RJO Futures Website
July 22 2014 Volume 8, Issue 15

 

Feature Article

Upcoming RJO Futures Webinars

Trading Agricultural Futures

Wed, Jul 23, 2014 at 4pm CDT

Register now! Trading grains and various agricultural products requires knowledge of the underlying asset class and our goal in this webinar is to introduce new agriculture futures traders to the contracts available in this market. Knowing when to be out of the market is just as critical as knowing when to be in the market and we will introduce technical analysis basics to identify potential market entry points in conjunction with our fundamental knowledge of the agricultural markets.

  • Keys to understanding Agruicultural Markets
  • Benefits of trading the Grains
  • What to consider before trading this market
  • Basic technical analysis techniques on the Ag's

Trading Currency Futures

Wed, Jul 30, 2014 at 4pm CDT

Register now! Learning about foreign currency futures trading can add a broad range of new products to your trading routine. In this session we'll cover many of the critical elements that you'll need to know regarding currency futures (also known as FX Futures). FX Futures trade 24 hours a day, 5 1/2 days a week. This is a very technical market that traders can potentially utilize to trade the markets outside of normal US stock market hours - with good volume and volatility. Depending on where you live and your work schedule, Forex Futures may be a good fit for your trading enterprise.

  • What makes FX a good market to trade?
  • Benefits of trading foreign currency
  • Typical trends within FX Futures
  • An FX Futures trading strategy

 

Metals - Gold

Nick DeGeorge

In today's early morning trade, August is down just a tad, currently trading at $1312.1 a troy ounce. After strong corporate earnings out of the US, the gold market has pulled off its overnight highs, but with two major geopolitical situations facing the market, the Russia/ Ukraine and Gaza crisis; it might be hard for the shiny to trade below last week's low of $1292.6. Additionally, this morning's CPI numbers are somewhat inflationary and the year-on-year rate is unchanged, pressing right at the 2 percent level at 2.1 percent.

If you take a look at the daily August gold chart, you'll see over the last week or so it's been in a tight $40 trading range. If it breaks last week's low of $1292.6 back on July 15, look for a retest of the June lows at $1240.2 an ounce. If it breaks last week's high of $1325.9, then look for a retest of the July highs of $1346.8 an ounce. I have highlighted these levels below on my daily gold August 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.

Aug '14 Gold Daily Chart

Source: RJO Vantage

 

Metals - Silver


Although on July 14 the September silver market saw one of its biggest drops in almost three months, the story from the middle of June until the 14th is more interesting. In a previous eView I mentioned this market has been in a long-term downtrend since April of 2011 when this market almost hit 50. While watching the drop of July 14 on an intraday chart it looks ugly, but with the horizontal lines on the chart below it tells a different story. Near-term support is 20630 which this market has bounced off twice since the rally up to these levels. On the bear side, the more times the market knocks on the support door the more likely it is to be let in. Basically, every rally since 2011 in this market has been sold and that doesn't bode well for the current situation. However, if support at 20630 can actually hold, the next level for this market to beat is 21630 to have any hope to continue the summer 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.

Sep '14 Silver Daily Chart

Source: RJO Futures PRO

 

Energies - Crude Oil

Mike-Sabo

Well, things have appeared to have quieted down in Iraq (at least from a news standpoint) and Libya's government officials claim to have things somewhat under control. This has helped to start pulling some of the recent fear premium out of the market. Stated in my eView article dated July 8, 2014, "September oil has moved from a high of $106.64 on June 25 to a low of $102.52 today and it appears it may have more downside action in store." In fact, September crude oil did continue lower, down to a low of $98.68 on July 15 (right down to the 200-day moving average, see chart below, dark purple line is the 50-day MA and dark blue line is the 200-day MA). Current oil stock piles, which stand at 375.04 million barrels, are still high for this time of year even with the recent draw last week. Our highest stocks for this time of year were at 389.50 in 1990, so one can see we are not that far away from our all time highs. Expectations for tomorrow's EIA report are looking like we could see another draw. Last week traders were looking for a draw of 2.5 million barrels and we saw a draw of over 7.5 million barrels – well above expectations and that helped give the market a short-term bounce. This coupled with the Malaysian Airline jet being shot down and the escalating conflict in the Gaza strip have helped build premium back into the oil market.

Short-term technical indicators are a bit mixed in my opinion and it appears the market is consolidating. I believe the bears still have control of the market even with the short-term bounce we just saw. Currently, I recommend targeting oil at the $100 a barrel area, with potential for a further breakdown.

I still recommend looking to play oil on the downside. Using the proper strategy such as a put option ratio spread could help you position to take advantage of it. Please call me for more details if you would like to discuss some strategies.

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.

