The World Agriculture Supply Demand Report (WASDE) will be issued by the USDA on December 10. Do not enter new positions prior to the report. If positions show losses, we suggest you liquidate the position today, or prior to the issuance of the report at 11 o’clock CST. Appropriate stop protection should be in place on all positions.

Soybeans:

January soybeans lost 2.50 cents on volume of 176,116 contracts. Total open interest increased by 5,221 contracts, which relative to volume is approximately 20% above average. The January contract lost 9,255 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on December 9, January soybeans are trading 18.25 cents higher and have made a new high for the move at 13.45, which is its highest point since December 2 when January soybeans made a high of 13.46. We advise holders of long positions to maintain their stops at the December 3 low of 13.11 1/4. It appears the market wants to go higher, albeit reluctantly. Although exports have been off the charts positive, the fact remains a large Brazilian crop is on its way and massive buying of US soybeans by China may slow to a trickle. Stay with longs, but realize that a huge crop from Brazil is going to start impacting the US market negatively.

Soybean meal:

January soybean meal lost 70 cents on volume of 86,962 contracts. Total open interest declined by 739 contracts, which relative to volume is approximately 60% below average. The December contract lost 695 of open interest in January -7045, which means there were hefty open interest increases in the forward months to bring down total open interest to a below average number. As this report is being compiled on December 9, January soybean meal is trading $11.40 higher and has made a high of 439.50, which is its highest price since December 2 when January meal reached 442.10. Unfortunately, soybean meal dipped below $423.70 on December 6, which would have stopped out those holding long futures positions. We recommend a stand aside posture because even though meal may work its way higher, the Brazilian soybean crop will begin to impact the marketplace’s perception of current soybean meal values.

Corn:

March corn advanced 0.75 cents on low volume of 152,651 contracts. Total open interest increased only 52 contracts, and the December contract lost 939 of open interest while March -4076, which means there was sufficient buying in the forward months to bring total open interest to nearly unchanged. As this report is being compiled on December 9, corn is trading 2.75 cents higher, however it has not taken out the high of $4.39 1/2 made on December 4. This has been the high of the move thus far. We continue to think corn will work its way higher and the WASDE report may provide some additional impetus. Stand aside.

Wheat:

March Chicago wheat lost 1.00 cent on very light volume of 49,384 contracts. Total open interest declined by 1,937, which relative to volume is approximately 55% above average meaning that liquidation was fairly heavy as Chicago wheat made a new low for the move at 6.49 1/4. The December contract lost 167 of open interest, and this will be going off the board shortly. As this report is being compiled on December 9, March Chicago wheat is trading 0.50 cents higher and has retested the low of 6.49 1/4, but thus far has been unable to penetrate it. In the December 8 Weekend Wrap, we recommended that short put positions be liquidated because of the possibility of a further break to the downside. At this point, we prefer to wait for the generation of a short-term buy signal before recommending bullish positions.

March Kansas City wheat gained 0.25 cents on light volume of 14,411 contracts. Total open interest increased by 1,064 contracts, which relative to volume is approximately 190% above average meaning that new longs and shorts were aggressively initiating new positions, but neither side was able to move the market much. The December contract lost 122 and March lost 352 of open interest, which means there were significant increases of open interest in the forward months. Although we like KC wheat after it generates a short-term buy signal, the fact remains that the heavy long position of manage money makes KC wheat vulnerable to more downside. As this report is being compiled on December 9, March KC wheat is trading 0.75  cents higher. Stand aside pending the generation of a short-term buy signal.

Cotton:

March cotton advanced 1.56 cents on volume of 23,378 contracts. Total open interest increased by a massive 1,327 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively initiating positions and driving cotton prices significantly higher. In the December 8 Weekend Wrap, we stated it was important for open interest to increase above average and that the low for the day must be above 79.47. As this report is being compiled on December 9, March cotton has made a new high for the move at 80.75 and is currently trading 17 points higher. The low for the day has been 80.05, which means it is likely March cotton will generate a short-term buy signal on December 9.

Live cattle:

February live cattle lost 5 points on light volume of 41,482 contracts. Total open interest declined by 9,958 contracts, which is due to the December contract losing 11,452, and this contract will be going off the board shortly. We continue to think the best way to trade cattle is to initiate bull call spreads and/or bull put spreads and/or write out of the money puts. As this report is being compiled on December 9, February cattle is trading unchanged on the day.

Lean hogs:

February lean hogs advanced 32.5 points on volume of 42,717 contracts. Total open interest declined by 859 contracts, which relative to volume is approximately 20% below average, meaning that liquidation was light. The December contract accounted for loss of 2,245 of open interest, which means there was sufficient open interest increases in the forward months to bring down total open interest to below average. As this report is being compiled on December 9, February hogs are trading 92.5 points higher and have made a new high for the move at 90.800. On November 22, February cattle generated a short-term sell signal and on December 6 generated an intermediate term sell signal. Generally speaking after the generation of sell signals, the market tends to have a countertrend rally lasting 1-3 days. It will be very important to see what happens to open interest for trading on December 9. On a move of this size, open interest should increase significantly above average and volume should expand as well.  However, on December 9, volume is below that of December 6. We would use the rally is an opportunity to initiate bullish positions, and exit bearish positions at the December 2 high of 90.975.

