RJO Futures Website
May 13, 2014 Volume 8, Issue 10

 

Feature Article

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Metals - Gold

Nick DeGeorge

In the early morning trade, June gold is basically unchanged and currently trading at $1295.9 an ounce. Over the past month and a half, the yellow metal has been in a tight trading range of roughly $60, trading between $1268.0 and $1331.0. A massive outside day put in on the daily June gold chart yesterday, improved physical demand in all commodities, and optimism in India following their election has all provided an advantage for the bull camp.

If we quickly analyze the June daily gold chart, it looks like gold in the near-term is about to make a big move and the chart is putting in defined buy and sell signals. Let's keep it simple. If gold breaks the April 24th low of $1268.4 then look for the precious metal to test $1200.0 an ounce, and if it breaks the high from May 5th of $1315.8, then look for a rally to $1400.0. I have highlighted these technical levels below on my daily June 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.

Jun '14 Gold Daily Chart

Source: RJO Vantage

 

Metals - Silver


The silver market is showing that the bulls will not step down from their long position. When this market broke a long in place support, the bulls were quick to find a bid and bring it up from the lows of 18685 to its recent comfortable range of 19500. It has been unable to break above resistance of 19930 from the end of April and 20430 from the middle of April. Until these levels can be broken the tone continues to remain sideways with a caution towards bearish.

In the last eView we were approaching the post polar vortex employment report and it blew past most expectations to show 288,000 jobs created with the previous two months revised higher. The ADP employment report showed 220,000 jobs created. While the employment sector appeared to be in decent shape the GDP quarter over quarter showed a drop to .1%, with most calling the increase in the Affordable Healthcare Act was the main reason this was positive, and only barely. Since the April non-farm payroll reports the weekly unemployment claims have remained elevated so it's possible the next report won't be as positive. As the FOMC continues to wind down their Quantitative Easing program the markets remain fairly nervous as to the inflationary impact when they finally leave the markets. The weekly economic information hasn't been too strong, but it hasn't been weak either. It continues to be a cautious story unfolding week by week. This continues to weigh on the bull side of this market with weaker than expected employment and growth numbers potentially giving food to the 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.

Jul '14 Silver Daily Chart

Source: RJO Vantage

 

Energies - Crude Oil

Mike-Sabo

This week's eView is a lot like my last one, in that my opinion hasn't changed much. June crude oil has been in a consolidation mode moving slightly higher after its recent sell off. Current oil stock piles are running at record highs for this time of year even though last week the EIA reported a small draw of about 1.8 million barrels. This week's EIA is expected to come in around slightly unchanged to a possible slight draw. The current situation in Russia and Ukraine continues to escalate some but appears to have little to no effect on oil supplies; it does appear to have caused some fear premium to flow into the price of oil though. The EIA estimates total US crude oil production averaged approximately 8.3 million barrels per day in April 2014, this would be the highest monthly average production since March 1988. Total US crude oil production has averaged approximately 7.4 million barrels per day in 2013 and is expected to increase to 8.5 million barrels per day in 2014 and 9.2 million barrels per day in 2015. The 2015 forecast, if obtained, would be the highest annual average production level since 1972.

Short-term technical indicators appear slightly overbought after the small climb higher. I still look for June oil to break down and head for the 200 moving average which is around $97.50 a barrel – but not without a fight.

With the current supply and demand situation coupled with the technical indicators, I still remain bearish on oil. One way to play oil to the downside may be through a bear put ratio spread, specifically buying one near the money put and selling three deeper out of the money puts, I truly like this strategy. Please call me for more details regarding strike prices.

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.

Jun '14 Crude Oil Daily Chart

Source: RJO Vantage

 

Energies - Natural Gas

Bill Moore

July natural gas futures are quiet this morning after a four day, 40 cent sell off. Last traded price is 4430 (8:46am CDT). We're in the midst of a full-on rebuilding of the storage that was pressured during the harsh winter months. This process may be limited however with a warmer forecast on the horizon for the end of May. This tug of war should present interesting trade opportunities as volatility has clearly returned to natural gas in 2014. We've had consistent builds in the inventory numbers, the most recent being 74 bcf.

Those following the charts will notice the key support area between 4280 and 4400 with the relative strength index pointing towards an oversold environment. Bulls will undoubtedly be looking for a bounce in price. We did close below the 9- and 50-day moving averages. If we do break the 4250 level, look for further downside towards the 200-day moving average and beyond.

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.

