January soybeans lost 3 cents on light volume of 143,657 contracts. Open interest declined by 1,746 contracts, which in relation to volume is approximately 45% less than average. There was liquidation the January contract totaling 4,950 contracts. Export sales as reported by the USDA on November 29 were disappointing at 319,100 tons for the 2012-2013 season. As of the report, export commitments total slightly over 1 billion bushels versus the USDA projections for 2012 2013 of 1.345 billion bushels. On November 28, there was an announcement of a sale to China of 290,000 tons, which is not included in this week’s export sales. The market continues to look tired at the mid-$14 level. Stand aside.
January soybean meal lost 70 cents on relatively heavy volume of 99,575 contracts. Volume was the highest since November 12 when 106,586 contracts were traded and open interest increased by 1,424 contracts while January soybean meal declined by $18.30. On November 28, open interest declined by 1,599 contracts, which in relation to volume is approximately 30% less than average. The December and January contracts were responsible for liquidation of 8,855 contracts, but there was sufficient buying in the forward months to bring the open interest down to a relatively small number. The export sales number released by the USDA on November 29 was outstanding. Total soybean meal sales for 2012-2013 were 365,000 tons, which is the biggest export sales number since the season began on October 1. As of the latest report, 64% of the USDA’s export projection has already been committed. From now until September 30, 2013, sales need to average only 57,000 tons per week to meet the USDA projection. Stand aside.
January soybean oil lost 3 points on volume of 151,664 contracts. Note that volume in soybean oil exceeded soybeans. Open interest declined by 4,452 contracts, which in relation to volume is approximately 20% above average. Export sales released on November 29 were outstanding for soybean oil as well. 121,530 pounds were sold in the latest reporting period, which is only 2500 tons less than last week. As of the latest report, soybean oil commitments exceed the USDA projection of 544,000 tons for the 2012-2013 season. If sales continue at this blistering pace, they will support higher soybean oil prices, but also give a lift to soybeans. Stand aside.
Corn: On November 28, March corn generated an intermediate term buy signal. This reverses the intermediate sell signal generated on November 13.
March corn closed unchanged on volume of 329,309 contracts. Total open interest declined by only 929 contracts, which in relation to volume is minuscule and dramatically below average. The real story was the liquidation of 32,476 contracts in the December contract and the addition of contracts in the March 2013-December 2013 contracts, which whittled down the negative open interest to an extremely small number. We view this as very positive open interest action relative to price. Corn made a new high for the move at $7.67 1/2, which was the highest price for corn since October 12 when March corn made a high of $7.72 1/2. Export sales for corn totaled 236,100 for the 2012-2013 season and 27,400 for the 2013-2014 season. These are disappointing, and the low pace of export sales is holding the market back. We expect corn to pullback to the $7.43 area. A short-term buy signal has not been generated. Stand aside.
March wheat gained 2.75 cents on volume of 125,592 contracts. Open interest declined by a whopping 6,237 contracts, which in relation to volume is 100% above average. There was liquidation in the December contract which totaled 16,155 contracts. Note the contrast in the price and open interest action of corn versus wheat. Liquidation in the December corn contract was approximately twice what was in wheat, yet the decline in corn total open interest was dramatically smaller than the open interest decline in wheat. Wheat made a new high for the move at $8.95 1/2, which was the highest price since November 12 when March wheat reached 9.01. Export sales of 279,300 tons was a major disappointment and like corn, exports need to pick up before the market can launch a sustained move higher. Stand aside.
January crude oil lost 69 cents on higher than normal volume of 451,008 contracts. Volume was the highest since November 20 when 607,214 contracts were traded and open interest increased by 27,708 contracts while crude oil declined $2.53. On November 28, open interest increased by 11,535 contracts, which in relation to volume is average. November 28 was the 3rd day in a row in which crude oil prices declined, and open interest increased. From November 26 through November 28. Open interest has increased by 27,950 contracts while crude oil has declined by $1.79. Stand aside.
January heating oil declined by .0038 on light volume of 129,667 contracts. Open interest declined by 3,222 contracts, which in relation to volume is average. Heating oil made a new low for the move at $2.9885, which was the lowest price for heating oil since November 16 when it reached 2.9603. November 28 was the 7th day in a row that price and open interest action acted in a bullish congruent fashion. Continue to stand aside.
