand aside.

S&P 500 E mini:

The S&P 500 E mini advanced 8.25 points on light holiday volume of 738,191 contracts. Total open interest declined by 771,160 contracts. We will contact the exchange for an explanation as to why the total open interest decline is greater than total volume. As this report is being compiled on December 24, the March E mini is trading 6.50 points higher and has made a new high for the move at 1829.50. Also of importance, the interest rate on the 10 year note has hit a new high of 2.99%, which took out the previous high of 2.98% made during September 2013. We think it is likely the interest rate on the 10 year will back off a bit before resuming its upward trend. A break above 3.00% is inevitable. Unlike most others, we believe the movement of higher interest rates will be far more rapid than does the consensus. We think the big story in the 1st quarter of 2014 will be increasingly high interest rates and what they are doing to the economy, housing in particular. For those that hold long positions in equities, we think it is mandatory to have long put protection because there is going to be a tipping point in the relationship between interest rates and equities.