RJO Futures eView Newsletter January 6, 2015 | Market Insight | RJO Futures

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January 6, 2015

Volume 9, Issue 1

 

Metals - Gold

Nick DeGeorge

In the early morning trade, February gold is trading up again and extending its rally for a third straight session. After ending its second straight year of decline, the shiny one is looking to bounce back and hoping it will see signs of real inflation in 2015. The big drop in the S&P, copper and crude oil are causing a lot of uncertainty, which I believe is the main cause of this three day rally. However, can gold continue its rally with all the deflationary signals that are currently out there?

If we take a look at the daily gold chart, you'll clearly see that gold is breaking out. If gold gets back above today's high of $1215.0 an ounce, then look for it to retest the December 9th high of $1239.0. If it fails to hold this level, then look for a retest of last week's low of $1178.8.

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.

Feb '15 Gold Daily Chart

Source: RJO Futures PRO

 

Metals - Silver


After opening 2014 just shy of 20 at 19440, silver closed 2014 lower for the second year in a row at 15685. Prior, the silver market hadn't closed the year out in the teens since 2009. Unemployment in Dec of 2009 was 10% compared to 5.8% for last month. We'll get the most recent numbers on Friday but I have a feeling unemployment won't jump to 10%.

Of course, almost anyone can pull up a chart and reference the past as to what has happened, but the more difficult task is figuring out what's going to happen. Very near-term resistance on this market is 16810 with a second resistance of 17355. After the aggressive move down over the past year a close above 17355 is the bare minimum to suggest a start of a new uptrend, with a close above 1800 needed to show more conviction to the upside. However if the March Silver futures fail, support of 14155 could become new resistance. Hold tight.

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.

Silver Daily Continuation Chart

Source: RJO Futures PRO

 

Energies - Crude Oil

Mike-Sabo

February crude oil has continued to reward the bears in the market when the entire month of December oil sold off from a high on 12-1-14 of $69.33 to a low on 12-31-14 of $52.44, almost a $17 move lower over 22 trading days. OPEC has been quiet after their meeting on Thanksgiving and their decision to do nothing to curb oil production. Right now it comes down to basic supply and demand issues � the market appears well supplied and demand is very questionable. Europe continues to have significant economic problems and Greece is back in the news again! The US dollar continues to march higher helping put pressure on oil as well. Current oil stocks continue to run over the all time highs for this time of year. Total stocks currently stand at 385.45 million barrels, which is about 25 million more barrels than the all time high for this time of year, and over 40 million more barrels than the 5-year average for this time of year. Commercial interests have continued to pick up with refinery capacity currently operating at 94.4% which is 2% higher than last year. Most traders appear to be mixed on their expectation with tomorrow's EIA Report. I think we will see a decrease in the stocks. At some point these producers will start to cut back on their production helping to stem the selling wave.

Short-term technical indicators are oversold in my opinion but that has not stopped the selling. February oil made a new contract low this morning. A break back above $55.20 could trigger a short-term rally.

I currently recommend looking to play oil on the upside but with caution as further selling pressure is possible. Using the proper strategy such as a call-fly-spread or bull call spread could help you position to take advantage of a move higher. Futures traders should consider buying puts for downside protection. 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.

Feb '15 Crude Oil Daily Chart

Source: RJO Futures PRO

 

Energies - Natural Gas

Avery Burton

Despite starting the new year off with unusually cold temperatures gripping much of the US, natural gas prices have continued to push 2-year lows. Just one short year ago a similarly cold start to January helped natural gas futures reach ~4.40/mmbtu, a near 55% premium to where prices are today. One major difference between now and then would be the fundamental changes to the supply side of the entire energy sector. With crude oil pushing below $50/barrel and natural gas production likely starting its tenth consecutive year of growth (EIA), many traders have lost confidence in the upside of this market.

Regardless of how strong production currently is, it's critical to note that natural gas demand remains in a very consistent and long-term uptrend (IEA). In the end I believe this demand will persist and supplies will soon normalize. Now that a double bottom has developed around 2.80 in March natural gas, it may finally be time for bulls to come out of the woods. Traders should remain very aware of two large gaps that are unfilled on the chart (one around 3.40, and the other around 4.00). While I recommend considering March 2015 call options, the current double bottom offers a great stop-loss area for new outright long positions.

