RJO Futures Website
September 30, 2014 Volume 8, Issue 20

 

Feature Article

Upcoming RJO Futures Webinars

Critical Trading Mistakes

Wed, Oct 8, 2014 at 7:00pm CT

Register now! Avoid the critical mistakes in this business of trading. Be a student of the markets and focus on mastering the basics of trading for profit while managing risk. Most amateurs take unlimited risks for limited gains, this is not a good business strategy. Learn from the mistakes that you make in the market and be persistent. Trading with a proven strategy can reduce these critical errors.

  • Learn to think in probabilities
  • Find a proven strategy and believe in it
  • Predicting moves in the market, not chasing price
  • Managing the emotional roller coaster
  • Trading decisions based on facts not guess work

Trading Agricultural Futures

Wed, Oct 15, 2014 at 7:00pm CT

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


Metals - Gold

Nick DeGeorge

In the early morning trade, December gold is down slightly and currently trading at $1217.1 a troy ounce. Ever since gold broke its support of $1273.0 back in early September, which was the bottom of the symmetrical triangle pattern highlighted on my daily gold chart below, it has had a hard time sustaining any kind of short-term rally. The recent rally of the US dollar has put major pressure on gold, but with India's festivals fast approaching and the situation out of Hong Kong, the shiny one might be able to hold this $1,200.0 an ounce level and get a short-term pop before I believe continuing its downtrend.

If we take a quick look at the daily gold chart you'll clearly see that it has broken every major short-term support level, putting it clearly in a long-term downtrend. However, it is extremely oversold. It wouldn't be out of the question for it to get a rally up to $1240.0-$1275.0 before continuing its downtrend which might get down to roughly $1,050.0 being that's roughly the cost per ounce for production of the precious metal. I have highlighted all technical levels below on my daily 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.

Dec '14 Gold Daily Chart

Source: RJO Vantage

 

Metals - Silver


As suggested in the previous eView, the much held 1840 support level didn't hold and the Dec '14 silver market is now swimming, or dog paddling, in the abyss. While I'd like to point it to the confidence in the FOMC with the slowly improving US economy, or the slowly puttering along employment gains, I'll just say this was technically set up to do so. Although past results are not indicative of future results, the chart below is suggesting that this market is setting up for its next consolidation level.

The 2012 consolidation of this market was 3748 to 2607. The consolidation lasted for all of 2012. In April of 2013 this market broke support and consolidated from 1818 to 2512 before breaking support to the new level. Near-term lows so far are 1708. If the longer, tighter consolidation continues we can expect the consolidation to range 400 points for the foreseeable future, based on a 60% reduction of the range from 1100 to 700. If this is the case we might see the lows for this and the coming year around 1400.

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.

Dec '14 Silver Daily Chart

Source: RJO Futures PRO

 

Energies - Crude Oil

Mike-Sabo

Senior Market Strategist Mike Sabo talks about the energy futures. Crude is up and firm from last week's trading. The crude/Brent spread continues to narrow. Short-term demand appears to be strong as evidenced by the draw in stocks last week and the higher than normal refinery capacity utilization levels. The price of Nov '14 oil is hitting up against the 50-day moving average which could prove to be a resistance level. If crude breaks through the $94.50 - $95 level the market could target $97.

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.

 

Energies - Natural Gas

Bill Moore

Greetings! November natural gas futures this morning are fighting to sustain yesterday's breakout above the August 28th highs. The four day rally came to a halt with technical factors weighing heavy on the price. Natural gas tends to be highly technical in its price direction this time of year, as fundamentals tend to lack in influence. There are slightly cooler temperatures on the horizon which could put a slight pull on inventory from demand boost. Last week's injection of 97 BCF boosted the total number to 2,988. Keep an eye on the Ukraine as well. Struggle over a pending bill with Russia could put a supply crunch on.

As I'd mentioned before, the technical indicators are key this time of year. I'd like to see this market hold yesterday's breakout before committing to the bull camp. We are slightly over bought which could be contributing to today's resistance with profit taking. We did close above our swing resistance and the 10-day did just cross the 50-day moving average, as seen on the below chart. We have daily support at 4.060 and resistance at 4.263. Look for these old 4.300 lows as long-term resistance should we hold this rally.

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.