WTI Crude oil:

January crude oil advanced 27 cents on light volume of 510,791 contracts. Total open interest declined by 4,402 contracts, which relative to volume is approximately 60% below average. The January contract accounted for loss of 31,849 of open interest. Ever since January WTI had 3 decent sized rallies on December 2, 3 and 4, the market has stalled. As this report is being compiled on December 9, January WTI is trading 33 cents lower, and has not taken out the high of 98.07 made on December 6. The December 6 high was only fractionally above the December 5 high of 97.99. In short we are not enamored of WTI despite it being on a short-term buy signal, and an intermediate term sell signal. We do not think fundamentals support a sustained move higher, although the market will have rallies, WTI will have to overcome resistance at our key pivot points of $98.63, 99.54 and 100.18. In our view, it was a major disappointment that crude didn’t have a fairly strong rally on December 6, the day that the employment stats were released and the major stock market indices broadly rallied. We recommend a stand aside posture, and if there is another rally, depending upon volume and open interest stats, it might be interesting to examine the possibility of a short out of the money call position.

Brent crude oil:

February Brent crude oil rallied 63 cents on light volume of 474,908. Although volume was lackluster, the open interest increase was not with an addition of 17,132 contracts, which relative to volume is approximately 40% above average, meaning that new longs were initiating new positions aggressively, but were only able to move the market a fraction higher. The January contract accounted for loss of 8,790 of open interest, which makes the total open interest increase much more impressive. Although the open interest increase was impressive, and price action was positive, the lackluster volume betrays a lack of participation. Though Brent has been on a short and intermediate term buy signal, we have been unimpressed with the action, and the high of 113.02 made on December 4, would appear to be the top of the move. As this report is being compiled on December 9, February Brent is trading $2.06 lower and has made a new low for the move at 109.10. Stand aside.

Natural gas:

January natural gas lost 1.8 cents on heavy volume of 580,733 contracts. Total open interest declined by 5,907 contracts, which relative to volume is approximately 50% below average. The January contract accounted for loss of 31,849 of open interest and there were open interest increases in the February 2014 through May 2015 contracts. As this report is being compiled on December 9, natural gas is trading 11.7 cents higher and has made a new high for the move at $4.248, which is the highest price on the continuation chart since the week of May 27, 2013. From the week of February 18, 2013 through the week of April 15, 2013 natural gas advanced for 9 consecutive weeks. Thus far through last Friday natural gas has advanced for 5 consecutive weeks.The high of the 9 week move occurred 2 weeks later during the week of April 29 when June natural gas reached $4.444. Natural gas has become a weather market, which makes it extremely dangerous and difficult to trade.Weather will be determinethe course of the market for the next week. Stand aside.

Copper:

March copper advanced 1.90 cents on volume of 53,312 contracts.Total open interest increased by 1,717 contracts, which relative to volume is approximately 25% above average meaning that new longs were initiating positions and driving prices higher. In the December 8 Weekend Wrap, we mentioned it was important for open interest to increase on Friday’s rally. Although, we will not be reporting regularly on copper, we recommended a bull spread in the March-July 2014 contracts and for clients with higher risk tolerance to move out on the term structure to the September or December contracts.

Euro:

TheDecember euro advanced 20 pips on volume of 237,419 contracts.Total open interest increased by 11,961 contracts, which relative to volume is approximately 100% above average meaning that new longs were aggressively entering the market and driving prices fractionally higher. December 6 was the 3rd day in a row that open interest increased significantly, and as this report is being compiled on December 9, the December euro is trading 41 pips higher and has made a new high for the move at 1.3747. The December euro generated a short-term buy signal on December 5, and had already been on an intermediate term buy signal. The relatively low number of managed money net longs tells us that the euro can continue to rally without much of a correction. 

British pound:

The British pound advanced 2 pips on heavy volume of 132,637 contracts. Total open interest increased by 4,041 contracts, which relative to volume is approximately 20% above average. As this report is being compiled on December 9, theDecember pound is trading 84 pips higher, but has not taken out 1.6442 the high made on December 2.The long GBP/EUR cross continues to be overbought relative to its 50 day moving average of 1.1880, but is trading near fair value according to the 20 day moving average of 1.1968 We expect the pound to continue to gain on the euro.

S&P 500 E mini:

The December S&P 500 E mini advanced 21.00 points on volume of 1,824,311 contracts.Volume was the highest since December 4 when 2,128,853 contracts were traded and the E mini advanced 0.25 points while open interest increased 4,429 contracts. On December 6, total open interest increased by 27,473 contracts, which relative to volume is approximately 40% below average.We continue to recommend long put protection for those clients who have long equity positions.