If you'd like to learn more about futures trading or the energies market specifically, please contact Avery Burton at 866-741-0339 or aburton@rjofutures.com.

Feb '15 Natural Gas Daily Chart

Source: RJO Futures PRO


Softs - Sugar

Joe Nikruto

This week's sugar comment finds March sugar futures in the midst of a respectable technical pop. Up 62 points at the time of this writing, in this morning's trade sugar was able to break out above both the 10- and 18-day moving averages, trading all the way up to 15.06. Difficult to believe that the key reversal showing on the chart from Monday is solely responsible for an 80 point move in sugar but it is likely contributing to the strength here today. Draw your own conclusions but note that 5,400 contracts traded in the 5 minute bar on the way up to 15.06 and 11,000 contracts traded in the next 5 minutes as March sugar futures fell from the high back down to 14.65. I am mindful that dryness in South America could be a catalyst for significant short covering. But at this point I am not sure that there is enough demand to offset ample global supply should there be no damage from hot and dry conditions there.

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

Despite a slight rally off the November 13th low, the overall directional trend in cotton remains lowers as technical structure continues to host relatively lower highs and lower lows. Price action found local resistance around the 38.2% retracement (approx. 62.10) from the recent sub-range from August swing high and November low. This area could very well serve as the "swing high" going forward and traders could consider using this level as significant resistance. Above here, the 63.70 � 63.80 will serve as additional near-term resistance going forward. The RSI remains subdued below the 60 level, indicative of a bear market, which is confirmed by the price action on the chart. So long as the recent swing highs remain unbroken, the probabilities will continue to favor further sideways to lower price action. 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.

Mar '15 Cotton Daily Chart

Source: RJO Futures PRO

 

Softs - Cocoa


March cocoa found support around 2900 and is trying to recover from early morning lows. Technically, a close above could have us headed back to the 3000 level. Over the past two days we have seen higher closes despite negative outside markets. A strong dollar and weaker equity market haven't had much effect on cocoa. Positive supply and demand news leads the attempted recovery. Bad weather in Ivory Coast and a possible El Nino threat this quarter has interested buyers. Ivory Coast port arrivals are 130,000 plus tones behind last season's pace. If you are bullish and looking to go long, consider buying futures in the March contract on follow through at 2955; use protective stops based on your risk tolerance.

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 Futures PRO

 

Softs - Coffee

Adam Tuiaana

Is coffee trying to make a recovery? Most likely, no. Although we still await premium from a poor Brazilian harvest, coffee prices cannot lie. A steady freefall after the critical violation of the 180 area has signaled traders to stack up on the short side, which prompted a quick and ugly visit down to the 160 level. We've also seen a continued weak Brazilian currency, which has added some pressure on coffee prices.

I have seen nothing to suggest that a bottom in coffee prices is in. I believe this rally to be an opportunity to sell, unless we reach back over the 200 level. Until then, look for an opportunity to sell on rallies. Call or email to discuss specific strategies that traders can apply in this situation.

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.

Mar '15 Coffee Daily Chart

Source: RJO Futures PRO

 

Agriculture - Grain

Stephen Davis

Good afternoon traders. The grain markets are higher today as they continue with The New Year's rally. While the funds have come in and bought the market this year, traders are also citing developing dryness in northeast Brazil, fund money shifting from energy to agriculture and Informa's 10:30am CST release today of 2014 corn and soybean production ,which is expected to be lower on reduced acreage. This agriculture market rally is impressive considering how technically weak we closed last week with the strength of the US dollar, new lows in crude oil and the CRB index, reports of upcoming fund selling in corn and wheat in annual rebalancing, and much larger ending stocks in corn and soybeans compared to a year ago.

