RJO Futures Website
March 18, 2014 Volume 8, Issue 6


Feature Article

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Metals - Gold

Nick DeGeorge

In the early morning trade, gold has pulled back a little over one percent from yesterday's close and is currently trading at $13560 an ounce. It has pulled back from its six-month high before the Feds meet probably due to speculation that they will continue stimulus. The shiny one has advanced 13 percent this year already due to turmoil in Ukraine, slowing economic growth, and some profit taking from the investors that enjoyed the large sell off throughout 2013.

Even with the latest two day sell off, you can clearly see that April gold is still in a pretty solid uptrend if you analyze the daily chart. However, if gold closes below $13500, look for a possible sell off to $13250-$13000. For the bulls, if it hold this $13500 level and breaks yesterday's high of $1392.6, then look for a pop to $14300-$14500 a troy ounce. Also, it looks like the golden cross over is starting to develop, which is where the 50-day moving average crosses above the 200-day moving average. If this happens, April gold should continue to enjoy more momentum to the upside. I have highlighted all technical levels below on my daily April gold chart.

If you'd like to learn more about futures trading or the metals market specifically, please contact Nick DeGeorge at 312-373-5316 or ndegeorge@rjofutures.com.

Apr '14 Gold Daily Chart

Source: RJO Vantage


Metals - Silver

The silver market lost some strength over the past two days, but hope doesn't appear to be lost. The downward sloping trend line is setup as a stronger form of resistance as this market has failed from this line multiple times since February 24th. In conjunction with this failure of resistance the 20620 level is holding as strong support, being tested for the second time today as support. Silver demand remains strong as the Silver Institute reported US silver jewelry sales are increasing for the fifth year in a row, with a 17% increase for 2013 and retailers reporting silver jewelry sales were 33% of their unit volume. 92% of retailers were optimistic the silver boom will continue for the next several years.

The economic information remains mixed with the majority of information citing weather as the biggest setback. As I reported yesterday in my Monday update, FactSet commented that, "Weather was mentioned at least once in 195 conference calls, an 81% increase year over year." With this being the common cause for slowness it could still be multiple months before the showing of a true slowdown rears its head without negative weather effects. Tomorrow's FOMC statement has the expectation for another $10 billion decrease in monthly bond purchases, but the hope is for more forward guidance as to what else they're looking for to continue the decrease, or to increase interest rates.

As per usual, this market has two distinct levels in needs to get above or below to continue its current trend. The longer term trend has been down but the near-term trend is higher. A break above 22215 would need to be broken to continue the bull trend with a close below the 20600 level to be broken to continue the down trend, with a break below 18800 to continue the current bear trend. Although this recent move in the May contract from the recent high is almost 1 dollar, I think it's too soon to call an end to this bull.

If you'd like to learn more about futures trading or the silver market specifically, please contact Mike Rataj at 800-453-4494 or mrataj@rjofutures.com.

May '14 Silver Daily Chart

Source: RJO Futures PRO


Energies - Crude Oil


May oil finally started its decent lower. (See my prior eView article dated 3-4-14) After May oil hit a high of $104.48 on March 3 oil has fallen to a low yesterday of $97.00. Last Monday, 03/10, May oil really started to sell off, now the market appears to be consolidating at these levels. The question still remains where does oil go from here? I still believe oil will move lower over time but not without a fight. Current oil stock piles still appear ample and have been confirmed by several consecutive weeks of builds. In addition, total US crude oil production has averaged 7.5 mill barrels per day in 2013. That's aprox 967,000 barrels per day higher than 2012 and the highest level of US oil production since 1989. In December 2013, US crude oil production reached 7.9 million barrels per day, according to EIA's recently released December 2013 Petroleum Supply Monthly, that's an increase of 785,000 barrels per day (11%) compared with December 2012. As one can see the US is very capable of increasing its oil production even under an administration that hasn't been exactly friendly to big oil.

