January soybeans advanced 11.75 cents on light holiday volume of 148,653 contracts. However, total open interest continued to explode higher, up 11,202 contracts, which relative to volume is approximately 210% above average indicating that new buyers continue to flood into soybeans. On Friday the January contract made a high of 10.46 3/4.
As this report is being compiled on November 28, the January contract is trading 5.75 cents higher on the day and has made another new high for the move of 10.65, which is the highest print since 10.68 1/4 made on July 18, 2016. The open interest action in soybeans for the past four days has been nothing short of spectacular. Beginning on November 21 through November 25, total open interest has increased by a massive 71,934 contracts while the January contract has gained 52.25 cents.
On October 18, OIA announced that January soybeans generated a short term buy signal and intermediate term buy signal on October 24. The market is massively overbought, but as we have said in the previous reports, this does not preclude soybeans from continuing their advance. Do not chase the rally and do not short soybeans.
WTI crude oil:
January WTI crude oil lost $1.90 on light holiday volume of 670,728 contracts. Total open interest increased by 7,913 contracts, which relative to volume is approximately 45% below average. The January contract accounted for a loss of 3,360 of open interest. As this report is being compiled on November 28, the January contract is trading $1.22 above Friday’s close and has made a daily high of 47.65, which is below Friday’s print of 48.04. For the January contract to generate a short term buy signal, the low of the day must be above OIA’s key pivot point for November 28 of 47.16. Stand aside.
Natural gas: On November 25, January and February 2017 natural gas generated short term buy signals. Both contracts were already on intermediate term buy signals.
January natural gas gained 5.5 on light holiday volume of 203,466 contracts. Total open interest declined by 4,881 contracts, which relative to volume is approximately 10% below average. In our November 22 research note, we wrote about the terrible open interest action relative to price advances. This continued on November 23 and 25 when the January contract gained 10.2 cents and total open interest declined by 3,911 in the two-day time frame. As this report is being compiled on November 28, the January contract continues to rocket higher, up 14.2 cents and has made a daily high of 3.35, which is the highest print since $3.366 made on October 13. Do not chase this rally.
From the November 22 research note on natural gas:
“Yesterday’s abysmal open interest action relative to the minor price advance follows the equally abysmal open interest action on November 21 when the January contract gained 9.7 cents on low volume of 331,510 contracts and total open interest increased just 661 contracts, dramatically below average.”
“In summary, managed money has become substantially less net long and the abysmal open interest action reflects short-sellers liquidating on the rally. The natural gas market is responding to colder temperatures in the East and Midwest, and if they remain at lower levels, we expect natural gas prices to continue their advance. Wait for the short term buy signal, then a pullback lasting 1-3 days and this will be the opportunity to initiate bullish positions.”
December gold lost $10.90 on surprisingly strong holiday volume of 405,078 contracts. Total open interest declined by 7,799 contracts, which relative to volume is approximately 20% below average, and the total open interest decline indicates that market participants are liquidating as prices moved to their lowest levels since February 2016. On November 25, the December contract made a low of $1170.30, which is the lowest print since 1150.00 made on February 5.
As this report is being compiled on November 28, the December contract is having a slight rally, which is due to a minor dollar index decline. On November 11, OIA announced that December 2016 and February 2017 New York gold generated short term sell signals. Both contracts had already been on intermediate term sell signals. Stand aside.