January soybeans gained 10.50 cents on light holiday volume of 53,853 contracts. Total open interest declined by 146 contracts, and the January contract lost 2,453 of open interest. There is little new to report in the soybean complex. Stand aside.
January soybean meal gained 10 cents on light volume of 33,809 contracts. Total open interest declined by 3,853 contracts, which in relation to volume is approximately 350% above average, meaning that liquidation was heavy relative to volume. The December contract accounted for the liquidation of 4,623 contracts. Stand aside.
January soybean oil gained 51 points on volume of 68,974 contracts. Note that volume in soybean oil exceeded soybeans and soybean meal. Total open interest declined by 9,977 contracts, which in relation to volume is approximately 475% above average meaning that liquidation was off the charts. However, the December contract accounted for liquidation of 12,892 contracts because the contract is rapidly approaching 1st notice day. Stand aside.
December corn gained 4.50 cents on light volume of 132,207 contracts. Total open interest declined by 12,901 contracts, which in relation to volume is approximately 300% above average, meaning that liquidation was heavy. Accounting for the open interest decline was the December contract, where 20,957 contracts were liquidated. Stand aside.
December wheat gained 2.50 cents on volume of 52,720 contracts. Total open interest declined by 23,474 contracts, which in relation to volume is approximately 1600% above average, meaning that liquidation was off the charts. The December contract accounted for liquidation of 23,202 contracts. Stand aside.
January crude oil gained 90 cents on light volume of 157,466 contracts. Open interest increased by 2,645 contracts, which in relation to volume is approximately 30% less than average. During the past 2 days, crude oil has rallied $1.53 and open interest has increased by a mere 6,898 contracts. Additionally, open interest increases relative to volume have been below average. The rallies continue to be unconvincing, and the market may consolidate for a while in the current range, but we see crude oil retesting the lows in the $84 area. Of course, if there is a resolution of the fiscal cliff issue, undoubtedly crude oil will rally with the rest of the market. Stand aside.
January heating oil closed .0049 higher on light volume of 57,313 contracts. Open interest increased by 1,736 contracts, which in relation to volume is approximately 20% above average. November 23 was the 4th day in a row that open interest has acted in a bullish congruent fashion relative to price. The market will have to decisively close over the 50 day moving average of $3.09, before it can take another leg higher.
December natural gas closed unchanged on light volume of 165,428 contracts. Open interest exploded higher for the 2nd day in a row by 16,211 contracts, which in relation to volume is 300% above average. The problem with natural gas on November 23 was that participation was low, but commitments were heavy, however, natural gas prices could not be moved to close higher. In our view, this indicates aggressive selling possibly of the commercial variety at the high end of the range. In the November 25 Weekend Wrap, we cautioned clients that natural gas has a tendency to pull back in late November and then have a bounce into mid-December. Also, we mentioned that natural gas was overbought relative to its 50 day moving average. As this report is being compiled on November 26, January natural gas is trading 16.8 cents lower. It will be interesting to see whether this move shakes out any of the new longs that have entered the market during the past 2 days.
December gold advanced $23.20 on heavy volume of 214,718 contracts. Volume was the highest since November 15 when December gold lost $16.30 on volume of 215,088 contracts and open interest increased by 1,182 contracts. It was very impressive to see volume expand to the high end of its range during a holiday shortened session. The open interest action was just as impressive by increasing 14,106 contracts, which in relation to volume is approximately 160% above average, meaning that participation was heavy and commitments were heavy. This is bullish. Depending upon the action of the outside markets, gold could consolidate for a couple of days, before taking another leg higher. It is likely that gold will generate a short-term buy signal, which would reverse the sell signal generated in October. As we indicated in the Weekend Wrap, we would like to see how gold performs when equities are sharply lower and/or the dollar is sharply higher. Once the short term sell signal is generated, there is a greater likelihood there will be a pullback, and this would be the move to enter long positions. As this report is being compiled on November 26, December gold is trading $2.30 lower, and volume is extremely heavy at 191,373 contracts thus far in the session.
December silver advanced 76.6 cents on volume of 54,505 contracts. Although volume tapered off on the holiday shortened session from the previous several days, it remained above the average daily volume year to date of 52,236 contracts. The market looks poised to take another leg higher, but it is also likely that silver will consolidate for couple of days. As this report is being compiled on November 26, December silver is trading nearly unchanged on the day, but volume has exploded and silver has traded over 97,000 contracts thus far. It is highly likely that silver will generate a short-term buy signal, which will reverse the sell signal generated during October. Once this occurs, a pullback is likely, and this would be the move that clients should look to enter long positions.
The Australian dollar advanced 1.04 cents on volume of 120,147 contracts. Volume was fairly respectable considering the holiday shortened session, and was only 13,448 contracts below its average daily volume year to date of 133,595 contracts. Open interest exploded by increasing 19,399 contracts, which in relation to volume is approximately 550% above average, which is off charts. Stand aside.
The December euro gained 1.60 cents on volume of 309,767 contracts. Volume was higher than November 13 when 309,706 contracts were traded and the euro made a new low for the move at 1.2665 while open interest declined by 4 contracts. On November 23, open interest declined on the price advance by 5,938 contracts, which in relation to volume is approximately 10% less than average. From November 19 through November 23 open interest has declined by 12,353 contracts while the December euro has advanced by 2.40 cents. This is bearish open interest action relative to price. Stand aside.
S&P 500 E mini:
The December S&P 500 E mini gained 16.50 points on light holiday volume of 917,034 contracts. Open interest declined on the price advance by 15,319 contracts, which in relation to volume is approximately 30% less than average. Since the S&P 500 E mini made its bottom on November 16 at 1340.25 thru November 23, open interest has increased by a total of 3,222 contracts while the S&P 500 E mini has advanced 54.55 points. This is bearish. At this juncture, the performance of the S&P 500 E mini and the rest of the commodity markets will be dependent upon action or lack thereof in Washington DC with respect to the fiscal cliff. It certainly appears based upon anecdotal evidence that the Republican Party is moving toward accepting higher taxes, which should make a deal much easier. Maintenance of long puts should be based upon your risk tolerance and your assessment of the probability of a deal being struck sooner rather than later. As we said in the Weekend Wrap of November 25, the economy is going to have to show growth above and beyond the pace of the last year, if the market is to move substantially higher. If the economy continues to move at a sluggish pace, we think the top of 1468 is in place.