Cash markets, which are quiet at the moment, should weigh on the markets after the January crop report. US farmer selling usually takes off in January. At the present, farmer selling has been quiet as farmers look for a further rally. The real focus is next Monday's USDA reports which will include the winter wheat seeding data for this year, 1st quarter estimates for corn and soybean usage, as well as the final production figures for the corn and soybean crops for 2014. Be careful with this USDA report as it can set the tempo for the first part of the year as limit moves both up and down are quite common. Once this USDA crop report gets out of the way it is hard to fathom what can continue to drive these grain markets higher. South American weather is in good shape. Every grain analyst out there will tell you this rally cannot last. That concerns me when everyone says the same thing.

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.

Mar '15 Wheat Daily Chart

Source: RJO Futures PRO

Mar '15 Corn Daily Chart

Source: RJO Futures PRO

Mar '15 Soybeans Daily Chart

Source: RJO Futures PRO

 

Agriculture - Livestock

Jeff Gilfillan

The beginning of last year witnessed a 5.8% decline in equities and a cold snap. We have the cold back and a similar decline in equities that targets 1932 in the March ES. European instability, holiday hangovers and consumers setting their new budgets for 2015 is helping to feed the cold start for the year and rolling over into the cash meat market. Beef production is down and the charts are still heavy. Some analysts recommending hedge coverage if and when new highs are met, also may signal we may not get there.

The markets are pricing in deflation across the board that should eventually catch up to the beef market as supply gets rebuilt and competitive meats increase production to capture market share. As we have seen this does not happen overnight and once consumers abandon their new budgets and skip the gym for the delayed holiday party and playoff/Super Bowl gatherings, retailers will again scramble to stock the shelf.

Next week's USDA crop report should provide some direction for both the grain/livestock market. Late January economic reports and central bank meetings should provide needed clarity in the equity/fixed income markets. Expect wider swings the next two weeks with good support $6-7 under cash in live cattle and resistance just under 170 in the front-month futures.

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 Chart

Source: GeckoSoftware.com

Feeder Cattle Monthly Chart

Source: GeckoSoftware.com

 

Interest Rates

Phillip Streible

T-bond futures continue to show a strong uptrend with large trading ranges with support significantly lower at 143'31. Yesterday we saw the key close over 147'00 which shows the uptrend is solidly in place. If you are long bonds and notes be sure to adjust your stops before Friday's nonfarm payroll report. Most analysts expect a report north of 200,000 jobs and I can't agree more to this especially with holiday hiring. My only concern is that the volume has been low. Note futures are showing the same uptrend with a technical double bottom in place at 125'17. ADX is strengthening showing the upward trend is strengthening. If we see a close over 128'00 today that will confirm the strength of the move. Looking at money managers from the COT report, my interpretation is that they are short bonds and long notes.

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.

Mar '15 10-Year T-Notes Daily Chart

Source: RJO Futures PRO

 

Equity Indexes

Jeffrey Friedman

Stock index futures were down big these past four days after making all time highs for a 5-year bull market. Monetary policy remains in question with the ending of US bond buying program. Fed policy is encouraging and still leaves other investment options as largely unattractive. Economic news has mostly been good. Stocks futures rose largely in the last part of 2014 despite skittish news from overseas which should have weighed on them the last 30 days. Overall, favorable economic news (including Fed news) outweighed worries about the Europe, Ukraine, China and Iraq.

For end of year 2013 to end of year 2014, major indexes futures were up as follows: the Dow, up 7.6 percent; the S&P 500, up 11.5 percent; and the Nasdaq, up 13.5 percent;

The consumer sector is the focus this coming week with the highlight being the employment situation report for December, released on Friday. Payroll jobs for November came in stronger than expected. Jobless claims have been low recently, so the question is whether job growth remains relatively strong. On the other hand, wage growth has been sluggish and traders will be looking for stronger growth.

Technical outlook for the March S&P futures remain in a long-term bull market. The short-term trend is sideways to up, with most chart followers targeting 2060 and then 2090 as their target for resistance. The S&P could go down to 2005 and then 1965 as a downside target. The market must go under 2000 on a close for the short-term trend to change.

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.

Mar '15 E-mini S&P 500 Daily Chart

Source: RJO Futures PRO

 

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