Economic data still continues to be a mixed bag both here in the US and globally. The growing unrest between Russia and Ukraine hasn't helped oil at all recently, initially we saw a pop but traders quickly realized it appears to be a non-event. Crimea has voted and Russia has taken action while the US and the rest of the world sit by doing nothing – no surprise. The US and EU have committed to economic sanctions against Russia, which appear to mean very little to the Russians, and in reality what exactly are they going to do? As long as Russia takes no further action against Ukraine I suspect little to no impact on the price of oil.

Short-term technical indicators still appear neutral to slightly oversold to me. At these levels the market looks to be consolidating. So far today the market is an inside day, generally viewed as a sign of strong market consolidation. In addition, yesterday's low of $97.00 a barrel happened to be right at about the 200-day moving average. The question remains how to play oil to the short side? I believe one way may be through a bear put ratio spread specifically buying one near the money put and selling three deeper out of the money puts . Using this type of strategy traders don't really get "hurt" if the market should rally, BUT it does give you the potential to play oil to the downside – please call me for more details.

If you'd like to learn more about futures trading or the energies market specifically, please contact Mike Sabo at 312-373-5248 or msabo@rjofutures.com.

May '14 Crude Oil Daily Chart

Source: RJO Vantage


Energies - Natural Gas

Bill Moore

Greetings. The morning trade session in natural gas finds the market trading at 4.484, down 5.2 cents on the April contract. We find ourselves in a bit of a bearish holding pattern now that the terms "polar vortex" and "extreme blizzard conditions" are a thing of the past. (For now anyway.) Peaks on the March contract were considerably higher but the April contract reached a 2/24/14 high of 5.209 before selling off considerably. Weather will continue to drive this market, but I believe the extreme volatility should be behind us. Yesterday's trading saw the market gap higher and advance above 4.550 on a colder outlook. Storage levels are well below the five-year average and last week's inventory number saw another draw of 195 BCF. At face value, this sounds overly bullish for the market. It is important to remember however that we are still sitting on a very large stock of Natural gas. Being well below the five year average may be a distorted indicator for price direction. April and May traditionally are months of declined usage in the US.

Looking to the charts, last Thursday's push down to 4355 could have been viewed by some as a potential breakout to the downside. The neck line of a potential "head and shoulders" formation has been a false breakout for the time being. We closed below the 10-day moving average. If this is indeed a false breakout, look for added pressure from the buy side. Resistance comes in today at 4580 and 4633. Look for support at 4480.

If you'd like to learn more about futures trading or the energies market specifically, please contact Bill Moore at 800-422-6610 or wmoore@rjofutures.com.

Apr '14 Natural Gas Daily Chart with Moving Averages, RSI and MACD

Source: RJO Futures PRO

Softs - Sugar

Joe Nikruto

This week's commentary finds May sugar futures at a possible inflection point. The threat of drought damage in South America, a flood of hot money into commodity futures, and 'news' of Chinese stockpiling from lower levels has resulted in a month long rally in May sugar futures. This rally has seen sugar trade from a low for the move of 14.92 to a recent high of 18.47. In the last few days support levels have been violated and the consolidation pattern on the chart is beginning to fail. Trade below 17.03 speaks to a move to 16.50 and lower. The levels left on the chart by the head and shoulders reversal of the year long downtrend may provide both an attraction and support for this market. Seasoned traders know that markets have a tendency to test and violate obvious levels on charts. But it will be highly instructive should sugar show the ability to hold one of these levels. I say one of these levels because unfortunately there are at least four maybe five of them between 16.70 and 15.50. Fundamentally, rain in the forecast and ideas that stress from dry conditions will not have the same impact on sugar as it has had on coffee has prices retreating according to this morning's comment from the Hightower group. They went on further to highlight the continuing strong production and resulting supply available globally. In spite of the fundamentals one of the best comments I have seen so far this year about sugar futures comes from Dave Toth, technical analyst at RJO MRT pointing out that a "correction to the 16.00 area or lower could provide one of the great risk/reward buys of 2014."

If you'd like to learn more about futures trading or the sugar market specifically, please contact Joe Nikruto at 800-453-4494 or jnikruto@rjofutures.com.