Nov '14 Natural Gas Daily Chart

Source: RJO Vantage


Softs - Sugar

Joe Nikruto

This week's comment finds the technical picture in March sugar futures much changed. Will the fundamentals for sugar catch up? That is the big question. Wire services are reporting recent strong interest in physical sugar as buyers and sellers both look to book orders before month and quarter end. This action finds futures traders short and suffering a bit of a squeeze from the renewed physical demand and likely some profit taking as long held short trades are booked for month/quarter end statements as well. Technically March sugar futures have been on a tear for the last six trading sessions easily taking out both the 10-day and 18-day moving averages overhead. Open interest has dropped the last two sessions on volume that can be described as just decent. This could be a signal that the rally is tired and March sugar futures may need a few days to consolidate and gather itself for another leg higher. The 50-day moving average remains, currently 17.36, as overhead resistance/target. The commercial trader category has gotten relatively long or rather less short. The commercial category often leads the market. This can be the precursor to a major change in trend. But even just short covering could take the March sugar futures up to and over the 17.50 level. Look for trend following traders to continue to cover with price action over 17.17 and 17.46 basis the March contract. It has felt like buyers have been holding off on purchases now for some time which may have made the recent weakness in sugar more pronounced. The fundamental situation has been one of ample global supply with more sugar, though less than previous years, on the way. Certainly, there has been little incentive for anyone to try to catch the falling knife. We may be coming to a point where stockpiles have been depleted and buyers are securing needed supplies as we head into year end. Will this renewed buying interest be enough to change the psychology and the trend of the sugar futures market? The jury is still out. Watch the 50-day moving average. This market has not been able to do any work above the 50-day moving average since June. Any closes above will be a clear signal that physical buyers are supporting the market rather than ignoring it. Also, watch 16.00 in March futures as an ability to hold this level should also indicate underlying support from physical sugar demand.

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.

Mar '15 Sugar Daily Chart

Source: RJO Futures PRO



 

Softs - Cotton

Erik Tatje

Ample global stocks of cotton continue to weigh heavily on cotton futures prices as the market recently made new lows and now sets its sights on the 60.00 psychological level. After briefly trading above the intermediate term trendline originating from the 5/8 peak, the market has since sold off below the trendline and the faster 20-day movinga averge has also crossed below the 50-day All of these technical signals serve as confirmation of the bearish tone of cotton, and the negative trend appears to remain in play below the 68.48 swing high. Furthermore, a trade below the 60.83 could very well open the door to additional selling pressure.

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


December cocoa has started to consolidate as we wait for fundamental news to give us a direction. The December contract had a strong rally beginning in the second week of September, with contract highs hitting 3399 on September 25th. Bullish traders believe the continued spread of the Ebola virus through Africa could cause issues with transportation and logistics. Some analysts are forecasting a price target of 3800 if Ivory Coast and Ghana run into more fundamental issues. However, as of now, profit taking and bearish traders are of the mindset that the closed Ivory Coast borders have helped contain the spread of the Ebola virus, which has led to the recent sell-off. Technically we are trading on or at the 9-day moving average. We'll see support at 3300, and below that 3280. The Ebola outbreak will be the key factor for now – look to buy calls if you are bullish.

In the September 16th eView, I recommended buying Dec '14 3300 calls at $210 real money plus fees. Those options are now in the money with 39 days till expiration and are trading at $1,230 real money.

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.

Dec '14 Cocoa Daily Chart w/Moving Averages

Source: RJO Vantage

 

Softs - Coffee

Adam Tuiaana

The coffee market looks to be garnering support from the promise of an even smaller crop in 2015, coming out of the largest coffee producer, Brazil. We've seen some choppy and volatile price action over the past couple of months, but it now appears that the market is holding support above the 175 level. Keep in mind that there are still excess bumper crops from Columbia and Vietnam that have likely continued to keep coffee prices below the 200 level. Traders will likely sit tight until the excess short-term supply has worked its way out to satisfy world demand.

On the technical side, December coffee prices have recently violated the 18285 consolidation low from August 20th, but have since charged to retake the 190 level. There are several strategies that can be applied here in this situation. Call or email for strategy details.

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.

Dec '14 Coffee Daily Chart

Source: RJO Futures PRO

 

Agriculture - Grain

Stephen Davis

Good Afternoon Traders! It is a USDA report day, as well as Turnaround Tuesday at the CME. Corn, soybeans and wheat are all down with wheat and soy almost down double digits following NASS's Crop report Monday afternoon, in which crops are still rated very highly. Crop conditions are losing importance as harvest gains steam. However, my work suggests that the stability in crop ratings over the last month implies higher yield adjustments in the October and November crop reports. I believe this is the most important statement anyone can say or write at this time regarding our grain markets.

South America weather models also maintain helpful rainfall of .50 to 1.50 inches in Mato Grosso, (Brazil's major soybean area) through the next five days, which will keep soybean seeding there ahead of normal. However, too much rain is falling across southern Brazil, as wheat harvest kicks off there.

