RJO Futures Website
November 11, 2014 Volume 8, Issue 23

 

Feature Article

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Metals - Gold

Nick DeGeorge

In the early morning trade, December gold is continuing its downtrend and trading at $1,154.0 a troy ounce. Gold is expected to continue its downtrend with the surge in the US dollar and many analysts predicting that the rally will continue throughout 2015, especially on strong speculation that interest rate hikes by the Feds will finally be put forth into action. After last week's breach of the $1,181.0 support level, investors/traders alike will now look at the $1,050.0 to $1,030.0 an ounce because that is what is roughly cost to pull the former shiny one out of the ground. Below is a daily RJOF PRO December daily gold chart for your review.

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 Futures PRO

 

Metals - Silver


Although there's been a lot of activity over the last four years, this market is back to where it was near the start of the financial crisis. Looking back at the stats of February 2010, the unemployment rate was 9.7% with a loss of 20,000 jobs for January, and 150,000 lost the previous month. The US GDP, while negative for the last quarter of 2008 and three quarters in 2009, was finally positive for the last quarter of 2009 at 3.5% and then 5.7% for 2010 Q1. It would still be another seven months before unemployment would top out at 10%, but that was enough to bring this market up to almost 50 in April of 2011.

Since that peak however, silver continues to be punished. GDP on of October 30, 2014 was positive at 3.5% with October's non-farm payroll report showing 214,000 jobs created and the unemployment rate dropping to 5.8%. The fundamentals of the market have clearly changed and the US is in a different position than it was in 2009. After writing such a bearish article it makes me think this market has to go up, but I'm still convinced we could see 1400 as support in the coming months before we see a consolidation trade.

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

Eli Tesfaye

The break below 77.13 in December crude oil suggests that the market is not quite done going lower; 15% or so weakness in the dollar late morning today is slowing the downward pressure in crude oil. With EIA predicting further rise in US oil production yesterday, the fundamentals and technical aspect seems to be in agreement. For now at least, the downside target seems to be around 75.84 and it is hard to take this market serious on the long side unless it takes out the 79.85 high from my prospective.

Unless some sort of supply concern flair up or serious profit taking in the dollar, the track seems to favor slower but sustained weakness. Erratic short covering rally could also be triggered above the current level if bargain hunters come to lift the market as well.

Short-term technical indicators look oversold and it appears, for now at least, no sign of market consolidation. I believe the bears still have control of the market for the long-term, but short-term we may get bounces. It is not unusual for the market to rally hard in a bear market. 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 Eli Tesfaye at 312-373-5394 or etesfaye@rjofutures.com.

Dec '14 Crude Oil Daily Chart

Source: RJO Futures PRO

 

Energies - Natural Gas

Bill Moore

The natural gas market is under pressure again this morning following the massive sell-off that started Sunday night. It's amazing to see how hyper sensitive this market can be to weather outlook as we shift from bull to bear patterns here. With inventories still very strong, the market broke support and sold-off to 3700 from October 17th - October 27th. We then proceeded to 'dead cat' bounce upward to 4630 on a change of weather pattern. Technicians are likely frustrated here as the market is struggling to hold any kind of breakout here. If you live in the northern Corn Belt and are reading this, you already should be aware that winter is starting to make its way into the US. I'm looking at early 2015 call(s) spreads to take advantage of pending volatility. Nothing has changed pertaining to the nasty weather outlook for early 2015. Last week's inventory number saw another build of 91 bcf to 3,571. It should be noted that we haven't had anything lower than an 80 bcf build since May of 2014. I'm going to call support at 4.250 and below there at 4.126. Resistance is at 4.633.

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.

