January soybeans advanced 12 cents on heavier than normal volume of 176,924 contracts. Volume was the highest since November 13 when 184,189 contracts were traded and open interest declined by 1,009 contracts while soybeans advanced 3 cents. On December 6, total open interest declined by 4,363 contracts, which in relation to volume is average. The January and March contracts lost a total of 6,176 contracts of open interest. Just in the past 4 days when January soybeans advanced 52.50 cents, open interest has declined by 3,732 contracts. This is bearish. Additionally, the spread action of the nearby versus the back months has been bearish as well. We will discuss this in greater detail in the upcoming Weekend Wrap. Stand aside.
January soybean meal advanced $4.40 on volume of 59,962 contracts. Open interest increased by 2,711 contracts, which in relation to volume is approximately 75% above average meaning that longs were in control and they entered the market in substantial numbers. What makes the number even more impressive is that the December and January contracts lost a total of 3,187 contracts of open interest. This is the first time since November 29 that soybean meal has advanced and open interest has increased. During December 3, 4, 5, January soybean meal advanced $11.40, but open interest declined by 1755 contracts. Although the performance on December 6 was impressive the spread action has been negative. More about this in the upcoming Weekend Wrap. Stand aside.
January soybean oil gained 20 points on light volume of 108,426 contracts. Total open interest declined by 4,498 contracts, which in relation to volume is approximately 70% above average, meaning that liquidation was heavy. The December, January, March contracts lost a total of 4,919 contracts of open interest. The January contract closed at 51.20, which was the highest close since October 26 when January soybean oil settled at 51.31. Stand aside.
March corn lost 6.25 cents on volume of 152,454 contracts. Total open interest increased on the decline by 2,504 contracts, which in relation to volume is approximately 30% less than average. The December and March contracts lost a total of 2,333 of open interest. We have said that March corn should find support in the $7.39-7.43 area. However, as this report is being compiled, March corn has crashed below these levels and is trading 14 cents lower. This is the lowest since November 19. Stand aside.
March wheat gained 2 cents on extremely light volume of 56,587 contracts. Total open interest increased by 1,155 contracts, which in relation to volume is approximately 5% below average. The December and March contracts lost a total of 2,144 contracts of open interest, but there was sufficient buying in the back months to offset this decline. Nonetheless, the market continues to act poorly, and as this report is being compiled on December 7, March wheat is trading 7.25 lower. Stand aside.
January crude oil lost $1.62 on volume of 526,874 contracts. Volume was the highest since November 29 when crude oil gained $1.58 on volume of 532,550 and open interest declined by 7,756 contracts. On December 6, open interest declined by 2,187 contracts, which in relation to volume is 75% less than average. Considering the magnitude of the decline, and that open interest declined along with price, which was significantly below average, crude oil’s performance should be considered relatively positive. Stand aside.
January heating oil declined by 4.75 cents on volume of 126,929 contracts. Open interest increased on the decline by 1,890 contracts, which in relation to volume is approximately 30% less than average. During the past 2 days, heating oil has declined by 6.08 cents and open interest has increased by 3825 contracts. This is bearish open interest action relative to price. However, these are open interest increases that are below average, which indicates there is muted participation by new shorts entering the market. As this report is being compiled on December 7, heating oil is down 2.46 cents. Stand aside.
January natural gas declined 3.4 cents on volume of 383,651 contracts. Volume was the highest since November 14, when natural gas traded 409,902 contracts and open interest increased by 10,127 contracts, while natural gas advanced 2.1 cents. On December 6, open interest increased by 2,047 contracts, which in relation to volume is approximately 65% below average. The tipoff about the inability for the market to mount a sustained rally occurred on December 5, when natural gas advanced 16.1 cents and volume was approximately 58,000 below the average daily volume on a year-to-date basis. Please see December 5 report on natural gas. Stand aside.
February gold advanced $8.00 on volume of 151,410 contracts. Open interest increased by a minuscule 190 contracts, which is essentially an unchanged number, meaning that old longs and shorts were liquidating to be replaced by new longs and shorts. There is no point being in the precious metals at this juncture due to the real possibility of a swoon in the equity markets. Although the dollar is trading somewhat higher on December 7, and traded sharply higher on December 6, gold has held up. However, clients should not take comfort in this. Stand aside.
March silver gained 15.7 cents on volume of 42,692 contracts open interest increased by 1,052 contracts, which in relation to volume is average. Note the difference between the open interest action in gold and silver relative to price. Although silver remains on a short and intermediate term buy signal, we continue to recommend that clients stand aside until we see how silver performs when the equity market trades sharply lower. Stand aside.
Please review the special bulletin on the euro that we sent a couple of hours ago.
S&P 500 E mini:
The S&P 500 E mini advanced 4.75 points on light volume of 1,405,370 contracts. Open interest declined by 3,100 contracts, which in relation to volume is minuscule and dramatically below average. In essence, it can be considered unchanged open interest, which means that old longs and shorts were liquidating, and being replaced by new longs and shorts. The employment report was released at 7:30 CST and was considered to be above expectations. The market had a sharp rally on that news and has proceeded to sell off for the rest of the session. It is important to note that the intraday chart of the E mini tells an interesting story.
When the employment number was announced at 7:30 a.m. through-8:00 a.m., the E mini traded from a low of 1408.75 to the high of 1422.25 (the day’s high) or a range of 13.50 points. The volume during this time frame was 140,462 contracts. From 8:30 a.m. through 9:00 a.m. the E mini sold off and traded from a high of 1420.00 down to the low of 1413.25, or a range of 6.75 points. The volume during the decline was 195,103 contracts. In other words, during the 30 minute advance, the E mini had twice the range, but significantly lower volume, then did the the subsequent 30 minute decline. This indicates dramatically less buying enthusiasm and much more aggressive selling. As this report is being compiled on December 7, the S&P 500 E mini is trading 3.50 points higher. Maintain long puts.