There is still a lot of uncertainty regarding China's mood on GMO soybeans. After denouncing GMO crops last week, newswires have reported the government aims to improve public perception of modified crops as well as develop them for their own production. The net result of this should not be extreme. It is just that importers are losing money as soybean prices have fallen more than expected.

This morning's Quarterly Stocks report will be traded briefly. Than it is on to just how big U.S. and world crops will be in the October WASDE report next Friday.

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

 

Agriculture - Livestock

Jeff Gilfillan

Live and feeder cattle futures continue to break new highs led by firm cash markets. A friend of mine recently texted me a picture of a $63.00 steak he purchased from a local butcher. Did I mention he purchased this steak? There is still some margin for retailers to buy live cattle under 163-164 before prices need to move much on the shelf, but I suspect the beef eaters buying $63.00 steaks may not notice. Us folks with tighter budgets may keep walking down the glass displays looking for pork, lamb and chicken so we can rationalize the six pack of craft beer or the organic milk.

Last month, I mentioned there may be some seasonal tightening of the cattle/hog spread, but I would not short cattle outright or via spreads until some noticeable improvement in CPF data.

As mentioned in early September, if you are a speculator consider purchasing 2015 live cattle calls on setbacks. The last two newsletters I also suggested put protection for producers in the feeders over 220 and again over 230. I believe live cattle still has the potential going into 2015 to see 180, at which point hedge protection may be warranted for feedlots if the futures reverse to a premium over cash alongside feed price protection at current levels in corn and beans.

Absent a global bearish demand set of events, I suspect live cattle futures will hold above 151-152 support. All parts of the supply chain seem to be keeping output in check to keep prices firm and retail buyers seem to have absorbed the steady price increases.

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 Weekly Monthly Chart

Source: GeckoSoftware.com

 

Interest Rates

Phillip Streible

The interest rate markets have seen strong trading trends over the past few months where ebbs and flows from thoughts of rising interest rates to declining interest rates have occurred. When dissecting the fundamentals we have seen a few different reoccurring themes. First of all, when the FOMC meetings occur the Fed tends to keep a vague picture causing a sharp upswing in the markets, once this news comes out and is absorbed in the trend the market starts a decline. Second, everyone is under the belief that interest rates will rise by mid-2015 and the Fed will be done with QE next month.

So looking at the market from a trading perspective, my recommendation is to continue to play a lower rate theme. Currently the MACD has turned bullish and stochastics are continuing to turn up. Consider jumping on the long side of the 30-year bonds on a correction back to 137 and don't risk more than down to 135-15. On the 10-year notes traders may want to wait for a better confirmation of the uptrend north of 125-05. This should signal a move back up to 126 and don't risk anything greater than 123-16 (the double bottom from the end of July).

If you'd like to learn more about futures trading or the interest rates market specifically, please contact Phillip Streible at 800-438-4805 or pstreible@rjofutures.com.

Dec '14 30-Year T-Bonds Daily Chart

Source: RJO Futures PRO

 

Equity Indexes

Tarik Husseini

Today is the last day of the 3rd quarter, which looks to mark seven consecutive winning quarters for the S&P market. Over the last 7 quarters the S&P is up 39%. This is the greatest winning streak since 1998. Illustrated in the 2 year chart below, is a perfect 45 degree bullish trend if there ever was one. Technically speaking we are comfortably in the uptrend, which hasn't shown any strong signs of abating. Looking at the bullish channel in the S&P, a drop to the 1935.00 level would encounter strong trend line support, with an expected bounce back into the channel. Over the past two weeks the December S&P has touched an all-time high of 2014.50, and is currently trading 1961.50. There has been a lot of play around the 50-day moving average at 1966.00. If one were looking for a reason to be bearish the S&P, you could point out that September has been the worst month in the last 13 months, with a decline of 1.3%. This quarter the S&P is up .9%, the worst quarter in the last seven. The VIX, volatility index, has spiked up 33% since the S&P made its all time high on 9/19. And there has not been a 10% correction in the last 3 years. Fundamentally speaking, the things to watch would be the end of QE and a potential move higher in interest rates, the EU and their battle with anemic inflation, and the current protests sweeping Hong Kong and potentially spilling over to the mainland. To wrap up, it makes sense to continue trading with the bullish trend until the market signals otherwise. This may come in the form of a break and close below the 2 year channel, or a fundamental shift triggered by Fed or ECB action.

If you'd like to learn more about futures trading or the equity markets specifically, please contact Tarik Husseini at 800-672-0664 or thusseini@rjofutures.com.

E-mini S&P 500 Daily Continuation Chart

Source: RJO Vantage

 

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