RJO Futures Website
May 27, 2014 Volume 8, Issue 11

 

Feature Article

Upcoming RJO Futures Webinars

Introduction to Options on Futures

June 4, 2014 at 12pm CT
Register now! Join us as CME Group's Pete Mulmat, Director of Education, introduces options on futures. Options on futures let you participate in the futures markets with defined risk. You can take advantage of price movements in commodities, stock indices, foreign exchange and interest rates with an added layer of versatility.

Using examples from CME Group's Equity Index markets, he will introduce you to:

  • Product fundamentals
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See how these products can fit into your "traders toolbox," and offer you greater opportunities to act on market movement.

 

Metals - Gold

Nick DeGeorge

In the early morning trade, June gold is down roughly $20 an ounce and currently trading at $1272.2 an ounce. There seems to be a risk on feeling by global equity markets to start the short trading week off. Positive reactions to the European elections, progress on tensions between Russia and Ukraine, and strong economic data out of Italy and Germany are all factors waning on the price of gold.

If you look at the daily June gold chart, you'll clearly see some technical damage on the charts along with the data above gives the bears the advantage to the start of the week. If gold breaks below the $1268.0 level, then look for some more pressure selling to the $1,200 handle because this is a major support level for the bears. I highlighted this technical level 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


Today is option expiration in the June silver market, and as of now that appears to be the biggest driver in this market. The past six days have provided an extremely tight consolidative range within the longer term consolidation since the middle of April. Recent market activity doesn't have much of a story to tell on the technical side. With such a long consolidation, support and resistance become fairly well defined so any break above or below the respective levels could help trigger a move in a new direction. Before the consolidation the longer term trend was down, if today's movement isn't just a near-term psych out the technical expectation is for the downward trend to continue.

With not a lot of reports over the past two weeks the economic news has been mostly mixed to fairly light. The most significant report last week was the minutes from the last FOMC meeting. As per usual they mentioned the need to clarify the exit and the raising of rates. The latest cause for concern from them has been that the housing market is potentially starting to weaken. In addition to the unemployment and inflation rates, the housing numbers could have further importance until they see stability. If we focus exclusively on the markets for the news we'd assume all is good with this continued downward pressure on the metals markets. With the fear bid removed from this market we can assume the market sees the FOMC exit going smoothly with no big speed bumps up ahead. What could go wrong?

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

Since the last eView July oil has managed to claw its way higher. After going thru some consolidation July oil broke out higher moving up to its current level of 104. The last several sessions the market is once again starting to consolidate. Current oil stock piles are still running high for this time of year. Last week the EIA reported a draw of about 7.2 million barrels, quite a bit more than the trade was looking for. This leaves total stocks at 391.3 million barrels about 3.5 million barrels shy of the all time high. The current situation in Russia and Ukraine continues to play out but might be coming to a head as elections were held over the weekend. Conflict still continues in Libya leaving some questions as to total output which appears to have caused some fear premium to flow into the price of oil. The market is very vulnerable to long liquidation due to a close to record amount of net spec long postions.

Short-term technical indicators appear very overbought after the recent climb higher and look to be trading up against the upper trend line on the channel. I look for July oil to head down for the 50-day moving average which is around $100.20 a barrel. One nice thing about oil right now is the ebbs and flows of the market. Although I remain bearish, the price action has given plenty of opportunity to the bulls as well.

With the current supply and demand situation coupled with the technical indicators–I still remain bearish on oil even though the market has been in a slight uptrend the last couple of weeks. In my opinion oil won't go down without a fight.One way to trade 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 like this approach to trade oil on the downside because of the characteristics of how oil trades. 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.

Jul '14 Crude Oil Daily Chart

Source: RJO Vantage

 

Energies - Natural Gas

Bill Moore

July natural gas futures are strong today, mostly on profit taking and a technical bounce from a good support level. Storage injections have been strong these past few weeks and well above seasonal averages. Weather is looking hot for the coming weeks which could help temper the quantity of these injections. Keeping in mind that our current storage stands at 1,266 BCF, we are still 43% below the 5-year average. These strong injections are certainly well needed. Non commercial traders are short 80,772 contracts, which is up 10,065 from the last commitment of traders report.