Sep '14 Crude Oil Daily Chart

Source: RJO Vantage

 

Energies - Natural Gas

Bill Moore

Picking up from where we left off last issue, natural gas futures continue to push lower on a mild weather outlook heading into August. We've been in a full on sell off mode for the past four sessions with a last traded price of 3809 on the September contract. Traders will likely be wondering now when this market will bottom out. Fundamentals are still pointing lower. It's safe to say that history will remember this summer as a mild one and demand for natural gas right now is relatively low. Inventory sits at 2,129 BCF with last week's injection of 107 BCF (higher than expected). We are also expected this year to have a record production in the US.

Looking to the charts, most of our indicators are still pointing downward. Saving grace for the bulls might be how dramatically oversold this market is. RSI has been below 20 all week which is a bull signal. I don't think 3500 is out of the question at this point. Resistance is at 3900. Support is at 3790.

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.

Sep '14 Natural Gas Daily Chart

Source: RJO Vantage


Softs - Sugar

Joe Nikruto

This week's October sugar futures commentary finds a market on the verge of new lows. In spite of two whole days (2!) of positive price action and calls from both fundamental and technical commentators for a reversal leading to a significant upside correction October sugar futures remain under pressure. It is easy to see why calls are coming fast and furious for a near-term bottom as the market 'feels' overdone to the downside. Traders in sugar futures have been trained for months to expect a bounce every time a new low has been carved out. The recent move lower has October sugar futures knocking into the head and shoulders 'up' pattern on the chart that started to form in December 2013. This market is now consolidating in the area of the neckline from that same head and shoulders pattern, roughly 17.18. It could take some work for October sugar futures to chew through this area and trade below 16.50.

A recent quarterly report from a commodity trading bank highlighted the fact that there are ample near-term supplies of sugar globally. While China has been an increasingly active buyer and ideas of a global supply deficit for the next crop year are gaining traction so far it has not been enough to counter the more than ample supply up front.

The Hightower group pointed out in their commentary the last few days that the large spec long is not as large as it was. Still, half that position remains, roughly 90k contracts. In most markets funds don't stay flat. This means that if they are not holding a long position they are building a short position. In years past in sugar futures the fund long was almost an embedded position, always there, no matter the market direction. It will be interesting to see if the funds cover all of that long and begin to initiate a short position. This could have more impact on market direction in the short-term than any of the well known fundamentals. 'Feelings' aside, the chart appears to be pointing lower in October sugar futures. After some consolidation here, just above 17.00, I will not be surprised to see this market start to work toward 16.50. Closes above the 18-day moving average, or 17.52 should put short traders on the defensive. Taking pain all the way back up to the 50-day moving average, 17.95, makes no sense from a risk/reward perspective.

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.

Oct '14 Sugar Daily Chart

Source: RJO Vantage



 

Softs - Cotton

Erik Tatje

Following the recent free fall in cotton prices, the market appears to be making a potential "rounding bottom" technical formation on the daily chart. The last four days have produced "doji" candlesticks, indicative of indecision in the market. The fact that the lower wicks of these candles are "round" in nature alludes to a potential shift in momentum. Price appears to be in agreement with the technical formation as the market is trading higher coming into today's session. Whether or not this pattern will prove accurate remains to be seen; however, it certainly should not be overlooked as a "rounding bottom" formation at these levels could provide an early entry opportunity for a potential corrective rally. If you'd like to discuss potential strategies to apply in the cotton market, or any other market, please contact me directly.

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.

Dec '14 Cotton Daily Chart

Source: RJO Vantage

 

Softs - Cocoa


September cocoa has broken above the 9- and 20-day moving averages, reaffirming the bullish tone. Today we see the contract trying to break above some resistance at 3128; a break above this level should lead to trading above 3150. Although cocoa has been range-bound, the bulls have had control of the market in the long-term. Supply and demand will be important to follow as short-term supply remains bearish, but demand may be strong enough to overcome and continue towards new contract highs. Quarterly grindings data for North America and Asia support bullish demand news. And, although growing conditions in Africa are good, we have yet to see any real negative impact on futures prices. Look to buy futures on follow-through if we break above 3150 - 3200 may not be too far off.

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.

Sep '14 Cocoa ICCU14 Daily Chart w/ Moving Averages

Source: RJO Vantage

 

Softs - Coffee

Adam Tuiaana

On 7/18 we saw a large rally to test the 17335 level, which was the high from 7/10. This area should pose good resistance to September coffee prices, as the Hightower Group stated that a "clear picture of this season's Brazilian harvest has been hard to come by." If in fact the realities of the upcoming harvest numbers are tight enough to counter-balance the current large near-term supplies of coffee, we will see an aggressive, explosive move to the upside. In fact, it is only the possibility of a tight harvest that currently keeps coffee prices at support levels.

On the technical side, last week coffee violated the March low of16965. This is a critical support area, and unless we can see some bullish harvest numbers from Brazil, I would advise staying short with the trend. Call or email for specific strategies.

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.