Jan '15 Natural Gas Daily Chart

Source: RJO Futures PRO


Softs - Sugar

Joe Nikruto

This week's comment finds the March sugar futures contract up over 50 points, at the time of this writing. This is the largest move we have seen in this market for weeks. On a five minute chart four distinct waves of buying can be seen on relatively big volume. This move has violated the 10- and 18-day moving average and has almost taken March sugar futures all the way to the 50-day moving average, 16.38. With the fund trader category pressing the short side in previous weeks it shouldn't surprise us to see bouts of short covering roiling the market. Fundamentals have turned positive if not outright bullish with demand running high from large importing countries. The Chinese side of the demand equation calls for attention as their production has been lacking and will have to be made up with increased imports. This fact has the power to arrest the downtrend and even change the direction in my opinion. I came into the day prepared to write about the demise of the 'cup with handle' pattern and give a quick sentence or two on the extra power of failed powerful technical patterns. Much like how a failed head and shoulders top pattern speaks to prices moving significantly higher, the same can be said for a the cup with handle bottom. If we found this market lower today my call would have been for much lower prices going forward.

As it stands, today's technical action has to be respected. I do find myself a bit suspicious that it has taken place on a bank holiday in what would have likely been a lower volume, lower participation trading session. March sugar futures have had a hard time trading above let alone closing over the 50-day moving average. I would use this line in the sand so to speak as a sign post. The ability of this market to post closes over the 16.38 level could speak to higher prices and be the spark that puts the fund trader into a short covering mode, a fire that could feed itself quickly. Our trend following work shows fund traders looking to cover short positions near 16.74. They start getting long in the 17.21 and 17.32 areas. Of course this is all bar talk until March sugar futures can close over the 50-day moving average more than one or two times. I am on the sidelines as this move has pushed price into a technical middle ground. Failure to continue the rally should allow traders to jump back on the short side with good levels for risk management. Positive price action will leave a double bottom on the chart and could point to Chinese demand becoming the dominant fundamental, again.

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

Monday's World Agricultural Supply Demand Expectations (WASDE) report showed an increase in production and ending stocks in the cotton market, which effectively sent prices lower for a retest of the 62.00 support pivot. Given the seemingly bearish nature of the report, all eyes will be on whether or not cotton can hold the previous lows of the currenct trading range from 60.83 – 62.00. Despite the strong sell-off following yesterdays report, prices did find initial support at 62.00 and remain above this figure, thus confirming support. Traders should continue to monitor price action around these key support levels as they could offer a "tell" as to where the market wants to go following yesterday's report. Any sustained weakness below 61.00 could potentially be the start of a new leg lower in cotton prices. Please contact me if you'd like to discuss potential strategies.

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


Technically, cocoa is forming a short-term recovery. The March contract closed above the 9-day moving average and has reached oversold levels. For the third straight session the March contract has seen a positive close. Today's high has been 2925 with today's support level at 2900. If we can close above 2915, 2950 will be the next level to target. Fundamentally, the news is quiet. Lack of demand and very little weather concerns continue to weigh negatively on the market. If you are still interested in gaining exposure to the long side, look to buy 3300 calls for 280.00 real money before fees. The March contract traded at these levels as recently as the end of September. These options have 88 days until expiration.

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.

Mar '15 Cocoa Daily Chart w/Moving Averages

Source: RJO Vantage

 

Softs - Coffee

Adam Tuiaana

The fundamentals of past poor weather conditions and an overall global production deficit will likely support coffee prices into 2015, but for the time being we're seeing exporters hedge with short selling, and speculators are liquidating long positions. Open interest continues to dwindle, down nearly 10,000 contracts. Forecasted wet weather this week in key production areas of Brazil will be seen as positive for crop production, and will likely add more pressure to coffee prices.

On the technical side, December coffee prices continue to freefall to the 17640 critical low from Sept 22nd. A break of this level may precipitate a quick run down to the 165 level. Recovery back above the 200 level will likely spell a semi slow visit back to the 22500 level and continued intermediate uptrend. I believe long-term coffee prices will find their way back above that critical 22500 area, but until we see that take place a break of the aforementioned 17640 level would make me bearish.

There are several strategies that traders can apply in this situation. Call or email for specific strategies to fit your trading plan.

