Soybeans:

January soybeans closed unchanged on volume of 203,036 contracts. Total open interest increased by 9,064 contracts, which relative to volume is approximately 75% above average meaning that new longs were aggressively entering the market, but were unable to move the market into new high territory, let alone close positively. As this report is being compiled on November 27, January soybeans are trading 3.25 cents lower after making a new high for the move at 13.41. On November 25, January soybeans generated a short-term buy signal and had already been on an intermediate term buy signal. Generally speaking after a buy signal has been generated, a pullback ensues, which lasts from 1-3 days. The 20 day moving average for the January contract is 12.90 1/8, and a setback near this level would provide a buying opportunity.

Soybean meal:

December soybean meal advanced $13.00 while the January contract gained 3.50 on total volume of 149,860 contracts. Volume increased by approximately 11,000 contracts from November 25 when December meal advanced 9.40 and January gained 7.40 while total open interest declined 4,573 contracts. On November 26, total open interest declined by 9,138 contracts, which is the result of December losing 13,594 contracts due to 1st notice day on November 29. On November 25, January soybean meal generated a short-term buy signal and had already been on an intermediate term buy signal. As this report is being compiled on November 27, January soybean meal is trading 60 cents higher and has made a new high for the move at $440.00, which took out the high of 439.15 made on September 16. Soybean meal is massively overextended relative to its 20 day moving average of 409.00 and its 50 day moving average of 408.90. We cannot recommend bullish positions until the market has had a decent size setback of perhaps $15.00 or more.

Corn:

March corn lost 6.50 cents on heavy volume of 401,855 contracts. Volume increased by approximately 140,000 contracts from November 25 when March corn lost 2.00 cents and open interest declined 35,485 contracts. On November 26, total open interest declined by 30,036 contracts, which is due to the December contract losing 55,217 contracts as the December contract enters 1st notice day on November 29. Corn remains on a short and intermediate term sell signal. Stand aside.

Wheat:

March Chicago wheat lost 3.25 cents on volume of 97,820 contracts. Total open interest declined by 2,950 contracts, which relative to volume is approximately 20% above average. The December contract lost 18,158 of open interest, and the open interest increases in the forward months brought down total open interest to a slightly above average number. As this report is being compiled on November 27, March wheat is trading 7.00 cents higher and has made a new high for the move at 6.67.

March Kansas City wheat lost 3.25 on heavy volume of 31,139 contracts. Volume was the highest since November 14 when 32,413 contracts were traded and total open interest increased by 827 contracts while KC wheat advanced 1 cent. On November 27, total open interest declined by 2,254 contracts, which is due to the December contract losing 5,897 of open interest as it approaches 1st notice day on November 29.

As this report is being compiled on November 27, March Chicago wheat is trading 6.75 higher and KC +4.25.We think the bottom is in for Chicago wheat and likely KC wheat is close to a bottom. Although KC and Chicago wheat remain on short and intermediate term sell signals, one strategy to take advantage of the bottoming process would be to write out of the money puts, and our preference would be to implement this strategy in Chicago wheat. There may be more downside in KC wheat due to the net long position of managed money.

Live cattle:

February live cattle gained 1.10 cents on light volume of 41,817 contracts. Total open interest increased by 879 contracts, which relative to volume is approximately 20% below average. However, the December contract lost 2,805 of open interest, which makes the total open interest increase more impressive (bullish). It appears that cattle made a definitive low of 1.31250 on November 20. Although cattle will not generate a short-term buy signal, an intermediate term buy signal will be generated on November 27. As this report is being compiled on November 27, February cattle is trading 77.5 points higher and has made a high of 1.34450, which is its highest price since November 18 when it reached 1.34650. We recommend a stand aside posture until February cattle generates a short-term buy signal.

Heating oil: On November 26, January heating oil generated an intermediate term buy signal and a short-term buy signal occurred on November 21.

WTI Crude oil:

January WTI crude oil lost 41 cents on extremely low volume of 322,593 contracts. Total open interest declined by 4,209 contracts, which relative to volume is approximately 50% less than average. The January contract lost 3,562 of open interest. As this report is being compiled on November 27, January WTI is trading $1.63 lower and has made a new low for the move at 91.77. The reason being circulated for the sharp decline is that the market was expecting a build of 500,000 barrels, and the EIA reported a build of 3 million barrels. Remarkably, though crude oil is trading sharply lower, heating oil is trading higher as is gasoline and Brent crude is trading only 5 cents lower on the day. 

