RJO Futures eView Newsletter February 17, 2015 | Market Insight | RJO Futures

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February 17, 2015

Volume 9, Issue 4


Exchange Info

Treasury Bond Roll Jumps the Gap in Delivery Basket

3:2 Ratio T-Bond Calendar Spread Now Live
In response to client demand, CME Group is now offering a 3:2 ratio T-Bond Calendar Spread enabling market participants to roll from the March '15 to the June '15 T-Bond contract in a nearly risk neutral manner. The Performance Bond Intra Spread Ratios for the March '15 and June '15 T-Bond contracts are also 3:2 to reflect the underlying economics of the contracts.

Additional Information

  • All other execution methods will continue to be available, including the existing 1:1 spread.
  • FAQ that contains the full details of the 3:2 ratio spread, including the ISV symbols.
  • Performance Bond requirements for the outrights and spreads.
  • Mind the Gap white paper on the gap in the US Treasury yield curve, and its impacts on the delivery basket and the upcoming calendar roll.
  • Track roll activity with the Pace of the Roll Tool
  • Special Executive Report on the Temporary Amendments to CBOT Rule 588.H (Globex Non-Reviewable Ranges) and Settlement Procedures for CBOT U.S. Treasury Bond Futures.

For questions, contact: interestrates@cmegroup.com


Trade Rx

Did you know daily trade recommendations and opinions are now available by email? Click here to sign up for Trade Rx by email.

Here is a sample of a recent Trade Rx:

Adam Tuiaana

Recommendation: BUY April Crude Oil at STOP
Risk/Reward: Potential risk per contract $n/a est. Profit target $n/a est.
Comments: April crude is triple-testing the 55 level with strong momentum. April crude 60 calls are a bargain at $970 ea (as of the time of this post). Consider calls and call spreads. - Buy equal numbered quantities of the April Crude 60 call @ $970 - Seek 150% appreciation on premium, remove half of the position upon reaching this goal.
Last Updated: 02/17/2015 01:15 PM

The risk of loss in trading futures and/or options is substantial.


Metals - Gold

Nick DeGeorge

In the early morning trade, April gold has continued its two week down trend and is currently trading down $14 at $1212.9 per ounce. Surprisingly , even with the ongoing Greek debt situation and the lack of a seize fire over the weekend with Russia and Ukraine, the shiny one still could not catch a bid or find any significant buying after roughly a $100 sell off over the last two weeks.

If we take a quick look at the daily April gold chart, you'll clearly see that it has broken all the significant support levels, trading below all major moving averages, and in a down trend. If it doesn't hold onto the $1,200.0 handle, then look for a retest of $1150.0 to $1125.0 an ounce level.

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.

Apr '15 Gold Daily Chart

Source: RJO Futures PRO


Metals - Silver

One of the biggest technical negatives on the March silver chart is the way this market has failed to get above the 1850 level, as well the continued failure at the 1800 level. There have been multiple attempts to get above but only to fail and fall aggressively. The fundamentals continue to build against this market with January's non-farm payrolls showing 257,000 jobs created with the two previous months being revised almost 100k higher. With the failure of 1800 this is the first level to watch to see this market break above to continue an uptrend, with a break of 1850 needed to be broken to consider a more serious move to the upside. Support holds at 1550 and even more so at 14150.

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


I believe the March crude oil may have finally bottomed (see chart below). Crude oil has been trading higher and over the last 2 weeks most of the price action has been above the 10-day moving average and in the last two sessions the market has been pushing through the 50-day moving average � bullish signs in my opinion. Several OPEC ministers have voiced their confidence that the market can hold onto these gains and believe in the price rebound. I still remain cautiously bullish. Last week's EIA data showed another build and yet the market has shrugged this off � the EIA also raised its benchmark target for oil in 2015, reinforcing the idea that the move higher might be here to stay. The market still appears well supplied with oil and I don't think we will see $100 barrel anytime soon but a move into the $60 area over the next few months is very possible. Europe continues with its share of economic problems, nothing new here. Commercial interests continue to pick up and the US rig count continues to shrink, both bullish signals. On the international front a pipeline explosion in Libya has flow of oil from their largest oil field � the Government warned it may stop output all together if the attacks don't end soon.

