Soybeans:

January soybeans lost 33 cents on volume of 174,248 contracts. Remarkably, volume on the decline was approximately 39,000 contracts below November 12 when soybeans advanced 13.50 cents and open interest increased by 4,324 contracts. Additionally, volume on Friday was below average daily volume for October 2013 of 229,940 contracts and year to date volume of 186,090 contracts. In short, it does not appear that longs were panicking on the move lower. On November 15, total open interest declined by 5,239 contracts, which relative to volume is approximately 20% above average, which again confirms that market participants were complacent about the decline. Toward the end of the session, the EPA announced the possibility of a biofuel cut back from 18.15  billion gallons to 15.21 billion gallons in 2014. A final decision will not be made until the spring of 2014. Although January soybeans remain on a short and intermediate term buy signal, we suggest that clients avoid the long side of the market because a short term sell signal is likely on the horizon.

Soybean meal:

December soybean meal lost $14.10 on volume of 107,439 contracts. Total open interest declined by 2,049 contracts, which relative to volume is approximately 20% below average. The December contract lost 9,100 of open interest. As this report is being compiled on November 18, December soybean meal is trading $3.80 higher. At this juncture, we recommend a stand aside posture and think it is inevitable that soybean meal will generate a short-term sell signal.

Corn:

December corn lost 4.50 cents on volume of 427,400 contracts. Total open interest declined by 4,917 contracts, which relative to volume is approximately 50% below average. The December contract lost 23,721 of open interest. As this report is being compiled on November 18, December corn is trading 7.25 cents lower and has made a new low for the move the $4.11 1/2. Corn remains on a short and intermediate term sell signal. We continue to recommend a stand aside posture. The market is massively oversold and could rally at any time. We are more comfortable recommending bearish positions in corn once the market has rid itself of at least some of the speculative short sellers. This may not occur until the next USDA report.

Wheat:

December Chicago wheat lost 0.25 cents on volume of 111,344 contracts. Total open interest declined by 2,304 contracts, which relative to volume is approximately 20% below average. The December contract lost 9,184 of open interest. December Chicago wheat remains on a short and intermediate term sell signal, and as this report is being compiled on November 18, December Chicago wheat is trading 0.25  cents lower, and has taken out the low made on November 15 of $6.42 3/4. As we pointed out in the November 17 Weekend Wrap, the short to long ratio in Chicago wheat is higher than it is in corn. This is mystifying considering the potential bullish fundamentals in wheat versus the abysmal fundamentals of corn. December Chicago wheat remains on a short and intermediate term sell signal.

December Kansas City wheat lost 4.50 cents on volume of 25,651 contracts. Total open interest declined by 1,476 contracts, which relative to volume is approximately 120% above average. The December contract lost 4,951 of open interest. As this report is being compiled on November 18, December KC wheat is trading 3.25 cents lower and has made a new low for the move at 6.93 3/4. December KC wheat remains on a short and intermediate term sell signal. Stand aside.

Live cattle:

February live cattle advanced 27.5 points on volume of 42,819 contracts. Total open interest increased by 331 contracts, which relative to volume is approximately 55% below average. The December contract lost 2,958 of open interest, which makes the total open interest increase more impressive (bullish). In the November 17 Weekend Wrap, we performed an analysis of price and open interest action and our conclusion is that in the short-term, prices are headed lower. As this report is being compiled on November 18, December cattle is trading 1.30 cents lower and February is -1.50. We think this is the beginning of the washout that we have been talking about and once it is over, cattle is going to be a terrific buy. Cattle remains on a short and intermediate term buy signal.

Crude oil:

January crude oil gained 8 cents on low volume of 435,190 contracts. Total open interest declined by 44,415 contracts, which relative to volume is approximately 195% above average meaning that liquidation was extremely heavy. The reason for this is the December contract lost 57,992 of open interest. As this report is being compiled on November 18, January crude is trading 83 cents lower on low volume. Crude oil remains on a short and intermediate term sell signal. Surprisingly, the long to short ratio (4.22:1, which is down from the previous week of 4.82:1.) is at a fairly elevated position considering the decline of the past month. Despite the sharp move lower, the market has been unable to mount a sustained rally, which would allow for the initiation of bearish positions. Stand aside.

