RJO Futures Website
August 5, 2014 Volume 8, Issue 16

 

Feature Article

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Metals - Gold

Nick DeGeorge

In the early morning trade, December gold is currently down and trading at $1284.9 an ounce. Overnight, China reported a weaker than expected look at service-sector PMI and the lowest on record. Also, there are talks that gold investors are trimming long positions and also less demand for the physical demand for the precious metals. The last factor that has been hurting the price of gold is the negative technical action on the charts.

If you take a look at the daily December gold chart, you'll see all the false breakouts over the last couple of weeks, which have caused the gold market to make lower highs and higher lows. Furthermore, December gold is trading below all major moving averages and currently in a down trending market.

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.

Dec '14 Gold Daily Chart

Source: RJO Vantage

 

Metals - Silver


September silver on a daily and thus weekly basis has been anything but impressive. On a purely technical standpoint lower lows and lower highs are the sign of a downtrend. This market failed the week of July 18th to break above resistance of 21.630 which led to the falling to 20.00. This coincides with economic information that continues to improve. Last week was fairly busy where ADP employment showed an increase of 218,000, a fall from last month's 281,000, but optimistic for pushing above 200k. GDP showed a massive jump from -2.9% the previous quarter to UP 4%! This is the first estimate so watch for revisions on August 28th, but this preliminary estimate suggests maybe the weather was responsible for slow growth in the first quarter. Compared to last month's increase of 298,000, Friday's jobs number was down with only 209,000. To put things into perspective, over the past year 200,000 job increases were bright spots and seemed unlikely, but now we're at the fourth consecutive increase of 200,000+ increases in a row, a possible start to a new trend. Maybe 300,000 could be the next area of resistance. So where does this leave silver? In the near-term, the trend is down. Since this is such an emotional market, volatility is probably the closest thing to a guarantee, so as always expect it. Support is the long held 18650 with 61.8% retracement at 19790. If the market can hold this level, resistance at 2163 and 2216 need to be broken for a bull to rear its head.

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

September crude has continued to move lower, down to a low of $97.09 on August 1. (See chart below, dark purple line is the 50-day moving average and dark blue line is the 200-day moving average). Current oil stockpiles appear more than ample and demand again is in question. Oil demand has slumped off a bit with traders focusing on a refinery fire in Kansas and some weak data out of China. Expectations for tomorrow's EIA report are looking like we could see another draw. Last week traders were looking for a draw and they got one slightly greater than what was expected. It appears fear premium has been coming out of the market as a cease fire has been announced in the Gaza Strip. News has been scarce on Libya, Ukraine and Iraq. It does appear ISIS has been gaining ground in Iraq thou. All of these geographical areas have the potential to flare up very quickly, which in turn can build premium back into the market very quickly.

Short-term technical indicators look oversold and it appears the market is consolidating. I believe the bears still have control of the market though. Currently, I recommend targeting the 200-day moving average up around $99.50-$100 a barrel area.

I still like oil on the downside, but I think oil could be in store for a small bounce up. 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

Greetings! Smooth sailing here this morning with the natural gas futures. Last traded price on the September contract is 3879. (8:18 am CST) The market has been confined to a range between 3720 and 3890 for the last ten sessions. This of course is on the heels of the massive liquidation from the June 16th high of 4874. Traders will be looking to see if this can prove to be a solid footing for a reversal. The first step towards any bullish divergence will be if we can fill the 3 cent gap created on July 21st when we legged lower to 3910. As we push into August, the market will be observant of the upcoming hurricane season. Hurricane Bertha was recently downgraded to a tropical storm and is looking to be a non issue. Weekly injections are consistently strong and production is still chugging along at a record pace. Look for technicals to set the tone for the coming weeks.