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

Source: RJO Vantage


Softs - Sugar

Joe Nikruto

This week's commentary finds July sugar futures bouncing in what appears to be convincing fashion. At the time of this writing July futures are up 51 points on very good volume of roughly 56,000 contracts. It would be easy to dismiss this move as technical, a needed bounce to alleviate the oversold chart condition. But with that many contracts changing hands in today's session the move has to be respected. While this move has easily taken out the 50-day moving average at 17.68 there are still previous highs at 17.85 and 18.03 to contend with. The move places us at the top side of the triangle we have been watching, the same triangle that we saw July sugar futures begin to fall out of in our last commentary two weeks ago. While the move appears dramatic on the chart, I remain suspicious of the sizeable supply of sugar available on the world market. The commentary this morning from the Hightower group highlights the 'risk on' feeling in the markets and the rallies taking place on many of the world's stock indexes. They also spoke of lower production coming from Brazil. If today's price action turns out to be mostly 'fund' buying this will not be the first time we have seen the funds take this market for a run when there is even the hint of supply disruption. I have been recommending relatively inexpensive puts with less than 30 days to expiration. While I am not currently correct, the puts give us some staying power. Futures traders have to respect the charts as the funds likely have more firepower and could extend this rally above 18.50. I am confident in the idea of supply ultimately trumping short-term fund driven rallies, but the volume on the move today has my attention. I would not want to suggest futures traders dig their heels in based on known bearish fundamentals.

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.

Jul '14 Sugar Daily Chart

Source: RJO Vantage



 

Softs - Cotton

Erik Tatje

Despite weakness in the cotton market over the past few days, the underlying structure of the market remains unchanged and the recent correction in price could present a valid buying opportunity for those looking to play the long side of cotton. Price action has recently penetrated below the 50-day moving average; however, the RSI remains around the 40 level, which typically signals an oversold environment in a bull market. Furthermore, significant resistance could be anticipated around previous consolidation lows around 89.80 – 90.00. Until price breaks down from the higher high, higher low structure of the market, cotton remains bullish and the recent correction in price could offer bullish traders a more favorable entry level from which to establish a long position.

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.

Jul '14 Cotton Daily Chart

Source: RJO Vantage

 

Softs - Cocoa


Technically, July cocoa is still bearish as we trade below the 9- and 20-day moving averages. Although we are reaching oversold levels, there is still strong, long liquidation from spec traders. As the attached chart shows, we are close to hitting a trend line that may cause a bounce in prices. There is support at 2849 and 2805 which should also help a short-term pop up and possible corrective trend. Fundamentally, supply news continues to hurt the bulls. Sunny weather in Ivory Coast is creating even higher mid-crop production. Ivory Coast port arrivals are also 10.5% ahead of last season's pace. Although the supply and demand news has pressured the cocoa market for most of the year, I believe we are reaching good levels to go long, especially if we test the 2800 level. Consider buying calls for a more conservative approach. Monitor the outside markets and British Pound prices to see if they give cocoa a hold in the green and a positive close.

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.

Jul '14 Cocoa( ICCN14) Daily Chart w/ Moving Averages

Source: RJO Vantage

 

Agriculture - Grain

Stephen Davis

Good Afternoon Traders!! The overnight CME grains are mixed with corn a few cents lower , old crop soybeans up 13, new crop soybeans up 3 and wheat down 10. It is turn around Tuesday and the news on planting progress is out. After Monday's bashing, the bulls have made a stand.

Planting progress is right about the five year average. I expect, based on today's weather forecast, that US corn seeding will advance to 75%, soybeans 45%, and spring wheat to 55% completed as of Sunday. Rather than early planting, the most important ingredient for grains is summer weather. The Central US weather forecast is generally favorable. The recent rains are perfect for corn and soy germination and emergence. While it is important to get all the crops planted, I think the next concern you are going to hear is that it is too dry out there for the row crops. It needs to rain each week to replenish the soil moisture. If we get into July and then August this summer and it does not rain these row crops will rally in a gigantic fashion. We are not there yet. CZ14 gapped lower Sunday night and the top of the gap is yesterday's high at 4962. Look for CZ14 to get into the gap area the next few days and then fall from there. Let these grain markets sell off the next few weeks and then look to call options to get long and position yourself for the volatility that lies ahead.

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.