May '14 Daily Sugar Futures Chart

Source: RJO Vantage


Softs - Cotton

Erik Tatje

With a "global cotton" futures contract set to begin trading later this year, prices of the May cotton contract continues to trend higher. Just how much impact the addition of the "global cotton contract" will have on the Cotton No. 2 contract is yet to be seen; however, the market doesn't seem overly concerned about it. Prices have been trending higher since bottoming in late November '13 and the underlying bullish sentiment in this market remains firm. Local support in the cotton market can be seen around 90.50 – 90.75, with longer term structure around 86.00 – 86.50. The intermediate trend remains positive above 86.00 and buying corrective pullbacks into support remains a valid trading strategy until proven otherwise.

If you'd like to learn more about futures trading or the cotton market specifically, please contact me directly at 800-826-1120 or etatje@rjofutures.com.

May '14 Cotton Daily Chart

Source: RJO Vantage


Softs - Cocoa

The bulls continue to control the cocoa market. Congestion on the May chart should provide another breakout up. If we can continue to trade above 3000, look for an upside target of 3090. Look to buy futures on pull back or buy calls for a more conservative approach if you want exposure to the market. Fundamentally, the market is looking to react to the strong global demand for cocoa. With supply staying a concern, simple economics shows us the path of this commodity. Some traders are concerned we are reaching overbought levels, but if the technicals and fundamentals continue to support the bulls how can traders avoid the trend? Other important points to watch; Ivory Coast port arrivals which continue to be above last year's levels, weather in West Africa and the British pound and its relationship against the dollar.

If you'd like to learn more about futures trading or the cocoa market specifically, please contact Peter Mooses at 800-826-4124 or pmooses@rjofutures.com.

May '14 Cocoa ICCK14 Daily Chart w/ Moving Averages

Source: RJO Vantage


Softs - Coffee

Adam Tuiaana

Weather reports are becoming a bit more favorable, and wetter weather ahead for Brazil growing areas may spark a little bit of a correction down in May coffee prices. As we've witnessed over the past couple weeks, the break above the high of 1.8125 from Feb 25th has seen major "weather-premium follow through buying." This wetter forecast will likely send May coffee prices back down to the 160 level sometime over the next few weeks. After that time I believe we will stay on track to revisit the 2.00 level. In my last eView article I said, "I believe we will begin to see, at least in the near-term, a slightly large correction to answer a very aggressive, large price explosion very soon." My outlook remains the same. Traders should consider put options to manage risk, and allow themselves time in the trade.

If you'd like to learn more about futures trading or the coffee market specifically, please contact RJO Futures Senior Trading Broker Adam Tuiaana at 800-453-4494 or atuiaana@rjofutures.com.

May '14 Coffee Daily Chart

Source: RJO Vantage


Agriculture - Grain

Stephen Davis

The grain markets are higher in turn around Tuesday fashion. Soybeans are up 20,wheat is up 8 and corn is up 3 on chart based considerations and firming US cash soybean basis bids. The US farmer has slowed and in some cases stopped their selling as soy prices retreated nearly $1.00 from the highs. Most US processors have their cash needs covered out to next month and they have bumped up their basis bids in an effort to book additional soybean supply to quench the demand into May.

It's an important day for the bulls to regain control of the corn and soybean markets. The big March 31st USDA stocks and planting report looms and the bulls will have to decide how much length to take into this risky report. These are major reports coming out and the trade will soon focus on these. Hogs and Pigs, Grain Stocks and Planting Intentions will be a gigantic amount of information for markets to absorb. How many pigs did PEDv kill? How much less feed did that take? How much grain left the country? How many corn acres will they plant? Did this rally buy soybean acres? These and many more questions will be looking for answers from our USDA.

I have always been taught that the wheat market is a political grain. In text book fashion wheat gapped higher on March 3rd and never came back to fill that gap. Pay attention to gaps. There certainly is no guarantee, but it looks like this political rally in wheat can continue until this gap is filled.

If you'd like to learn more about futures trading or the agricultural market specifically, please contact Stephen Davis at 800-367-7181 or sdavis@rjofutures.com.

May '14 Wheat Daily Chart

Source: RJO Futures PRO

May '14 Corn Daily Chart

Source: RJO Futures PRO


Agriculture - Livestock

Jeff Gilfillan

Live cattle futures spiked in late February to 153.00 front-month high and continues to find strength over 143.875 in April. Choice cutout is at record highs (242.85) amid tightening supplies.

