Soybeans:

January soybeans advanced 16.50 cents on light holiday volume of 116,230 contracts. Total open interest increased by a massive 7,390 contracts, which relative to volume is approximately 150% above average meaning that new longs were aggressively entering the market and driving prices higher. In the overnight session of December 1, January soybeans made a new high of $13.46 and is currently trading 16.25 cents lower on the day. During the past 5 sessions beginning on November 22, total open interest has increased each day and totals 38,391 contracts while soybeans have advanced 44.75 cents. January soybeans generated a short-term buy signal on November 25, and the market had one day of a negative decline, which occurred on November 27, the day before Thanksgiving. We much prefer the long side of soybean meal, and suggest that clients wait another day before contemplating bullish positions in soybeans. 

Soybean meal:

January soybean meal advanced $7.00 on light holiday volume of 58,142 contracts. Total open interest increased by a massive 3,154 contracts, which relative to volume is approximately 120% above average meaning that new longs were aggressively entering the market and driving soybean meal prices higher. As this report is being compiled on December 2, January meal has made a new high at $442.10, but reversed and is now trading $8.40 lower on the day. Interestingly, though soybean meal is significantly outperforming soybeans on a year to date and quarterly basis, the recent open interest action in soybeans has been far more favorable than soybean meal. Using the November 22 start date (for comparison purposes) total open interest in soybean meal has declined by 9,857 contracts while January soybean meal has advanced $32.40. The expiration of the December contract has exerted negative influence on total open interest as market participants liquidate their positions prior to first notice day. We much prefer the long side of soybean meal, and suggest that clients wait another day before contemplating bullish positions.

Corn:

March corn lost 2.00 cents on light holiday volume of 131,844 contracts. Total open interest declined by 3,010 contracts, which relative to volume is approximately 10% below average. As this report is being compiled on December 2, March corn is trading 4.75 cents lower and has made a new low for the move the $4.18 1/2. Stand aside.

Wheat:

March Chicago wheat advanced 5.25 cents on total volume of 54,357 contracts. Total open interest increased by 1,442 contracts, which relative to volume is average. The December contract lost 4,414 of open interest, which makes the total open interest increase much more impressive (bullish). During the overnight session on December 1, March wheat made a new high for the move the $6.74 3/4, and on December 2 is trading 5.75 cents lower and has made a low for the day of $6.60 1/2. We continue to advocate writing out of the money puts in the March contract because we think Chicago wheat is going higher and is transitioning from bear to bull. March Chicago wheat remains on a short and intermediate term sell signal.

March Kansas City wheat advanced 2.75 cents on light holiday volume of 10,607 contracts. Total open interest declined by 754 contracts, which relative to volume is approximately 185% above average, meaning that liquidation was extremely heavy on the fractional advance. The December contract accounted for loss of 964 of open interest. As this report is being compiled on December 2, March KC wheat is trading 2.00 cents lower. KC wheat remains on a short and intermediate term sell signal, but we think it is at a bottom or very near to it.

Live cattle:

February live cattle advanced 15 points on light holiday volume of 25,704 contracts. Total open interest increased by a massive 1,865 contracts, which relative to volume is approximately 180% above average meaning that new longs were aggressively entering the market and driving prices fractionally higher. February cattle made a new high for the move at 1.34725, however it has a ways to go before taking out the October 17 high of 1.35400. The market will likely struggle at the upper end of its recent trading range and we suggest waiting for a setback, to the 1.3300 level before contemplating bullish positions. The 20 day moving average is 1.33490 and the 50 day 1.33750. Cattle remain on a short and intermediate term buy signal.

WTI Crude oil:

January crude oil advanced 42 cents on volume of 243,641 contracts. Total open interest declined by 1,454 contracts, which relative to volume is approximately 70% below average. The January contract accounted for loss of 6,857 of open interest. As this report is being compiled on December 2, January WTI is trading $1.08 higher and has made a high of 94.08, which is its highest price since November 26 when it made a high of 94.69. Although WTI remains on a short and intermediate term sell signal, we caution clients against being on the short side of the market. Brent crude, heating oil and gasoline are on short and intermediate term buy signals, and a countertrend rally is long overdue.

Brent crude oil:

January Brent crude lost $1.17 on volume of 338,394 contracts. Total open interest increased by 1,355 contracts, which relative to volume is approximately 85% below average. As this report is being compiled on December 2, January Brent is trading $2.27 higher and has made a new high for the move at 112.34, which is January Brent’s highest price since August 29 when it made a high of $112.83. On November 21, January Brent crude generated a short and intermediate term buy signal, and thus the market should only be traded from the long side. However, the market is massively overbought relative to its 20 day moving average of 108.24 and the 50 day moving average of 108.10. Do not enter new bullish positions at current levels.

Natural gas:

January natural gas advanced 5.9 cents on light holiday volume of 178,805 contracts. Total open interest increased by a massive 9,089 contracts, which relative to volume is approximately 100% above average meaning that new longs were aggressively initiating positions and driving prices to new highs. The January contract lost 937 of open interest, which makes the total open interest increase more impressive (bullish). On November 29, January natural gas closed at $3.954, which is above our key pivot point of 3.946, but despite this will not generate an intermediate term buy signal on December 2. During the past 2 days beginning on November 27, open interest has increased each day and totals 20,206 contracts while natural gas has advanced 9 cents. We are waiting for the COT stats, which should be released Monday afternoon. This will tell us the extent to which managed money has reduced their net short position and will provide us with some guidance going forward.

Euro:

The December euro advanced 14 pips on decent holiday volume of 187,504 contracts. Total open interest increased by 3,913 contracts, which relative to volume is approximately 20% below average. The December euro made a high of 1.3623, which was fractionally above the high made on November 27 of 1.3615, and on December 2 has made a high of 1.3616 and is currently trading 46 points lower. Although it has gotten close, the December euro has not yet generated a short-term buy signal, but remains on an intermediate term buy signal. A pullback is not unexpected, and the euro could pullback further to its 20 day moving average of 1.3490. We think the best way to trade the euro is through the currency cross GBP/EUR, which we recommended on November 22, and which has been profitable. However, do not enter new long positions at this juncture due to the overbought condition of GBP/EUR relative to its 20 day moving average of 1.1956 and the 50 day moving average of 1.1872.

British pound:

The December British pound advanced 85 pips on volume of 115,257 contracts. Total open interest increased by a massive 5,965 contracts, which relative to volume is approximately 100% above average meaning that new longs were aggressively initiating positions and driving prices to new highs. The high of 1.6383 made on November 29 has been taken out on December 2 with a new high for the move at 1.6442. The British pound is massively overbought relative to its 20 day moving average of 1.6093 and the 50 day moving average of 1.6087. Additionally, total open interest has increased every day since November 13, which means that the long side of the December/March British pound is becoming a very crowded trade. Stand aside.

S&P 500 E mini:

The December S&P 500 E mini lost 0.25 points on light holiday volume of 834,597 contracts. Total open interest increased by 12,461 contracts, which relative to volume is approximately 40% below average. We encourage clients to review our commentary on interest rates made in the December 1 Weekend Wrap, and the potential ramifications on equities and commodities. As this report is being compiled on December 2, the E mini is trading 1.25 points lower and the March 10 year note is trading 15.5 points lower. Long put protection is mandatory if clients hold long equity positions.