Due to the Veterans Day holiday, export sales will be released on November 15.
November soybeans gained 0.50 and the January contract gained 0.50 cents on volume of 152,113 contracts. Total open interest increased by 3,234 contracts, which relative to volume is approximately 20% below average the November contract accounted for loss of 735 of open interest, which makes the total open interest increase more impressive. As this report is being compiled on November 14, November soybeans are trading 3.50 higher while the January contract is trading 2.75 cents lower. On November 11, January soybeans generated a short and intermediate term buy signal, and as we mentioned in yesterday’s report, we think that pullbacks will be shallow, especially with the long to short ratio of managed money trading at the very low-end of its trading range compared to previous weeks. Additionally, January beans are trading close to their 50 day moving average, which means they are neither overbought nor oversold. We suggest that clients position themselves on the bullish side of the market and futures traders should use the November 11 low of $12.88 1/4 as an exit point for long positions. Option traders should use February forward options.
December soybean meal lost $4.40 on volume of 88,825 contracts. Total open interest increased by 1,148 contracts, which relative to volume is approximately 45% less than average. The December contract lost 3,197 contracts, which makes the total open interest increase more impressive (bearish). As this report is being compiled on November 14, December soybean meal is trading 1.90 lower and has made a low for the day at $420.30, which is 40 cents below the low made on November 13. For long positions in futures, we recommend using the exit point of $417.30, which is the low of November 11. Option traders should be looking to buy calls in February forward months.
December corn lost 2.50 cents on very heavy volume of 481,024 contracts. Total open interest increased by 589 contracts and the December contract lost 39,042 of open interest. There was sufficient open interest increases in the forward months to offset the decline in the December contract. As this report is being compiled on November 14, December corn is trading 3.75 cents lower. We continue to advise a stand aside posture.
December Chicago wheat gained 0.25 cents on fairly heavy volume of 129,828 contracts. Total open interest increased by 4,991 contracts, which relative to volume is approximately 50% above average meaning that new longs and shorts were entering the market at an aggressive pace, but neither side was able to move the market much beyond unchanged. December Chicago wheat made a new low for the move at 6.43 1/4, and as this report is being compiled on November 14, the low of November 13 has not been taken out.
Beginning on November 4 through November 13, open interest has increased by a massive 50,404 contracts while wheat has declined only 22.25 cents. While the price and open interest action is unquestionably bearish, the massive increase of open interest, a good portion of which is likely to be speculative in nature, will set the stage for a significant rally down the road. December Chicago wheat remains on a short and intermediate term sell signal. Stand aside.
December Kansas City wheat lost 1.25 cents on total volume of 32,958 contracts. Volume increased approximately 5,500 contracts from November 12 when KC wheat lost 3.00 cents and total open interest increased by 831 contracts. On November 13, total open interest declined by 143 contracts, which relative to volume is approximately 80% less than average. The December contract lost a whopping 6,341 of open interest, and there were large open interest increases in the forward months which brought down total open interest to a minor number. The COT numbers will be released tomorrow, and this will give us a much better idea of the extent to which managed money has increased their bearish positions. December KC wheat remains on a short and intermediate term sell signal. Stand aside.
December live cattle gained 7.5 points on heavy volume of 67,907 contracts. Volume increased approximately 7,000 contracts from November 12 when December cattle lost 7.5 points and open interest increased 2,264 contracts. On November 13, total open interest increased by 4,932 contracts, which relative to volume is approximately 185% above average, meaning that longs and shorts engaged in major battle, and longs were only able to move the market fractionally higher. The December contract lost 6,357 of open interest, which makes the total open interest increase much more impressive (bullish). Cattle has been trading in a consolidation pattern for the past month, and with ever-increasing open interest, we envision that a sharp move in one direction or the other is on the horizon. It will be interesting to see what the COT report shows about the position of managed money. As of the last report, managed money was long cattle by ratio of 6.01:1. Stand aside.
