RJO Futures eView Newsletter January 20, 2015 | Market Insight | RJO Futures

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January 20, 2015

Volume 9, Issue 2


Metals - Gold

Nick DeGeorge

In the early morning trade, February gold is still enjoying its recent rally and currently breaking another fresh high trading at $1,288.7. I believe the shiny one has extended its recent rally in large part on hopes that the ECB will pursue a fresh new round of stimulus this Thursday, which has also extended rallies in global equity markets. Also, world currency markets have endured a huge sell-off over the last couple of months, which investors/traders alike have been repositioning their bets; due to the huge volume increase in the shiny one I'm betting that's where a large chunk of their capital has been moved to, therefore helping to further extend the rally in gold.

If we take a look at the daily February gold chart, you'll clearly see that the gold has broken a lot of resistance and is currently prone for higher prices. If gold can break the $1,300.0 an ounce level, these are the three levels I believe it could at least retest: First, $1,323.0, which is the August 8th high; next, the high of July 10th of $1,347.3; and finally, the March 14th high of $1,389.1, which is not out of the question for this market to retest by the end of the first quarter of 2015.

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

It's a new year with some new love for the metals with silver showing its strongest upside move in months. Silver opened the year at 15730 and today's high was 18045 in the March contract. That's almost three full points in a month! With a close above 17820 this puts this market in near-term bull market territory. This is a great first step. A close above 18630 will bring this market out of the 14100/18620 range and potentially into higher ranges. As much as I'd like to see a close into the 20's traders will need to pay attention to how the 18630 level is handled. For most of last year silver traded in a 400 point range so if this market fails at 18630, silver could be range bound from 14100 to 18630. However, if this market takes off at 18630, we could shortly see silver in the 20's.

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

Eli Tesfaye

Front month March crude oil is down $1.65 on the day at $47.47. The path of least resistance continues to be to the downside. Last week, the market made a corrective type rally to the upside and reached all the way up to $51.73 before it backed off. It wasn't able to hold that gain in overnight trade with the IMF announcement of downward revision of global world forecast from 3.8% to 3.5% for 2015. It seems that for now, the bears have control again in the energy complex in general. I still think that a corrective type of rally is in the cards. I wouldn't be surprised if oil hit the $50.00 area again before heading lower if the supply build ups continue.

One thing to note is that the Commitments of Traders Futures and Options report from Jan 13th shows that the non-commercial and non-reportable traders added 11,230 to their net long positions. If and any talk of producers cutting back on oil production is needed to stem further free fall and shift the momentum away from bears to the bulls. Just from a technical prospective the market is due for a bounce. If this week's energy report shows another buildup, the market will be back in the "sell-rally mode" again.

In my opinion, just because the market is oversold, it doesn't mean it wouldn't go lower. I'm merely stating that caution is warranted. I like to recommend option strategies to take advantage of rally type of trades.

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.

Feb '15 Crude Oil Daily Chart

Source: RJO Futures PRO


Energies - Natural Gas

Avery Burton

February 2015 natural gas futures are down ~10% today and back within cents of their 2-year lows, falling down from a near $0.50/mmbtu pop last week. Though last week's rally was a strong and noteworthy effort for the market to regain stability in a typically high-demand season, it was clearly short-lived.

Many attribute today's sell-off to updated weather models predicting warmer US temperatures through the next two weeks. It is worth making a special note that although higher temperatures are expected until the end of January, many analysts predict that this Thursday's EIA report (1/22) will announce a draw in inventories of roughly -202 bcf from last week. This would put our month-to-date inventories at a -569 bcf deficit to where they were on Jan. 1st! Can the speculation of a short warm-spell entirely negate the effects of consistently decreasing supplies? Apparently.

When I notice short-term fundamental predictions outweighing both major technical and fundamental facts, the trend at hand may likely be becoming exhausted. Rather than aggressively buying this market with hopes that the recent lows will hold as support, I recommend keeping a close eye on Thursday's EIA report and how prices respond to this retest of yearly lows. If by Thursday support has held strong around $2.80 and there is indeed a confirmed large draw in natural gas inventories, bulls may then enter their call options or long futures positions with greater confidence. If one or both of these conditions are not met, I believe there is certainly still room to see natural gas continue lower in the coming weeks.

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.

Natural Gas Weekly Continuation Chart

Source: RJO Futures PRO

Softs - Sugar

Joe Nikruto

This week's comment finds March sugar futures again in the midst of a sizeable move higher. As of this writing the market was up 31, powering through round number 15.50 and previous high 15.62. In my previous comment I was more than a little suspicious, but ultimately respectful, of the short covering that dry weather in Brazil could inspire. Commodity trading funds have decreased their short position and appear to be on the way to flipping that position to the long side. Today's price action in March sugar futures should have stopped out most remaining fund traders with short positions. The 16.04 level appears to be the first area where funds will start getting long. I remain suspicious of what is almost turning into a seasonal trade, dryness in South America forcing funds to cover short positions. My feeling is that ultimately supply will trump this short covering rally and we could see a resumption of the downward trend. Production numbers show that even at lower prices producers have incentive to produce. Also it is important to remember that Chinese demand while lessened by a slowing economy will remain robust for commodities such as sugar, no matter what the Chinese may say in the press. With that said, it would be unwise to fight the chart. A quick look at the Fib retracement lines drawn off a high of 19.83 and a low of 14.06 show that a 50% retracement lies somewhere in the area of 17.00. What does this tell us? Only that March sugar futures could have some room to run if funds get roped into building a long position on the back of further technical strength.