Natural gas:

Although natural gas remains on a short and intermediate term sell signal, we wanted to call your attention to the fact that since natural gas bottomed at $3.379 on November 5, through November 15, open interest has increased by 14,781 contracts and natural gas has advanced 20.8 cents. We will be monitoring natural gas closely to see if it generates a short-term buy signal. We know that managed money is short by a ratio of 1.37:1, which is the highest reading in a couple of months. It is likely that managed money is on the wrong side of the trade. Do not short natural gas at this juncture.

 Platinum:

January platinum lost $5.20 on volume of 7990 contracts. Total open interest increased by 20 contracts. In the Weekend Wrap of November 17, we warned about the potential downside in platinum due to the extremely high long to short ratio and the underperformance of platinum. In addition, we discussed the increase of open interest from the time that platinum topped out on October 30. As this report is being compiled on November 18, January platinum is trading $27.40 lower and has made a new low for the move at 1410.60. Platinum will generate a short and intermediate term sell signal on November 18. In the Weekend Wrap we recommended writing out of the money call options, but unfortunately the market fell out of bed before this position could be initiated.

Euro:

The December euro fgained 35 points on volume of 146,721 contracts. Total open interest increased by 2,039 contracts, which relative to volume is approximately 40% below average. Despite the rally of the past several days, which began on November 11, open interest has declined 3,555 contracts through November 15. This is bearish open interest action relative to the price advance. As this report is being compiled on November 18, the December euro is trading 22 points higher and has made a new high for the move at 1.3543, which is its highest price since November 6 when it made a high of 1.3549. Despite the move higher, the December euro remains on a short-term sell signal and an intermediate term buy signal. We think the euro is headed lower, and as we have said before, there are number of ways to trade this move: write out of the money calls, or buy puts, or initiate bullish positions in the dollar index. As we have said before, we like the long side of USDJPY. It will be important to watch the trading activity the British pound because this currency has been the leader lately, and if it falters at the current price, it would likely signal that the downtrend in currencies comprising the dollar index resumes.

British pound:

The December British pound gained 5.4 pips on volume of 85,399 contracts. Total open interest increased by 3,068 contracts, which relative to volume is approximately 20% above average meaning that new longs and shorts were aggressively entering the market and longs were able to push the pound fractionally higher. The December British pound is at a critical juncture because in order for it to reverse the sell signal generated on November 1, the low of the day must be above 1.6118. As this report is being compiled on November 18, the British pound has made a high of 1.6146, which is its highest price since October 29 when the December British pound reached 1.6153. From November 13 through November 15, open interest has increased every day and totals 9,297 while the pound has advanced 1.4004. This is bullish open interest action relative to the price advance. The pound remains on a short-term sell signal, but an intermediate term buy signal.

Australian dollar:

The Australian dollar advanced 45 points on volume of 64,727 contracts. Total open interest declined by 3,315 contracts, which relative to volume is approximately 100% above average meaning that both longs and shorts were liquidating heavily as the market advanced. Although the Australian dollar continues to exhibit very bearish open interest action relative to price advances and declines, it has been unable to generate an intermediate term sell signal. Managed money is very bearish on the aussie and is currently holding a short to long ratio of 2.12:1, which is up from the previous week of 1.57:1. The Australian dollar’s inability to generate an intermediate term sell signal gives us pause about recommending bearish positions at this juncture. As this report is being compiled on November 18, the December Australian dollar is trading 28 points higher and has made a high of 94.02, which is its highest price since November 8 when it made a high of 94.60. Another factor to watch is that the moving averages, which looks favorable. For example, the 20 day moving average of the December contract is 94.41, 50 day 94.03 and 100 day 92.14. This is indicating near-term strength above the intermediate term moving averages.

S&P 500 E mini:

The December S&P 500 E mini gained 5.75 points on very low volume of 1,233,593 contracts. Total open interest increased by a massive 46,800 contracts, which relative to volume is approximately50% above average. This is the highest increase of open interest since the rally began on October 10, and signals one of two possibilities: The massive increase of open interest indicates a top or temporary top, or that this is the beginning of a new leg higher. We have no idea which is the case and know from a historical seasonal perspective that the market does tend to rally during the fourth quarter. However, there seems to be a tremendous amount of complacency in the market due to the perception that quantitative easing will go on forever and as long as this is the case, the market can do nothing but go higher. We think it is prudent to maintain long put protection in the event the consensus is wrong.