December crude oil advanced 84 cents on heavy volume of 777,883 contracts. Total open interest declined by 27,280 contracts, which relative to volume is approximately 40% above average, meaning that both longs and shorts were liquidating at an aggressive pace as the market rallied. The December contract lost 34,475 of open interest, and open interest increases in the back months were insufficient to bring down total open interest very much. As this report is being compiled on November 14, December crude oil is trading 9 cents higher on the day. The market has barely been able to rally, and this reveals the internal weakness of the market.
However, there is one caveat and it is that December gasoline will generate a short-term buy signal on November 14. Additionally, it appears likely that Brent crude will generate a short and intermediate term buy signal on November 14. From November 8 through November 13, open interest has increased by 10,012 contracts while January Brent has advanced $3.29. This is bullish open interest action relative to the price advance. As we pointed out in the November 10 Weekend Wrap, the relatively low long to short ratio of managed money compared to a similar period during May-June when crude was trading near the same level confirms that much of the bullish enthusiasm is out of the market. However, market participants are reluctant to initiate new short positions. See the November 13 report for additional insight into this. If clients are short call options that we recommended on September 29, this positions can continue to be held depending upon the remaining period on the option, and to what degree the call is out of money. Otherwise, stand aside.
January platinum lost $7.60 on volume of 6,884 contracts. Total open interest declined 78 contracts. As this report is being compiled on November 14, January platinum is trading $17.20 higher and gold and silver are both trading higher as well. The future chairman of the Federal Reserve is testifying before Congress, and this is powering stock indices and precious metals higher. Although platinum remains on a short and intermediate term buy signal, the fact is the 50 day moving average of 1443.60 is below the 150 day moving average of 1458.80 and below the 200 day moving average of 1505.50 on the continuation chart. The January chart shows the same configuration of moving averages. We think the enthusiasm for more quantitative easing is overblown, and that the dollar index will resume its climb. This will negatively impact platinum and the rest of the precious metals complex. We continue to recommend a stand aside posture.
The December euro gained 35 points on volume of 231,310 contracts. Total open interest increased by 1,646 contracts, which relative to volume is approximately 60% less than average. The euro made a high of 1.3499, and as this report is being compiled on November 14, the euro has not taken out the high of November 13. There are couple of ways of trading a bearish euro position. Clients can initiate futures positions in the euro, write out of the money calls or buy puts. One other way that makes perfect sense is to initiate bullish positions in the dollar index. One of our favorite trades involving the dollar index is long USDJPY. This currency pair just generated a short and intermediate term buy signal. The 50 day ma is 98.51, 150 ma 98.70 and 200 ma 97.68.
The December British pound advanced 1.32 cents on higher than usual volume of 127,823 contracts. Volume was the highest since September 19 when 138,104 contracts were traded. When comparing volume on November 13 to average daily volume year to date of 119,087 contracts, the sharp move higher lacked significant participation. Total open interest increased by 3,762 contracts, which relative to volume is approximately 20% above average, which again is disappointing. For the pound to reverse its short-term sell signal, its daily range must not dip below 1.6014 and then 1.6117 on the December contract.
The December Australian dollar gained 26 points on volume of 75,763 contracts. Total open interest declined by 132 contracts, which is minuscule and dramatically below average, but this continues the very negative open interest action relative to price advances and declines. We would prefer to see a rally to the 50 day moving average before initiating bearish positions. Additionally, we are leery that managed money has probably increased their shorts making the aussie a candidate for a short covering rally. Despite its weakness, the aussie has not yet generated an intermediate term sell signal.
S&P 500 E mini:
The December S&P 500 E mini advanced 13.75 points on volume of 1,687,580 contracts. Total open interest increased by 7,261 contracts, which in relative to volume is approximately 75% below average. On November 13, the E mini made a new high at 1782.25, and as this report is being compiled on November 14, it is made another new high at 1788.50 on low volume. Apparently, the reason for the enthusiasm is the testimony by the new Fed chairman in waiting and her willingness to continue quantitative easing. Despite this, volume and open interest continues to tell us that market participants lack enthusiasm as the market moves higher. Initiate and maintain long put protection. Also, realize that the November December and January timeframe is usually bullish, and therefore the market may continue to move higher. However, the debt ceiling issue is still on the table, and this time could be more fractious than usual