January 2017 soybeans advanced by a very strong 26.50 cents on somewhat muted volume of 243,456 contracts. However, total open interest exploded higher by a massive 30,331 contracts, which relative to volume is approximately 425% above average. On October 18, OIA announced that January soybeans generated a short term buy signal and an intermediate term buy signal on October 24. For recommendations on how to trade the soybean market, please email or call.
WTI crude oil: In yesterday’s report, we stated that the short term buy signal in WTI would occur if the daily low is above our pivot point of 47.15. This was an ERROR and the pivot point in yesterday’s report was for the December contract. The pivot point for the January contract is $47.57 and today’s low has been 47.17. As a consequence January WTI will not generate a short term buy signal on November 22.
January WTI advanced by a strong $1.88 on volume of 1,205,418 contracts. Volume increased from November 18 when WTI advanced 38 cents on volume of 1,143,032 contracts and total open interest declined by 16,551. On November 21, total open interest increased by a very disappointing 15,417 contracts, which relative to volume is approximately 45% below average. The December contract accounted for a loss of 24,039 of open interest. Although there were enough open interest increases in the forward months to offset the decline in December, yesterday’s unimpressive open interest increase is troubling.
As this report is being compiled on November 22, the January contract is trading 87 cents lower on heavy volume and in the early going made a high of $49.20, which is the highest print since 50.42 made on October 28. We continue to recommend a stand aside posture. The market has been driven by speculation of a reduction in output by OPEC countries, and as we have said before, placing speculative bets on what OPEC will or will not do is unwise.
Heating oil: January heating oil will generate a short term buy signal on November 22 provided the daily low remains above OIA’s he pivot point for November 22 of 1.5192. We have no recommendation.
S&P 500 E-mini:
The December S&P 500 E-mini advanced 12.25 points on surprisingly low volume of 1,239,269 contracts. Total open interest increased by a respectable 41,484 contracts, which relative to volume is approximately 20% above average. We took a look at the E-mini during the past week when it rallied and the surprise has been the abysmal volume even as the E-mini moved up to all-time highs.
For example, on November 17, the December contract gained 11.50 points on volume of 1,357,544 and total open interest increased by 28,375. On November 15 the December E-mini advanced 18.75 points on volume of 1,450,548 contracts and total open interest increased by 12,698. It’s positive that open interest continues to advance along with prices, but average volume during the three rally days was 1,348,666 contracts.This is substantially below the average daily volume for October 2016 of 1,549,153 contracts and year to date average daily volume of 1,896,575. It is apparent that many would be participants remain on the sidelines.
However, we think this is a positive for now and that the market will continue to inch its way higher during the strong seasonal period of the year, which typically lasts through January. Once the new president is sworn in on January 20, we think all bets are off, but barring a major catastrophe, the market is likely to move ahead at least through the end of December.
The Federal Reserve interest rate increase of the quarter of the point has been priced into the market and we think there will be little effect on equities once it has been implemented. On November 10, OIA announced that the December 2016 and March 2017 S&P 500 E-mini contracts generated short term buy signals and on November 15 generated intermediate term buy signals. For recommendations on how to trade the E-mini, please email or call at your convenience.