Because of reduced market activity due to the holidays, reports will be truncated. We will resume regular coverage after January 1.
January natural gas lost 1.3 cents on volume of 346,483 contracts. Total open interest declined by 17,716 contracts, which relative to volume is approximately 105% above average meaning liquidation was extremely heavy on yesterday’s modest decline. The January contract accounted for a loss of 21,069 of open interest. The COT report released on Friday revealed that managed money added 34,557 to their long positions and liquidated 21,843 of their short positions. Commercial interests added 9,230 to their long positions and also added 58,087 to their short positions. According to OIA’s calculations, managed money is now long natural gas by a ratio of 2.34:1, up sharply from the previous week of 1.73:1 and almost double the ratio two weeks ago of 1.30:1.
The COT tabulation date was December 13 and this encompassed the December 9 high of $3.777 and since then natural gas has fallen sharply. As this report is being compiled on December 20 the January contract is trading 7.7 cents lower and has made a new low for the move of $3.242, which is the lowest print since 3.251 made on November 28.
Natural gas is getting close to generating a short term sell signal and this will occur when the daily high is below OIA’s key pivot point for December 20 of 3.316. Although temperatures in the East and Midwest have been unseasonably cold, the market has discounted this and is now trading on the supply and demand for futures contracts and speculators are lopsidedly net long. This means there will be substantial selling pressure as prices continue to decline. Also, rallies will be met by longs who want to trim losses or book profits, which will keep the lid on advances. Stand aside.
The March dollar index gained 17.6 points on volume of 26,021 contracts. Total open interest increased by 678 contracts, which relative to volume is average. As this report is being compiled on December 20, the March contract is trading 12 points higher, but has made a new contract high of 103.625, which is the highest print since 103.670 made during January 2003 by the March 2003 contract. The dollar index is massively overbought and overdue for a substantial correction, but this will require that the euro has a substantial rally, which is likely because it is massively oversold. Do not enter bearish or bullish positions at current levels.
Copper: On December 19, March New York copper generated a short term sell signal and remains on an intermediate term buy signal.
March copper lost 6.50 cents on volume of 72,300 contracts. Total open interest declined by 1,641 contracts, which relative to volume is approximately 10% below average. As this report is being compiled report is being compiled on December 20, the March contract is trading nearly unchanged on the day, and has made a low of $2.4835, which is above yesterday’s low for the move of 2.4775, which is the lowest print since 2.4765 made on November 21. As we pointed out in yesterday’s report, we recommend initiating short positions in the ETF, ticker symbol: JJC after copper has experienced a rally lasting 1-3 days. Futures are too volatile and the options market is nonexistent due to its illiquidity.
March soybeans will generate a short term sell signal if the daily high is below OIA’s key pivot point for December 20 of 10.34 and the daily high and thus far in trading has been 10.30 4 3/4 and is currently trading 15.50 lower on the day. Although we cannot call the short term sell signal on December 20, due to his the high being above our pivot point, this will likely occur in tomorrow’s trading.
Soybean meal: March soybean meal will generate a short term sell signal on December 20 and it remains on an intermediate term buy signal.
Soybean oil: March soybean oil will generate a short term sell signal if the daily high is below OIA’s key pivot point for December 20 of 36.72 and the high thus far and trading is 36.92.
In tomorrow’s report, we will provide an analysis of the soybean complex.