Prices across the board need to remain high to rebuild supply, and packers need to adjust their capacity to reflect lower numbers. Live cattle supply concerns will not go away soon as heifer retention has gone up and beef cattle producers have more incentive to build weights. The SE states are showing signs of rebuilding stocks and should see good profits in 2014 at the feeder level.

Look for the markets to keep a strong underlying bid. The weekly front-month charts show value at 135.00 - 144.00.

There are several key reports that will help traders confirm supply coming out in the next few weeks. I suggest all clients connected to livestock/hogs to plug into RJOF Research on a daily basis to listen to our intraday audio reports and daily printable reports and forecasts. Continue to follow RJOF research or contact us at 888-861-0382 for spec and hedge recommendations.

If you'd like to learn more about futures trading or the agricultural market specifically, please contact Jeff Gilfillan at 888-861-0382 or jgilfillan@rjofutures.com.

Live Cattle LT Weekly Chart Combined

Source: GeckoSoftware.com


Interest Rates

Eli Tesfaye

March bonds, notes and Eurodollar are all trading higher this morning with uptick in safe heaven demands as tensions with Kremlin and the West intensifies over Crimea. The FOMC meeting started today and will probably result in tomorrow's announcement with a slight update in their guidance without raising the Fed fund rate anytime soon. Treasuries garner additional support from weaker German investor confidence reading since August. For the rest of the week I expect the economic reports to come in on the weaker side. If that is the case I expect the Treasury futures to firm up from these levels.

From a technical perspective, The 30-year Treasury bonds are posting higher highs and higher lows, at least from the daily chart. The weekly chart below shows that bonds have held the 130 level supports in the past month and have broken above the 134 levels and are in my analysis poised to head to north of 138 in the coming months. The 30-year bonds remain firm unless a close below 131 and that would signal a reversal to lower levels.

If you'd like to learn more about futures trading or the interest rates market specifically, please contact Eli Tesfaye at 800-367-7290 or etesfaye@rjofutures.com.

30-Year Treasury Bonds Weekly Continuation Chart

Source: RJO Futures PRO


Equity Indexes

Jeffrey Friedman

The economy in the first quarter of 2014 is moderately net positive with rebound numbers for retail sales. The key question is whether softness was due to severe winter weather in January and February or fundamentals. Though economic news was moderately net positive, Ukraine worries and slowing in China overshadowed U.S. data.

Super bad weather appears to have weighed on retail sales and industrial production. There will not be certainty on this until data based on typical weather are released, which means data for March or even April. Meanwhile, the Fed will have to sort out weather effects from underlying strength or weakness in the economy. Uncertainty clearly is higher due to weather.

Taking into account severe winter weather in January and February, the economy appears to be moderately healthy. With growth somewhat positive and possibly moderately strong for the 2013 fourth quarter the recovery likely can withstand the Fed continuing to taper at a slow pace. The economy continues moderate upward momentum, but financial markets remain subject to external events—lately Ukraine and China.

This week is heavy with economic news. The spotlight is on Fed Chair Janet Yellen's first quarterly press conference, the Fed statement, and Fed forecasts. Manufacturing and housing sectors have been wavering. Key updates come from industrial production, housing starts, and existing home sales.

For the year-to-date, major stock index futures are down as follows: the Dow, down 3.0 percent; the S&P 500, down 0.5 percent; and the Nasdaq, up 1.5 percent.

Technical outlook for the June S&P futures remain in a long-term bull market. In the short-term, the S&P futures are in an sideways to down trend, with most chart followers targeting 1878 as their target for resistance and then at 1887. The market must stay below 1853 if a stall is going to develop. A close under 1853 could give way to 1835. A close under 1835 could have the bears run this market down to 1804.

If you'd like to learn more about futures trading or the equity indices market specifically, please contact Jeffrey Friedman at 800-826-4124 or jfriedman@rjofutures.com.

Jun '14 E-mini S&P 500 Daily Chart

Source: RJO Futures PRO


This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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