Of Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.0 million barrels from the previous week. At 391.4 million barrels, U.S. crude oil inventories are well above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.8 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.7 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories fell 1.4 million barrels last week and are below the lower limit of the average range. Total commercial petroleum inventories decreased by 1.6 million barrels last week.

From the November 25 report:

“Although it would be easy for us to join the bearish side of the market, we are unable to join the pack due to gasoline being on a short and intermediate term buy signal, Brent crude on a short and intermediate term buy signal, heating oil on a short-term buy signal, and it appears that heating oil will generate in intermediate term buy signal on November 26.”

Brent crude:

January Brent crude lost 17 cents on volume of 551,556 contracts. Total open interest increased by 467 contracts, which is minuscule and dramatically below average. As this report is being compiled on November 27, January Brent crude is trading 11 cents lower and has made a high of 111.54 which took out the high of November 26 of 111.49. Brent crude remains on a short and intermediate term buy signal. Stand aside.

Natural gas:

January natural gas advanced 2.2 cents on volume of 293,758 contracts. Total open interest declined by 1,048 contracts, which is minuscule and dramatically below average. The December contract accounted for loss of 7,817 of open interest. As this report is being compiled on November 27, January natural gas is trading 3.8 cents higher and has made a new high for the move at $3.918, which is its highest price since October 25 when January natural gas reached 3.909. From November 20 through November 27, natural gas has advanced over 30 cents and total open interest has declined each day with the exception of November 22. The large number of managed money shorts is providing fuel for the move higher. As we said in yesterday’s report, it was important for natural gas to close above: $3.851, 3.888, 3.946. On November 26, natural gas closed at 3.864, above the 1st benchmark and it appears it may close above the 2nd on November 27. Do not chase the rally. We strongly advise to wait for a pullback before contemplating bullish positions. Because of the volatility of natural gas, we suggest option strategies such as a bull call spread or a bull put spread to be initiated after a pullback.

The Energy Information Administration announced that working gas in storage was 3,776 Bcf as of Friday, November 22, 2013, according to EIA estimates. This represents a net decline of 13 Bcf from the previous week. Stocks were 100 Bcf less than last year at this time and 17 Bcf above the 5-year average of 3,759 Bcf. In the East Region, stocks were 114 Bcf below the 5-year average following net withdrawals of 14 Bcf. Stocks in the Producing Region were 98 Bcf above the 5-year average of 1,193 Bcf after a net injection of 7 Bcf. Stocks in the West Region were 33 Bcf above the 5-year average after a net drawdown of 6 Bcf. At 3,776 Bcf, total working gas is within the 5-year historical range.

Euro:

The December euro advanced 59 points on volume of 185,046 contracts. Total open interest increased by a sizable 9,923 contracts, which relative to volume is approximately 110% above average, meaning that new longs were aggressively entering the market and pushing prices higher. The euro made a new high for the move at 1.3576, and as this report is being compiled on November 27 the December euro has made another new high at 1.3615 and is currently trading down 4 pips.

 From last evening’s report November 26 issued at 8:20 p.m. Pacific standard time

“We think it is imminent the euro will generate a short-term buy signal, which will reverse the short-term sell signal generated on November 1. The euro is already on an intermediate term buy signal. The euro has penetrated two important benchmarks Tuesday evening, and the exchange preliminary stats show that open interest increased by over 10,205 contracts, which relative to volume is 120% above average. We advise clients to liquidate short call positions and long put positions in the euro immediately. Also, if any   short futures positions are open, liquidate these as well.”

“Additionally, the long USD/JPY recommended last week should be liquidated because with an advance in the euro, the dollar will be impacted significantly. The position is profitable and we recommend moving to the sidelines. We discourage being long EUR/JPY or GBP/JPY due to their significant overbought condition.”

 British pound:

The December British pound gained 71 points on volume of 90,650 contracts. Total open interest increased by a massive 12,062 contracts, which relative to volume is approximately 320% above average meaning that new longs were entering the market at an extremely aggressive pace and driving prices higher. As this report is being compiled on November 27, the December British pound is trading 57 points higher and has made a new high for the move at 1.6329. This is the highest price for the pound on the continuation chart since January 2 2013 and September 21, 2012. A move to 1.6350 would constitutea major breakoutand take the pound to highs last seen in August2011.The pound is massively overbought, and we recommend a stand aside posture until such time as there is a correction.

S&P 500 E mini:

The December S&P 500 E mini lost 0.50 points on light holiday volume of 1,115,082 contracts. Total open interest declined by 11,787 contracts, which relative to volume is approximately 50% below average. Maintain long put protection if you are holding long equity positions.