As aforementioned, the price range has been consolidating between 3720 and 3890. We closed above our pivot point which is a positive signal. The market is currently trading above our 10-day moving average and this market is hungry for a bounce. Supply will continue to be a sizable roadblock for the bulls; however we should be observant of these weekly inventory reports. Support comes in at 3800 and below there at 3730. The 3890 level should prove to be strong resistance.

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 comment on October sugar futures finds us with a bit of déjà vu, all over again. A warehouse fire at a Brazilian port caused a spike in the price of sugar futures, again. The drama unfolded at breakneck speed with the opening price bar jumping from the previous session's closing price of 16.30 up to a high of 17.26 in the span of the 3 minutes. And just as fast, the rally fizzled with the market dropping to and stabilizing at the 16.70 price level for a time, only to fall again back down near the previous day's close. News sources highlighted the relatively small amount of sugar that was damaged and the willingness of sellers to pounce on the rally to describe what is a clear technical signal that the path of least of resistance, at least for now, is still down. Futures traders with resting sell orders overhead got a gift from the trading gods. Options traders waiting for a bounce to sell likely missed this opportunity. The fund trader category continues to liquidate longs and likely looks to increase short positions. It is very difficult for me to locate any bullish news or sentiment. October sugar futures are within a stone's throw of the lowest level on the chart, 15.79 and it looks like a one-way ride to new lows from here. The lack of any real traction for even the mildest bullish fundamental would leave me nervous if I was heavily short. Traders can reasonably use 16.75 for risk management. It is difficult to navigate a course of action for new positions at this level but should the market rally back up near the 18-day moving average, 16.80 or so, and fail I'd like to take another shot at the downside.

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

Very few futures markets have moves as much (in terms of %) as the cotton market in 2014. The fundamentals appear to be the main driver of this market as domestic production continues to soar. The previous WASDA report showed US production at 16.5 million bales, up 1.5 million from a month before. The upcoming report on August 12th will certainly provide us with more information, but for the time being, there doesn't appear to be much evidence to expect a change in this trend. Furthermore, world production continues to rise with large crops out of India. Given the large supply outlook in cotton combined with weak economic data out of China, the largest importer of Cotton, the fundamental outlook for this market remains negative. Yesterday afternoon there was a worse-than-anticipated crop condition report, which showed the percent of good/excellent crop was down to 53% from 54% in the week of 7/27. Despite the slightly lower percentage of good/excellent crop, the 53 figure is still 8% higher than this time last year (45%). At this time, the path of least resistance continues to be to the downside. Near-term resistance can be seen at 64.53 and 66.00 with the only relevant level of support around 62.00. If you'd like to discuss potential strategies to apply in the cotton market, or any other market, please contact me.

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 continues to trade in a wide range the past few weeks. We've seen a high of 3239 and a low of 3154 in that time frame. 3200 has been a magnet as the trade tends to lead back to that price. Long fund traders and speculators may be due for some profit taking at these levels. Keep an eye on the weather news coming out of West Africa - heavy rains and lack of sunshine may help support the market. Short-term technicals remain positive as we continue to close above the 9-day moving average. A break above 3216, today's current high, would be needed to attract some more buyers in the market. Consider placing buy stops above the market at 3220 to enter the market on follow-through.

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

Finally, the Brazil crop numbers have arrived! Expectedly, the small crop in Brazil will result in a tighter world supply in the long term. This lack of long-term supply sparked a buying frenzy, attracting those longs that formerly lay in wait. And also as expected, over the past couple trading sessions, September coffee prices have seen some very aggressive, wide swings, and volatility is high. The Hightower Group has also reported that "consumption in Brazil may exceed the US this year." If you were one of those quiet bulls, now is the time.

On the technical side, September coffee prices are now comfortably resting above the 185 area. This area should be critical support, and a race back to $2 should happen over the next couple of sessions (again). 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! A turn-around Tuesday is in the making as a private forecaster projected record large US corn and soybean yields and some much needed rain fell farther east than what was expected. The amount and location of the rains show the complexity of the Central US weather pattern and the problems that the models are having.