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

The recent USDA report showed an increase in domestic production as well as ending stocks, thus confirming abundant domestic supplies. Higher world stocks also confirmed the large supply side of the equation, which could likely be the reason for the continued weakness in price action. Cotton appears to be trading in a descending trend channel which could potentially serve as trading parameters going forward. As for today, cotton has penetrated the previous low from November and it would appear as though the negative bias will persist. Please contact me directly to discuss potential strategies to apply in this market.

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

Cocoa has pulled back the last two trading sessions as global demand has decreased. The move higher in the US Dollar has also pressured cocoa prices. The outside markets remain negative. European and North American grind numbers came in weak as well. Long liquidation and short-term profit taking is occurring below the 3000 mark. There is support in the March contract around 2930 and 2905. A break below 2900 has the market headed to 2850. Resistance is at 3015; a rally above this level has failed twice over the past few weeks. If you are looking to get long have some resting buy orders above that to catch a rally up from there if you are still a long-term bull. If the March contract can break out of the channel in the chart attached, 3100 is a realistic target.

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 and RSI

Source: RJO Futures PRO


Softs - Coffee

Adam Tuiaana

We continue to see the overwhelming global surplus of coffee reflect the freefall in the March futures price. Since we violated the 180 level, we have seen follow-through selling and continued long liquidation, which suggests more selling is in our future. In my last article, I stated, "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." My bias remains the same, until March coffee reaches the 160 level, continue to stay short, and manage the risk on long exposure. There are several strategies that traders can apply in this situation. Call or email for specifics.

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 holiday shortened week has started out lower with improved South American weather forecasts and economic weakness in China.The European Union will announce later this week whether it too will embrace QE in an effort to slow deflationary economic pressures. And also, Greece will hold an election on the weekend to determine if it is to maintain existing austerity measures. It is the world's financial markets and South American weather that grain traders will be watching this week.

The agricultural markets are taking a wait and see approach on this weakness to fully realize the size of the 2015 South American soybean crop and making sure that the US is able to remain somewhat competitive in the world soybean trade going forward. There continues to be commercial rumors that China is shifting some US soybean sales to Brazil or just washing out prior purchases. Grain markets are on alert for USDA notices of cancelations this week and reduced sales on Friday's weekly export sales report

It is the wheat market that appears to be in good support and the US wheat market is completive with world wheat prices out of our US gulf. It is the row crops, soy and corn that will continue to deflate into the February lows which can occur right around the Chinese lunar New Year which starts Feb.19. January continues to be a weak seasonal period for grains and certainly February and March is more positive a time frame for the likes of soybean meal and corn.

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.

Corn Weekly Continuation Chart

Source: RJO Futures PRO

Soybeans Weekly Continuation Chart

Source: RJO Futures PRO


Agriculture - Livestock

Jeff Gilfillan

Fed cattle sold off 4% in April futures for the week and beef production was down 6% YOY. Futures discount to cash is at an extreme level which may encourage a bounce early this week. Technical washout areas include 148.70 then 135.25 front month live cattle futures.

Producer hedges on rallies maybe wise going into new supply futures months. Lower grain prices should help weights and margins going into spring.

I do not see any reason to fade ongoing trend of a strong dollar, supported stock market, low rates and cheap feed and smaller beef supplies. Beef industry marketing did well as 2014 prices and I see no reason why historically firm prices should not continue as long as production is contained. Look for a strong spring in consumer spending...real estate, autos, and stocks.

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

Joe Nikruto

The hunt for yield in the global marketplace continues to offer support to US Treasury markets to start the new week. This comes with the ongoing slide in European yields, as well as prospects that the ECB is leaning closer toward more aggressive action at this week's policy meeting. It is possible that the Treasury market garnered added support in the wake of the IMF growth forecasts, which lowered their global growth outlook but slightly revised their US outlook higher. Meanwhile, a large concern currently is that the Treasury market is a bit elevated at these levels, which could lead to profit taking selling pressure. Even in the face of the latest back up in yields, some Fed reports from a closely watched Fed watcher indicated that the Fed was still on track for a 2015 interest rate hike.

While a level of support comes on the growing prospect for the ECB to pursue a fresh round of quantitative easing at this week's meeting, there is also good potential for the Central Bank to continue their trend of disappointment. These factors combined with technically overbought markets leave the bull camp increasingly vulnerable to a corrective setback. Key support is at 148-31 with weakness below this level setting up a move to 146-19.

If you'd like to learn more about futures trading or the interest rates market specifically, please contact Tony Cholly at 800-826-2270 or tcholly@rjobrien.com.

Mar '15 30-Year T-Bonds Daily Chart

Source: RJO Futures PRO


Equity Indexes

Greg Perlin

Stock Index Futures climbed today in part driven by hopes the European Central Bank will announce its bond-buying program this week.

Traders took in two key earnings results this morning, Morgan Stanley and Johnson & Johnson before the opening bell. Us markets were closed yesterday in observance of the Martin Luther King holiday and the only economic data on tap today will gauge the mood in the key home building industry slated to be released at 9:00am CT.

Key items to watch for today and the upcoming week are oil and the ECB policy meeting on Thursday. Oil has been very volatile and is currently down $2.28 at 46.85 down 4.5% today. As oil continues to slip, many energy companies are getting hurt which in turn can be a catalyst to lower stock prices as investors see the move down as a "deflationary indicator." Meanwhile, European equities were trading around seven year highs ahead of an expected unleashing of a sovereign bond buying plan by the European Central Bank when policy makers meet on Thursday at 6:30 AM Central.

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.

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

Source: RJO Futures PRO


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.


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