Short-term technical indicators have turned a bit overbought in my opinion but I do not believe the rally is over. At this point, if the market is able to take out the most recent high of $54.24 basis March, the rally should continue. Traders should continue to watch for a possible short squeeze.

I still recommend playing oil on the upside using the proper strategy such as a call-fly-spread or bull call spread that could help you position to take advantage of a move higher. Futures traders should consider buying puts for downside protection and could consider selling covered calls. 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.

Mar '15 Crude Oil Daily Chart

Source: RJO Futures PRO


Energies - Natural Gas

Avery Burton

Natural gas prices have made a small but noteworthy recovery since locking in new multi-year lows on February 6th. Unfortunately, this recovery is hardly comforting for bulls as downside trend lines remain intact and each rally higher has been quickly met with strong selling pressure.

Over the long weekend trader's caught wind of a very important headline: extremely cold temperatures are expected for the central and eastern US this week. Initially this had April '15 natural gas shooting up to a new monthly high of 2.893/mmbtu � a warranted reaction for what may likely happen to demand during such weather. However, without hesitation this market has brushed off fundamentals yet again and continues to bleed lower. As of 12 pm, noon here in Chicago, we have locked in a low of 2.713 for the day � a full 18 cents off the high.

As mentioned in February 3rd's eView, weather driven rallies have seemed promising for some time in this market but the lack of overall upside momentum has led to very bearish price action. Today's reversal from such a healthy pop reconfirms this and I believe traders should still continue to look for further downside trending. Previously mentioned levels remain intact at 2.575, 2.250, and 1.900. Some strong resistance is developing at 2.90 in the April contract.

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.

Apr '15 Natural Gas Daily Chart

Source: RJO Futures PRO

Softs - Sugar

Joe Nikruto

This week's sugar commentary finds May sugar futures in the midst of a ten day long consolidation following a break to new lows earlier this month. Ideas that we will see the lowest surplus in years and that sugar mills are losing enough money to remove themselves from the supply chain are gaining traction. Further, switching of cane from sugar to ethanol in Brazil could have an impact. Brazil's flex fueled vehicles can run on either ethanol or gasoline. The Brazilian tax on gasoline will likely give drivers the reason to choose the lower cost alternative and could lead to higher prices for sugar. The fact that I found these eloquently stated bullish arguments in a daily financial newspaper should lend eager bulls pause. While the rally that began at the beginning of the year was stuffed as prices reached 16.00, a double bottom formation is clearly in place on the chart and the risk reward does make sense for hopeful bulls. Look for closes over 15.19, the 50 day moving average and 15.50 an area where trend follower stops could be resting to signal if this market has the strength to sustain a change in trend. The March and May sugar futures have rallied almost 30 points in the last 15 minutes while I was writing this but I am mindful that today is expiration for March sugar options. The market "feels" low and I think this "feeling" is why traders may be eyeing a move higher. However, a break to new lows would be a clear signal that prices could be headed much lower than is currently anticipated by the trade.

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.

May '15 Sugar Futures Daily Chart

Source: RJO Futures PRO


Softs - Cotton

Erik Tatje

As buying interest begins to return to the cotton market, the May '15 contract appears to be forming a bottoming formation on the daily chart. Recent strength in price marks a new relative high for the move, taking out the previous swing high at 63.40. Futures are currently trading above the 62.50 technical pivot figure with the faster 20-day moving average setting up for a positive cross above the 50-day.

