This report is being compiled after the release of the USDA WASDE report. We will comment on the USDA numbers  in tomorrow’s report.

Soybeans:

January soybeans advanced 18.25 cents on volume of 238,641 contracts. Total open interest increased by 5,913 contracts, which relative to volume is average. The January contract accounted for loss of 13,097 of open interest, which makes the total open interest increase much more impressive (bullish). However, after the release of the WASDE report by the USDA, January soybeans are trading 2.25 cents lower after making a high for the move at 13.53 1/2. The high was made prior to the report and exceeded yesterday’s high of 13.46 3/4. For those long soybeans, we suggest tightening up sell stops from the previously recommended $13.11 1/4 because the market looks vulnerable to further downside action. The rally on December 9 looked tentative and the move higher is suspect. Soybeans remain on a short and intermediate term buy signal,, however new long positions should not be initiated, at current levels.

Soybean meal:

January soybean meal advanced $11.30 on heavy volume of 110,204 contracts. Volume was the heaviest since November 27 when 122,004 contracts were traded and January soybean meal lost $2.30 while total open interest declined 958 contracts. On December 9, total open interest increased by 3,416 contracts, which relative to volume is approximately 20% above average. The December contract lost 475 and January lost 4,892 of open interest, which makes the total open interest increase much more impressive (bullish). As this report is being compiled on December 10, January meal is trading 40 cents lower and has made a low of $435.00. On December 6, longs in soybean meal were stopped out at 423.70 and we recommend a sideline stance.

Corn:

March corn advanced 3.75 cents on light volume of 136,844 contracts. Total open interest increased by 3,450 contracts, which relative to volume is average. The December contract accounted for loss of 1,112 of open interest, which makes the total open interest increase more impressive (bullish). During the past couple of days we’ve seen somewhat more of a positive performance from corn, but as this report is being compiled on December 10, March corn is trading 4.75 cents lower. Corn remains on a short and intermediate term sell signal. Stand aside.

Wheat:

March Chicago wheat declined 0.50 cents on very light volume of 50,716 contracts. Total open interest increased by 880 contracts, which relative to volume is approximately 25% below average. The December contract lost 47 and March -1324 of open interest, which makes the total open interest increase somewhat bullish. However, on December 10, March Chicago wheat is trading 11.25 cents lower and has made a new low for the move at $6.35. In the December 8 Weekend Wrap, we recommended the short put position be liquidated, and everyone had an opportunity to do so yesterday. March Chicago wheat remains on a short and intermediate term sell signal. Stand aside.

March Chicago wheat advanced 0.50 cents on volume of 12,538 contracts. Total open interest increased by 1,389 contracts, which relative to volume is approximately 240% above average meaning that longs and shorts were aggressively entering new positions, but KC wheat closed just fractionally higher. The December contract lost 49 and March -307 of open interest. As this report is being compiled on December 10, March KC wheat is trading 11.75 cents lower and has made a new low for the move at $6.79 1/4. As in Chicago wheat, we recommended to liquidate short put positions on December 8. Clients should be on the sidelines. KC wheat remains on a short and intermediate term sell signal.

Cotton: On December 9, March cotton generated a short-term buy signal, but remains on an intermediate term sell signal.

March cotton lost 5 points on light volume of 14,638 contracts. Total open interest increased by a massive 1,832 contracts, which relative to volume is approximately 280% above average, meaning that both longs and shorts were extremely aggressive about initiating new positions, but neither side was able to move the market much one way or the other. However, cotton made a new high for the move at 80.75, which is its highest price since October 31 when it made a high of 80.96. Usually, after the generation of a buy signal, the market tends to pullback from 1-3 days, because the signal often represents an overbought condition. In the case of cotton, the market is trading at 80.74 on December 10, which is slightly below its 50 day moving average of 80.96. We think bullish positions can be initiated at current levels, and for long futures traders, we recommend a sell stop at or slightly below the low on December 10 of 79.76. Cotton must break through and close above the following key pivot points in order to continue moving higher: 81.41, 81.77, 82.22 and 82.94.

Live cattle:

February live cattle advanced 20 points on volume of 49,276 contracts. Total open interest declined by 3,480 contracts, which relative to volume is approximately 185% above average, meaning liquidation was extremely heavy on the fractional advance. The December contract accounted for loss of 3,678 of open interest. As this report is being compiled on December 10, February cattle is trading 55 points lower and has made a low for the day of 1.32250. We have previously suggested the initiation of bull call spreads or bull put spreads or shorting out of the money puts because we think cattle prices are headed higher. However the market has been in a consolidation mode since October. It appears inevitable that February cattle will generate a short-term sell signal on December 10. As such, we recommend that bullish positions be liquidated.