Sep '14 Coffee Daily Chart

Source: RJO Vantage

 

Agriculture - Grain

Stephen Davis

Good Afternoon Traders! It's Tuesday and a small turnaround has been established led by August soybeans and August soybean meal. There was nothing in Monday afternoon's Crop Progress report to spark any lasting short covering. The wheat market in particular is oversold and funds are holding a large net short position. The chart pattern on wheat is trying to base. If the wheat market can bottom, that would help the corn market stabilize in here.

USDA announces 180 metric tons new crop soy meal sold to Vietnam with 225 metric tons of new crop soy meal and 20 metric tons soy oil to unknown destinations. This is a clear indication that importers are locking down new crop US capacity in part on heightened uncertainty over reliability of world's largest soy product exporter-Argentina.

I will write here that a supply driven bear market will persist into harvest, with soybeans having the greatest downside risk. Key support in SX14 is $10.65. A close below this will attract additional fund selling.

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.

Dec '14 Corn Daily Chart

Source: RJO Futures PRO

Nov '14 Soybeans Daily Chart

Source: RJO Futures PRO

Sep '14 Wheat Daily Chart

Source: RJO Futures PRO

 

Agriculture - Livestock

Jeff Gilfillan

Tight supply, strong demand equals high prices. Speculators looking to buy pullbacks or fade the live cattle futures have continually missed the boat. Most of the current spec opportunities, I believe, are in the futures' spreads. The current August / October spread also provided a clue the recent bounce higher off of the July lows was a buying opportunity.

Cash markets will remain firm and wide as long as placements are low and packer margins are healthy. Higher prices will continue to encourage herd rebuilding but this process takes time; a cool summer, strong exports despite high prices and anticipated lower global production (Australia) should keep a strong bid all along the production chain. It's a perfect storm for protein suppliers. Diets containing low starch, high protein are in and beef has been marketed very well by the retail end. Maybe labeling product origin will provide the beef market another boost?

It looks like the market is pricing in today's cold storage and Friday's Cattle on Feed reports. See our research for trade estimates.

See today's Daily Livestock report within RJOF research to view recent demand numbers across the protein sector.Contact me with questions about entry points for the AUG/OCT spread.

Login to RJO Futures research (trials available) 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 and cash market a.m. updates. Our current research page includes a recommendation on the Aug/Oct live cattle futures spread and an outright long live cattle recommendation.

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.

Aug '14 / Oct '14 Live Cattle Futures Daily spread

RJO Futures PRO

Feeder Cattle Futures Monthly Chart

Source: GeckoSoftware.com

 

Interest Rates

Eli Tesfaye

Notes and Eurodollar are trading mixed but Bonds came off a bit as the result of a higher CPI report this morning. The CPI uptick report probably is being watched very carefully by the more hawkish Fed members as a sign they may need to act sooner than later - at least in my estimate. The late morning existing home sales were also positive numbers as well and added slight pressure on bonds.

The equities are on fire yet again with both the S&P 500 and NASDAQ trading at their contract highs. My observation is that with the exception of today, bonds and notes have been strong as well, helped by Geo-political situations.

Overall, the strength in bonds leads me to think that bond traders anticipate significant pull back in the equity market in the very near future. What I mean by that is that they want to be ahead of the flight to quality buyers if and when the equity market has a decent correction.

On the economic calendar day for the remainder of the week, New Home sales are expected to beat estimates. My view remains in the long run; upbeat to stable economic news will ultimately invite inflationary risk resulting in higher rates.

Technical prospective: In the last issue, I mention that a close above 136.00 could trigger higher price actions. I also said that near-term target is 138.00. The 138-141 area is considered the "box" 50-60% Fibonacci retracement from the high of 149.21 and low of 127.2. This range could provide a good deal of trading opportunity. Give me a call or email me to discuss specific trading strategies.

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.

Sep '14 30-Year T-Bonds Weekly Chart

Source: RJO Futures PRO

 

Equity Indexes

Greg Perlin

Investors are facing a busy day both on the data and the corporate front, with earnings and economic data to come to the market. McDonalds reported this morning with disappointing result and after the close we see Microsoft and Apple set to report. Also, investors are keeping an eye on any new developments in both Ukraine and Gaza.

June CPI report showed that the core rose 0.1% after a sharp rise of 0.3 gain in May. Overall, the CPI rose a seasonally adjusted 0.3% in June because of higher gasoline prices. Later this morning, the National Association of Realtors will report on existing home sales at 9:00am Central. Forecasts are calling for an annual rate of 5 million for June compared with a 4.89 million pace in May.

Technically, the Sep E-mini S&P is bullish, but needs to close over the old high of 1978.25 to trigger a breakout rally at new highs and send an aggressive extension to 1994.50. A close under 1952 warns for a correction near 1935. Only a close under 1922 marks a critical top.

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.

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

Source: RJO Vantage

 

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.

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.

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.

© 2015 RJO Futures
222 South Riverside Plaza | 9th Floor | Chicago, Illinois 60606
800.441.1616 | 312.373.5478