As I had mentioned before, the 4300 – 4350 level has been tested several times as support in the last three months. We haven't been able to break down and touch the 200-day moving average since January 10th. We are oversold but still holding a bearish posture. We closed below the 9-day moving average which is another bear signal. Look for resistance at 4.560 and support at 4.350.

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 an entirely different picture on the July sugar futures chart following our update in the last eView. On what was the highest volume in weeks, from May 12 to May 14 the July sugar futures rallied from 17.13 up to 18.28, consolidated and promptly fell right back into the zone from which it broke out. Today's price action shows July sugar futures dropping out of the bottom of that zone taking out support at 17.07 and 17.05, previous lows on the chart, again on big volume. Like every other technical tea leaf reader I get very interested in the "news" surrounding big moves. This is especially true when the big move makes me more 'not currently correct' than I already was. Wire services did a great job fitting news to the move. Concern over the El Nino weather pattern unfolding and the need for risk premium as well as possible supply reduction from Brazil are fine fundamentals. Since then though the market has fallen back into the 17.00 to 18.00 area where it has been chopping for the last month and with today's price action has broken out to the downside. According to the Hightower group in this morning's commentary, funds have been buyers on the way down over the last week. The move today places all long trades entered since May 12 squarely underwater. Adding to the downside pressure, trend followers have begun to be stopped out of long positions with some entering new short positions as well. It remains to be seen if the funds will be able to protect the 17 level with stepped up scale down buying or if today's move is the beginning of a round of capitulation by the speculative category that will drive this market to 16.00. The chart does point to a few clear facts: The 18 level has been soundly rejected. New longs are under significant duress. The next level of support is 16.80, a neckline from the reverse head and shoulders pattern seen on the chart from earlier in the year. In my opinion, if the July sugar futures can't find support in the area of 16.80 to 17.00 this market could trade to 16.00 or lower in short order.

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

"Sell in May and go away" appears to be the slogan for July cotton this year as prices have taken a tumble following a five-month rally. The RSI has swung down to extremely oversold readings and the 20-day moving average has recently crossed below the 50-day moving average, both of which are bearish indications. One area of potential support in cotton could come into play around the 85.40 – 85.70 area on the chart, where price is currently trading around. Given the recent price action in cotton, it appears as though the bears have taken control of the reins in this market.

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

Jeffrey Friedman

Technically, July cocoa is in a uptrend as we trade above the 10- and 20-day moving averages. We are reaching over bought levels and as the attached chart shows, we are close to hitting the double top that happened in March. There is support at 2980 and 2955 which should also help to support the market. Fundamentally, supply news continues to helps the bulls. Damage in Ivory Coast plantations helps prices higher by reducing supply production. Although the supply and demand news has helped the cocoa market for most of the year, I believe any good pull back are good levels to go long, especially if we test the 2950 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 equity indices market specifically, please contact Jeffrey Friedman at 800-826-4124 or jfriedman@rjofutures.com.

Jul '14 Cocoa( ICCN14) Daily Chart

Source: RJO Vantage

 

Softs - Coffee

Adam Tuiaana

Traders continue to grab sideline seats and await the initial results of the Brazilian harvest, which is fully underway. This season's drought in Brazil has major coffee trade houses estimating (in bags) near 40 million on the downside and near 56 million on the high side. We shall see the affects of how bad the hot and dry weather truly was this season.

On the technical side, we can notice a clear violation of the long term uptrend line that has been in place since January 28th of this year. We won't yet get scared of our long positions until a violation of the 16795 critical low has taken place. However, ahead of the upcoming harvest results, bulls should use caution if initiating new long positions. I would recommend using call options and spreads to approach this market, as it is almost guaranteed to become volatile soon.