Nov '14 Soybeans Daily Chart

Source: RJO Futures PRO

Dec '14 Corn Daily Chart

Source: RJO Futures PRO

 

Agriculture - Livestock

Jeff Gilfillan

Cash cattle continues to drift lower as expected and the discount futures to cash reflects massive first to second quarter production expectations. The 138 level in front-month live cattle futures now seems like where long-term value starts. Cash trade is stubbornly firm in the mid to high 140s. Commitment of Traders still reflects a hefty non-commercial net long of 151,126 as of 05/06. Spreads are seasonally weak between June and August but firm into the end of 2014. Overall, despite the anticipated summer supply increase priced into June futures, the cash and spreads reflect more of a "I'll believe it when I see it" on the supply side. Imports may be the x-factor limiting upside swings witnessed in January through March but feed cattle should remain firm into 2015 as front end supply is rebuilt. RJOF publishes comprehensive livestock research daily through several sources. I very much encourage clients and prospective traders to register for direct access. There are several new seasonal spread trades available in hogs and cattle. Contact me with questions.

See RJOF research to access daily reports on the livestock sector available in report and audio format with speculative and hedging recommendations alongside both fundamental and technical research.

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 Futures - 2014 August over December Spread Chart

Source: GeckoSoftware.com

 

Interest Rates

Eli Tesfaye

June bonds, notes and Eurodollars are all trading higher in the late morning. All time high equity prices are also providing a bit of support to treasuries. The NFIB small business optimism index rose a sizable 1.8 points to 95.2, its highest level since 2007. Hiring appears to be in full swing. The rest of the week is packed with economic reports that could give the bonds definitive direction. The annual Credit Markets Symposium is underway this morning with an opening speech from Jeffrey M. Lacker. Since its inception in 2007, the Credit Markets Symposium is designed to provide open dialogue between strong representation of industry and regulatory bodies to hopefully prevent another financial crisis.

Outside influence for bonds come from higher probabilities that the world's central banks will continue to provide accommodations. Germany's Bundesbank hinted their willingness to cut interest rates if needed. Economic data out of China shows that housing sales from Jan-April were down 9.9% and an overall sentiment of a cooling Chinese economy. The ongoing Eastern Ukraine issue is yet to cool off and I think this situation will continue to provide a base for bonds in near-term. For now, Russia seems to be siding with the economy. In the last eView I mentioned that if bonds take out the 135 level, they are poised to go higher. It is quite possible that bonds may be heading the "Box" 50-60% retracement from Jan 2014 lows.

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.

Jun '14 30-Year T-Bonds Monthly Chart

Source: RJO Futures PRO

 

Currencies

John Caruso

The Dollar has surged higher over the last few sessions, after posting a YTD low of 78.92 late last week. The June US Dollar Index rose to 80.285 in the early morning hours of Tuesday's trading session. European data was in focus, with softer readings from the German ZEW confidence, and comments from Mario Draghi late last week suggesting that the heightened value of the Euro was weighing on the EU's recovery. The USD Index did pull back following a weaker than expected Retail Sales (0.1%) number out of the US this morning. In my opinion, the USD Index will remain in check for the time being, as slower US growth data, coupled with YTD lows in Treasury Yields, will create a sense of fundamental resistance. The USD still remains in a "downtrend" and I largely expect the dollar to remain "range bound" between 80.40 and 79.50 until further direction from the US Federal Reserve and European Central Bank are highlighted. Resistance comes in at 80.33 today, while support rests at 79.69.

If you'd like to learn more about futures trading or the currencies market specifically, please contact John Caruso at 312-373-5286 or jcaruso@rjofutures.com.

Jun '14 US Dollar Index Daily Chart

Source: RJO Vantage



Equity Indexes

Jeffrey Friedman

Stock Index Futures were mostly down this past week. But stocks futures got off to a positive start yesterday climbing to a record after Internet and small-cap shares rallied amid deals activity that boosted confidence in the world's largest economy. According to analysts some investors have started expressing concern that economic growth may not be strong enough to support stocks futures near record highs.

The economy in the first quarter of 2014 is moderately net positive with rebound numbers for retail sales. This past week's economic news was moderately net positive. However, Ukraine worries and slowing in China overshadowed U.S. data.

Growth is somewhat positive and possibly moderately strong for the previous 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. Two of the biggest reports this week are retail sales and housing which could show good or bad. Also coming out are CPI, PPI and manufacturing.

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 a uptrend, with most chart followers targeting 1819 as their target for resistance. The S&P could go down to 1865 and then 1844 as a far target. The market must stay above 1865 if the uptrend is going to stay alive.

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

 

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