Although the recovery in price has been strong in the month of February, cotton is not "out of the woods" just yet. The 64.48 � 64.86 area on the chart will likely introduce additional resistance into the market as a result of both technical structure as well as a Fibonacci retracement level. Above here, the next major longer-term resistance zone for the May contract likely won't come into play until the 68.95�69.20 area. The near-term momentum favors a positive argument at this point with longer term biases turning from bearish to sideways. Corrective rallies have the potential to trade up to the previously mentioned 68.95�69.20 area before encountering significant technical resistance. This level (69.20) will likely be the key figure which cotton will need to trade above in order to turn the longer term directional trend positive.

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.

May '15 Cotton Daily Chart

Source: RJO Futures PRO


Softs - Cocoa

May cocoa is trying to make a new high for the year. As you can see in the chart below, cocoa has rallied and is taking back all the losses we saw in mid-January. Supply concerns have surfaced. A report of double-counting in Ivory Coast port arrivals has supported the market. Buyers have been aggressive taking advantage of the bullish news. With 2994 proving to be strong resistance in January, look to buy May cocoa on rallies. Consider placing buy orders above 2995 to catch a move above 3000. Another close above the 9-day moving average supports the current move higher. Be aware of profit takers liquidating their positions which could cause pullbacks and good buy opportunities in market for the short-term.

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.

May '15 Cocoa Daily Chart w/Moving Averages & RSI

Source: RJO Futures PRO


Softs - Coffee

Adam Tuiaana

We've now observed March coffee violate the 15840 critical low, which is overwhelmingly bearish. March coffee prices had been range-bound throughout most of January and February, but this violation has forced a breakdown out of the range. While many traders still hold out for that recovery rally, the vast majority still are willing to look beyond a tight future supply, due to past droughts and dry weather in Brazil.

Stay short, use put options and bearish strategies to approach this market. There are several strategies that traders can apply in this situation, so 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.

Mar '15 Coffee Daily Chart

Source: RJO Futures PRO


Agriculture - Grain

Stephen Davis

RJO Futures Senior Broker Stephen Davis discusses grain futures markets. Typically corn rallies this time of year but we haven't been seeing that this year so far. The US has four times the amount of soybeans this year. Tuesday the Crush Report will come out and spring planting is the next topic to consider.

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.


Agriculture - Livestock

Jeff Gilfillan

Live cattle futures continue to find underlying support in the cash market despite bearish outside forces. Packer margins are poor and bids are light while offers are holding steady over 165. The seasonals are bearish through late March and front-end supplies should not be an issue though feedlots may continue to expect packers to shoulder most of the price weakness as long as placements are light.

I believe the feeder cattle cash/futures may be the market to monitor going into Spring/Summer. The futures spreads in live cattle (see spread matrix below) is in backwardation reflecting firm cash prices. However, lower futures prices going out to June and further reflect higher seasonal supply expectations. Feeder cattle spreads are relatively flat through 2015; therefor expectations placements may continue to be historically light.

If technical washouts occur and cash feeders rollover again to the downside, look for 179 in the front month feeder cattle futures and 144 in front month live cattle futures are targets.

Most of the livestock seasonal trades from MRCI.com in February and March point to an overall weaker market in live cattle futures outrights against hogs and feeder cattle and June vs. Dec.

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

Spread Matrix - Free 100k Simulated Account

Source: RJO Futures PRO

Weekly Feeder Cattle Futures

Source: GeckoSoftware.com


Interest Rates

Phillip Streible

Debt futures may have sparked a long-term top as a multiple handle washout has happened since our last eView article. Since then we have seen a continued improvement in US Non-Farm Payrolls and a reduction in safe haven appetite. It appears that the FED's intention of adjusting rates is growing. The Wall Street Journal sites that since Jan 1 at least six of the top 17 top Federal Reserve officials have indicated they are open to raising interest rates in the coming months. I believe that this has added to the pressure for a continued downside move. Traders may consider put spreads or outright short positions with protective stops in place.

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 30-Year T-Bonds Daily Chart

Source: RJO Futures PRO



John Caruso

RJO Futures Senior Broker John Caruso discusses currency futures markets. The Greece decision is making the current markets very volatile. The dollar is trading flat, the euro is trading up and the British pound is trading down.

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.

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.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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