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. Soybeans are up double digits led by strength in soybean meal. Corn and wheat are down fractionally. The November WASDE report out yesterday does not argue for a rapid collapse in value, but rather a steady and grinding decline amid normal South American weather forecasted going into December. The November Crop Report was not market changing. It rather confirms that severely adverse weather is needed for any lasting bull market.

The ending stocks from yesterday's report are 2.008 for corn and .450 for soybeans. This is what drives the market. Two billion bushels of corn is a lot of corn left over and 450 million of soybeans is a lot of soybeans left over, especially with big South American soybean planting. US farmers are going to store grain this year and wait for a rally. In the short-term that is bullish and longer-term that is bearish The key for soybeans in the short-term is December soybean meal. It is up over $11 today and that is supporting the whole soybean complex.

The keys going forward will be cash movement, South American weather, the technical action around the key moving averages and the pace of US export sales.

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 Soybean Meal Daily Chart

Source: RJO Futures PRO

Jan '15 Soybeans Daily Chart

Source: RJO Futures PRO

 

Agriculture - Livestock

Jeff Gilfillan

Beef production for 2015 is estimated to be 3.2% lower than 2014 by the USDA. Supplies are tight overall but there is some backlog in the feedlots. Cattle on feed over 120 days is up 7% Y/Y and 13% over 5 year avg. Feeders placed over 800 lbs was up 8% Y/Y. This is largely due to the economics of adding weight due to favorable grazing conditions and cheap feed.

Cash cattle will be the driver this holiday season. The market traded 170 last week but trade has been thin. Will end users get caught short pre-holiday as they have been several times this year? From a technical standpoint, there appears to be room for a blow-off move higher and non-commercial participants have positioned a sizeable net long, though not extreme.

Low energy prices and stable 401ks may start the party planning process early this year and the cold weather should encourage an uptick in beef demand.

Packers are currently losing with high priced input and low priced cash product but this could change swiftly if wholesalers again get caught short.

Bearish traders may consider fading the Feb 2015 / April 2015 at a $3.00 premium February on a move higher. Watch this spread alongside cash as a precursor to near-term trend. Bullish participants might consider 172 calls in Feb 2015. I am overall bullish but playing the short spread with a tight stop.

Some of our analysts are pointing to 200 in fed cattle. I have been projecting 180. Hedge protection I believe should be considered using options over 180 going into spring.

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

Keep an eye on the downside action of the December T-bonds after yesterday's rejection north of 142'08 and a close right on the lows. We will most likely see the "rising interest rate" committee come back into play right after the holiday season provided retail sales are strong. The stock market is still moving up to unprecedented levels which will offset any interest rate concern. Recent treasury auctions have had declining demand which will reinforce the thoughts that higher interest rates are coming. Some of the dialog out of the FED members is suggesting the first short-term interest rate hike would be set to come in summer 2015, while other FED members are watching inflation rates and looking for a rise above 2% before giving the nod for a rate hike. For a trade strategy, traders may want to strangle the market buy owning calls and puts with calls as a defensive play and puts as your offensive play. You can also consider short futures with calls as a hedge.

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

Greg Perlin

December E-Mini opened firmer in pre-market trading although the trading session is expected to see thinner volume due to bond markets and Government offices that are closed for the Veteran's Day Holiday. One of the main drivers that keep pushing the S&P to higher ground is the strength in overseas markets. The Japanese Nikkei closed into a new seven-year high helped by ideas that Prime Minister Abe might consider delaying sales tax increases and could push for a snap election. China's Shanghai Composite rallied to a new three-year high overnight as well. Another supportive factor for the S&P has been the ongoing strength in the $/Yen. The $/yen briefly hit 116-00 overnight and has made another contract high which correlates into stock strength.

Technically the market is bullish, triggering a breakout over the 2022.50 weekly high, signaling for an aggressive bull run to 2070. Stable action over 2022.50 should prompt aggressive rallies. Harder corrections should hold 1987.75 to maintain the bull drive. A close under 1987.75 alerts for a turnover and a correction phase to 1945.50.

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.

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

Source: RJO Futures PRO

 

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