January natural gas declined by 9.1 cents on volume of 360,447 contracts. Volume increased by approximately 74,000 contracts from November 27 when natural gas advanced 2.4 cents. Open interest declined by a whopping 23,451 contracts, which in relation to volume is approximately 160% above average, meaning that liquidation was extremely heavy. During the past 3 days, open interest has declined by 23.3 cents. As this report is being compiled on November 29, natural gas has plunged through support at $3.72 and 3.66. The next area of support should be the 50 day moving average of 3.53. In our November 25 Weekend Wrap, we warned about the overbought situation in natural gas and the massive increase of open interest at a time when natgas usually pulls back. Stand aside.
December gold lost $25.80 on record breaking volume of 486,315 contracts. This was the highest volume of 2012. In reviewing our records, volume exceeded the previous high of 2012 made on May 29 when gold traded 484,716 contracts, and closed at $1555.50. On November 28, open interest declined bya whopping 27,236 contracts, which in relation to volume is approximately 125% above average, meaning that liquidation was extremely heavy.
As we mentioned in yesterday’s report, the low on November 28 was $1705.50, which nearly matched the previous lows made in November, with the exception of November 5 when gold hit its low of 1672.50. This was slightly above the 200 day moving average of 1670 recorded on that date. Major volume spikes are generally safe benchmarks to use when evaluating a major high or low. Based upon the number of times that gold has traded in the low 1700 area, we conclude the lows have probably been made for the year. Gold remains on an intermediate term buy signal, but has not yet generated a short-term buy signal, which would be confirmation to enter long positions. Clients should use the low 1700 area as an area support and stops should be placed there if they happen to be long. If 1700 is broken, a retest of the November 5 low is likely. This could occur in the event of a bad ending to the fiscal cliff issue. We have no doubt if the equity market is down 200 to 300 points or more, that precious metals will be dragged down with it.
December silver lost 29.7 cents on extremely heavy volume of 163,330 contracts. This is the highest volume of 2012 and going back to our records for 2011, we could find only one day that volume came close. This occurred on May 12, 2011 when 159,003 contracts were traded and silver declined by 71.8 cents, while open interest declined by 1,908 contracts. On November 28, open interest declined by 4,645 contracts, which in relation to volume is approximately 10% above average, meaning that the liquidation was not very strong relative to volume, even though it was down as much as gold intraday on a percentage basis.
In previous reports, we stated that silver would find support at its 50 day moving average, and though the market was down about $1.00 to $32.90, silver recovered nicely to close with a modest loss. Like gold, the major volume spike on November 28 in our view cements the low in silver, probably for the rest of the year. The exception to this would be a crisis about the fiscal cliff, which would likely send all markets lower. Any client not long, should use the 32.90 area as support for any new positions. Protective sell stop should be placed in this area as well. Silver is on a short and intermediate term buy signal, which means it should only be traded from the long side.
The December Australian dollar gained 29 points on volume of 117,248 contracts. Open interest increased by 810 contracts, which in relation to volume is 60% below average. Stand aside.
The euro lost 2 points on light volume of 234,892 contracts. Open interest increased by 428 contracts, which is a minuscule increase and dramatically below average. As this report is being compiled on November 29, the euro has tested the November 27 high of 1.3012, and has made a fractional new high at 1.3017. We think the euro is going to struggle at the upper end of its recent trading range. At this juncture, there is no reason to be involved in the euro.
S&P 500 E mini:
The S&P 500 E mini closed 9.50 higher on volume of 2,146,545 contracts. Volume was the highest since November 16 when 2,615,494 contracts were traded and the S&P gained 8.50 while open interest declined by 11,921 contracts. On November 28, open interest declined again on the advance by 6,865 contracts, which is a minuscule number and dramatically below average. On November 29, the Shanghai Composite Index closed again at a new low of 1963.49. As this report is being compiled, the E mini is trading 8.75 points higher. As we stated before, it is very difficult to calibrate the direction of the market because it is totally based upon the politics in Washington DC. The decision about whether to stay with long puts, or implement new long puts should be based upon your assessment of the likelihood of a resolution of this issue. We are not recommending any particular position now because the future direction the market is based solely upon the political gamesmanship in Washington.