Lean hogs:

February lean hogs advanced 85 points on volume of 43,981 contracts. Total open interest increased by 2,493 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and pushing prices higher. In yesterday’s report, we recommended that clients initiate bearish positions on the rally and use the sell stop of 90.975 as an exit point for bearish positions. As this report is being compiled on December 10, February hogs are trading 1.050 lower and have made a low for the day of 88.475. For futures traders, we recommend lowering the buy stop somewhat above your entry position, or alternatively the high of 89.950 made on December 10.

WTI Crude oil:

January WTI crude oil lost 31 cents on volume of 502,710 contracts. Total open interest declined by 6220 contracts, which relative to volume is approximately 45% below average. The January contract accounted for loss of 30,685 of open interest. As this report is being compiled on December 10, January crude is trading 92 cents higher and has made a new high for the move at 98.74. For January crude to continue higher, it must close above our key pivot points of 98.63, 99.54 and 100.18. In our view, the market has been trading in a lackluster fashion without conviction. We view this more as a technical rally rather than the beginning of a new bull market. In essence, the rally in crude has been a correction of the spread between WTI and Brent. 

Brent crude oil:

February Brent crude oil lost $2.50 on surprisingly light volume of 658,153 contracts. Volume was the highest since December 4 when 715,655 contracts were traded and Brent lost 74 cents while total open interest increased by 21,039 contracts. On December 9, total open interest declined by 34,982 contracts, which relative to volume is approximately 100% above average meaning that liquidation was extremely heavy despite the relatively low volume. The January contract accounted for loss of 34,151 of open interest. Like WTI, it appears there is a lack of enthusiasm for the upside in Brent, and we see no reason to be involved in the market.

Natural gas:

January natural gas advanced 11.8 cents on volume of 479,539 contracts. Volume was the lowest since December 4 when 255,201 contracts are traded and natural gas lost 1.6 cents while open interest increased by 2,403 contracts. On December 9, total open interest increased by 16,323 contracts, which relative to volume is approximately 40% above average meaning that new longs were very aggressive about initiating long positions and driving prices to new highs. As this report is being compiled on December 10, natural gas is trading unchanged but has made another new high at $4.287. The market is massively overbought and as soon as the weather changes, expect a correction, perhaps a vicious one. Stand aside.

Copper:

March copper advanced 95 points on low volume of 36,516 contracts. Total open interest increased by 932 contracts, which relative to volume is average. As this report is being compiled on December 10, March copper is trading 80 points higher and has made a new high for the move the $3.2790, which is the highest price for March copper since November 11 when it made a high of 3.2840. In the December 8 Weekend Wrap, we recommended a bull spread in March-July 2014 and for clients with higher risk tolerance, July-September 2014, July-December 2014.

Euro:

The December euro advanced 44 pips on light volume of 160,762 contracts.Volume was the lowest since November 27 (160,191 contracts), which was preholiday Thanksgiving trading when when open interest increased by 2,999 while the December euro lost 2 pips. On December 9, total open interest increased by 6,198 contracts, which relative to volume is approximately 50% above average meaning that new longs were aggressively entering the market and driving prices higher, though overall participation was low as evidenced by the disappointing volume. The euro made a new high on December 9 of 1.3747, and on December 10 has made another new high of 1.3796. The euro currently is trading at levels during the past year when tops have been made. The euro is overbought, and vulnerable to a setback. We have no recommended position at this juncture.

British pound:

The December British pound advanced 85 pips on volume of 103,233 contracts. Despite the sharp move higher, volume declined approximately 29,000 contracts from December 6 when the December pound advanced 2 pips and open interest increased by 4,041 contracts. On December 9, total open interest increased by 3,955 contracts, which relative to volume is approximately 50% above average meaning that new longs were aggressively initiating new positions and driving sterling higher. As this report is being compiled on December 10, the December pound has made a new high for the move of 1.6465, which took out the previous high of 1.6442 made on December 2. The pound currently is trading at levels last seen in August 2011. Sterling is overbought, and we expect a correction, however, it will likely outperform the euro. Stand aside.

S&P 500 E mini:

The December S&P 500 E mini gained 4.00 points on low volume of 1,128,331 contracts. Total open interest increased by 21,856 contracts, which relative to volume is approximately 20% below average. As this report is being compiled on December 10, the E mini is trading 6.25 points lower and has made a daily low of 1801.00. We continue to think the E mini is vulnerable on the downside, and expect a correction based upon rising interest rates on the 10 year note and/or the reality of the end of bond buying by the Federal Reserve. We think it is prudent to maintain long put protection if holding long equity positions.