January soybeans advanced 10.00 cents on heavy volume of 308,254 contracts. Volume has been the highest of the past several days, during which time soybeans rallied. Surprisingly, volume far exceeded that of November 21 when the January contract gained 26.50 cents on volume of 243,456 and total open interest increased by an astounding 30,331 contracts.
On November 28, total open interest increased again, this time by 13,978 contracts, which relative to volume is approximately 75% above average indicating that new buyers continue to take positions in soybeans. In yesterday’s trading, the January contract made a high of 10.65, which is the highest print since 10.68 1/4 made on July 18, 2016.
As this report is being compiled on November 29, the January contract is trading lower, down 10.50 cents and has not taken out yesterday’s high. The heavy volume in yesterday’s trading as soybeans climbed to a multi-month high is likely indicative of a top or temporary top. Additionally, the consecutive open interest increases since November 21 confirms that the soybean market is massively overbought and at the very least is due for a pause.
For the past five days open interest action has been nothing short of spectacular. Beginning on November 21 through November 28, total open interest has increased by a massive 85,912 contracts while the January contract has gained 62.25 cents.
On October 18, OIA announced that January soybeans generated a short term buy signal and an intermediate term buy signal on October 24. We recommend a stand aside posture for new bullish positions. Do not short soybeans.
WTI crude oil:
January WTI crude oil advanced $1.02 on volume of 1,161,013 contracts. Total open interest increased by a very disappointing 2,368 contracts, which essentially is an unchanged number and indicates a complete lack of enthusiasm for the upside. Yesterday, the January contract made a high of 47.65, which is below the November 25 print of 48.04 and the November 23 high of 48.43. The January contract accounted for a loss of 4,655 of open interest and there were barely enough open interest increases in the forward months to offset the decline in January and slightly increase total open interest.
Yesterday’s performance was abysmal. As this report is being compiled on November 29, the January contract is trading sharply lower, down $1.87 or -3.97% on concerns that OPEC may not reach an agreement to restrict production. As we have said before, clients should not make decisions to trade oil based upon what OPEC will or will not do. Stand aside.
January natural gas advanced 11.8 cents on volume of 485,312 contracts. Volume was the heaviest since November 11 when the January contract lost 1.3 cents on volume of 465,393 contracts and total open interest increased by 5,073. In summary, yesterday’s volume exceeded that of the past several days when natural gas prices advanced. The heavy volume tells us that the Johnny-come-lately crowd was rushing into the natural gas market as it began to test the October 13 print of $3.366.
On November 28, total open interest increased substantially, up by 10,041 contracts, which relative to volume is approximately 20% below average, but this is the largest open interest increase during the past several days when natural gas prices advanced. The December contract accounted for a loss of 7,531 of open interest, which means there were sufficient open interest increases in the forward months to offset the December contract and increase total open interest.
When adding the heavy volume along with the substantial increase of open interest and the fact that the January contract is at October 13 highs, we think the market is vulnerable to a sharp setback and recommend a stand aside posture. On November 25, January and February 2017 New York natural gas generated short term buy signals and are on intermediate term buy signals. Stand aside.