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.

Jul '14 Coffee Daily Chart

Source: RJO Vantage

 

Agriculture - Grain

John Kennedy

Senior Market Strategist John Kennedy gives you his grains futures commentary for the week. He covers corn, wheat, and soybeans. Overall a red day for grains this morning. Export Inspections were released today due to the 3-day weekend. Crop Progress will be at 3pm CST today. John thinks that there may continue to be negative movement in these markets until weather gives traders a game changer. Feel free to contact John to leave a question or comment on his video.

If you'd like to learn more about futures trading or the agricultural market specifically, please contact John Kennedy at 866-397-8194 or jkennedy@rjofutures.com.

 

Agriculture - Livestock

Jeff Gilfillan

Live cattle futures collapsed early last week after testing contract highs just under 140 in June futures. Non-commercial net longs reached 152,707 as of 05/20. Cash remained steady to weak and spreads widened as seasonal price weakness and profit taking edged the market lower. Intermediate support rests just over 135 in August futures with resistance at 138.

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 - Monthly LT

Source: GeckoSoftware.com

 

Interest Rates

Eli Tesfaye

June bonds are slightly higher but notes and Eurodollars are flat, to lower this late morning. All time high equity prices continue to provide some support to treasuries. The economic readings were all positive this morning, however, the overall sentiment still remains that the US economy is weak. In the April meeting Fed officials decided to continue to reduce bond purchases. Until there is a change in overall sentiment, bonds could possibly get additional upside support. Long end of the yield curve is the leader to the upside. Later in the week we are expectingthe GDP and Personal Income and Outlays to provide definitive guide.

Outside influences include the world's central banks that continue to provide accommodations. Although the Bank of England anticipates a rate hike next year, the ECB is considering lowering rates. Japan's economy is likely to show weakness in light of the national sales tax that hit its citizens in April.

Chart analysis shows that bonds were able to continue to hold gains. The "Box" 50-60% retracement from May 2013 high of 149.21 and Dec. 2013 low of 127.19 comes in between 141.07 and 138.20. I think that the market is likely to reach these areas before any significant pullbacks.

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 US Dollar continues to forge its way higher on better than expected US data, and speculation that the ECB will ease up their monetary policy at the Jun 5th meeting. The US Dollar is still dealing with a low interest rate environment, as well as concern from the Federal Reserve over the housing market which could apply the "brakes" to this trade in the near-term. Increasing talk that the Bank of England could be on the verge of raising interest rates is being met interestingly enough by pressure selling in the British Pound. It's been widely expected that the UK would lead the world in raising interest rates, and it appears as if a higher interest rate environment has been priced in for some time now. Today's trading action in the June British Pound does not favor the bulls near-term. From the technical aspect, we're experiencing an "outside day down" which is a bearish set-up in the near-term. The bulls won't leave without a fight, but there's certainly caution for concern over this market moving higher in the near-term.

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 British Pound Daily Chart

Source: RJO Vantage



Equity Indexes

Greg Perlin

In the past few months the economy has been positive with many reports showing growth and much improving labor force. The key question is whether the economy is showing continued growth or are we just seeing spurts of growth that won't be sustained as the Fed continues to unwind its taper program. Last week's economic news was positive led by a robust new home sales. Two headwinds that the economy faces in the coming weeks are tensions in Ukraine and slower growth in China.

Technical outlook for the June S&P futures remain in a long-term bull market. The recovery from the key 1864.75 support is giving the market a friendly trend bias. Another rebound from just under 1880 will prompt strong rallies, a close under 1864.75 is needed for a bear turnover and press for a test of 1839.50 and a larger topping downturn. Look for additional rally attempts to challenge for a breakout into new highs. A breakout over 1904 signals an initial run to 1922 and potentially to 1940.

If you'd like to learn more about futures trading or the Equity Indexes market specifically, please contact Greg Perlin at 800-826-2270 or gperlin@rjofutures.com.

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

Source: RJO Futures PRO

 

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