I remain bearish with Central US weather improving amid a wetter forecast. New lows are certainly possible by the end of the week if Midwest rains through Friday exceed expectations as they did last night. The latest radar shows rain in South Dakota, Southern Illinois, Northern Indiana, and western Ohio. If there is one more good rain coverage after this current system moves out it will go a long way in guaranteeing above trend 2014 row crop yields. After that the market will focus on yields relative to expectations and the degree to which these 4-year lows in grain prices is stimulating demand.

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

Dec '14 Wheat Daily Chart

Source: RJO Futures PRO

Nov '14 Soybeans Daily Chart

Source: RJO Futures PRO

 

Agriculture - Livestock

Jeff Gilfillan

Feeder and live cattle futures continue to trend higher led by firm cash markets and tightening spreads. Non-commercials continue to hold a strong net long (135,217 net long as of 07/29) but not yet at extreme levels. Cattle on feed results as of July 1st reflected lower cattle on feed (-2.4%), placements (-6.2%) and marketings (-1.8%) year over year. Cattle on feed over 120+ days were 5% higher year over year reflecting the favorable cost of gain in the feedlots.

Cash markets should remain firm but light through August but going into the 4th quarter the 120+ day supply and the non-reportable supply may weigh on the markets and test the strength of the deferred futures. The August/October spread has tightened up nearly $6.00 since mid July reflecting the markets short-term demand.

Producers may consider puts / hedges with feeders over 220.00 and again at 230.00. Speculators may look at 2015 long calls in live cattle to ride the trend and/or use to cover potential shorts in the 4th Qtr. Hightower research is currently in a few option positions. Contact us for details.

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. Open an account online to set-up complete access with the ability to set-up auto email subscriptions per sector.

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

Eurodollar, bonds and notes are all trading on the lower end this late morning. After last week's strong performance, this week's weakness in treasuries may be either a profit taking action or a major reversal; that remains to be seen.

Two weeks ago, I wrote about the possibility of near-term stronger bonds action due to possible equity pullback.

I wrote, "Overall, the strength in bonds leads me to think that bond traders anticipate a 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."

Last week's better number on balance has the financial markets now predicting that the Fed will act mid-2015 rather than later.

Technical prospective: Last week, bonds made a contract high on weekly bases at 139.03 and since has backed off a bit. I think equities will continue to correct and those who are bullish bonds will have a short-term edge for now. I also said that 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 provides 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

 

Currencies

John Caruso

Senior Market Strategist John Caruso gives you his currency commentary for the week. He gives traders a breakdown of this morning's economic numbers. This morning showed a strong USD. John gives traders some key levels to watch. The euro is breaking down, support should come later. John is looking for a corrective bounce in the British pound, in order for it to resume its bull trend higher. Outside day down in the Aussie. Give John a call to discuss the technicals of these markets.

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.



Equity Indexes

Jeffrey Friedman

Stock index futures were down big this past week following all-time highs in the S&P and Dow. Some traders have started expressing concern that economic growth may not be strong enough to support stocks futures near record highs.

The economy continues to improve with this past week's highlight being a good employment report. Monetary policy remains loose, boosting stock index futures. Fed policy is encouraging and still leaves other investment options as largely unattractive. Economic news has mostly been supportive. Stocks futures have risen largely in the month of July, despite skittish news from overseas which should have weighed on stocks futures last month. Overall, favorable economic news (including Fed news) outweighed worries about the Ukraine and Iraq. Stocks index futures are skittish over the thought that the FOMC could tighten sooner than later, but no one really knows!

Technical outlook for the September S&P futures remain in a long-term bull market. In the short-term, the S&P futures are in a downtrend, with most chart followers targeting 1875 and then 1837as their target for support. The S&P could go up to 1942 and then 1960 as an upside target. The market must go above 1960 if the uptrend is going to rejuvenated.

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.

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

Source: RJO Futures PRO

 

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