RJO Futures eView Newsletter March 3, 2015 | Market Insight | RJO Futures

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March 3, 2015

Volume 9, Issue 5


Exchange Info

2-Year Treasury Notes Achieve All-Time Highs

Traders position their portfolios ahead of a potential rate hike
Unemployment was a major focus of Federal Reserve Chair Yellen's Congressional testimony last week, and this Friday's employment reports could be a potential catalyst for changes to FOMC rates policy.

Traders are turning to 2-Year Treasury Futures and Options to position their portfolios for potential changes to FOMC policy, as evidenced by the following all-time records:

  • A record 1.9 million contracts were traded on February 24, which was the first day of the Yellen's testimony to Congress
  • February Futures & Options ADV hit a new record of 605,000+ contracts with Futures Q1 ADV up 61% year-over-year and Options Q1 ADV up 176% compared to last year
  • All-time high of 276 large open interest holders, as Open Interest across 2-Year Futures and Options has grown to over 1.5 million contracts

Mark Your Calendar for These Key Dates
This Week's Key Economic Events

  • Wednesday: ADP, ISM Non-Manufacturing
  • Thursday: Jobless Claims
  • Friday: Jobs Report

Upcoming FOMC Meetings

  • March 17-18
  • April 28-29
  • June 16-17

Additional Jobs Report Release Dates

  • April 3
  • May 8
  • June 5

Visit cmegroup.com/ir to learn more or contact us at interestrates@cmegroup.com


Metals - Gold

Nick DeGeorge

In the early morning trade, April gold is currently unchanged, but off its overnight lows and trading at $1208.2 an ounce. After yesterday's fresh new all-time highs in the S&P 500 and the NASDAQ hitting 5,000, gold continued its sell-off to start out the trading week. With US markets breaking records yesterday, the US dollar is poised to make new highs this week. Hawkish talk out of the Feds on US interest rates means this Friday's non-farm payroll results will be ever so important for gold bulls and the overall price action on the shiny one going forward.

April gold is currently trading below all its major moving averages. For the gold bulls, consider buying above $1225.0 and for the gold bears, consider selling below $1190.0.

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

Silver's performance continues to be less than stellar with a failure of the 1800 level in January, a distant memory as the May silver futures spent most of February in the 17 level. The latter half of the month went lower into the 16 range. Although the economic information isn't as amazing as one would hope, it's good enough to not rock the metals markets higher. The markets have ignored the US fundamentals as well as the issues with Europe and Greece. The next area of concern is strong support at 1600. This level needs to hold. This market came close a few times last week and has tested it this morning, albeit giving up the lows and now trading in the green. While today's action is nice, this market needs continued strength to bring the bull back.

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


Crude oil continues to show signs of a bottom, in my opinion (see chart below). Oil has been trading higher and over the last several weeks, we have seen strong market consolidation. In addition, Andrew Hall, a noted commodity trader, announced he has exited his bearish position on oil and many people followed him. Several OPEC ministers have voiced their confidence that the market has held onto these gains and believe in the price rebound. Rig counts have also continued to drop. Last week's EIA data showed another build and yet the market has not continued to sell-off. Total stocks stand at about 425 million barrels which is approximately 50 million barrels over the old high for this time of year.

Short-term technical indicators are oversold, in my opinion, and I believe the market is basing which could lead to a potential rally. If the market gets above the 10-day moving average in the next couple of sessions, traders should watch for a possible short squeeze. On February 27, April oil showed an inside day on the chart. Yesterday was a breakout to the upside suggesting the bulls are grabbing ahold of the market.

I still recommend playing oil on the upside using the proper strategy such as a call-fly-spread or a bull-call-spread. These could help you take advantage of a higher move. 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.

Apr '15 Crude Oil Daily Chart

Source: RJO Futures PRO


Energies - Natural Gas

Avery Burton

As we enter into the month of March and begin to look for signs of spring, many traders are left confused with the behavior of natural gas prices over the last three months. During this short period the natural gas market fell about 30% despite strong demand and consistently decreasing supplies.

Whether this move was warranted or not, it is critical to understand the drivers behind such a sell-off during a season that typically supports prices. For one, the entire energy sector has been very weak. In these same three months, diesel and gasoline products also fell about 30%, crude oil fell about 40%, and even ethanol sold-off nearly 20% of its value. Also, consider the US dollar which started off 2015 much as 2014 ended � with a relentless dollar pushing closer and closer to 10-year highs. This has undoubtedly contributed to the sell-off in natural gas, as it did for many other commodity markets.

Now that winter is coming to a close and demand will likely be normalizing, it will be very interesting to see how natural gas prices will behave. Could natural gas make the final 10% push lower to par its losses with crude oil? Very possibly. This would suggest that the market should settle around $2.20/mmbtu, which is almost exactly where prices bounced in June 2012 before a strong summer.

The major level that this market must break in order to achieve this suggested 2.20 would be 2.59, our current yearly low and a supportive level since 2012. Upside resistance levels exist around 2.80, 3.00, and the un-filled gap in-between 3.21 and 3.27.

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

Source: RJO Futures PRO

Softs - Cotton

Erik Tatje

The positive moment following the late January low took cotton as high as 66.24 before pulling back a bit off the highs. Recent strength has allowed the market to trade above important previous swing highs, which may be indicative of longer-term bottoming action in the cotton market. Near-term pullbacks could be seen finding support around 63.80 and 62.50. Although longer-term outlooks remain relatively bearish, the short-term momentum appears to favor further gains. The next key level of resistance in cotton doesn't come into play until around 69.14, which would certainly give cotton some additional room to rally. The 20-day moving average remains above the 50-day, highlighting the near-term positive momentum. The RSI appears to be making an attempt to transition to the 80-40 range.

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 - Coffee

Adam Tuiaana

Since we observed a major violation of the coffee 16120 (Feb 3rd critical low), we've seen continued follow through selling of May coffee which is overwhelmingly bearish. The market was in a steady state of pause, while the fundamentals worked their issues out, and short sellers jumped in when a breakdown out of this sideways consolidation was underway.

Fundamentals that support a possible bottom in coffee prices would be a weak Brazilian currency, wet weather in Brazil and a potentially oversold market. However, we'll not call a bottom until we break back above 16120 (at least). Until that happens, remember that "the trend is your friend".

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

May '15 Coffee Daily Chart

Source: RJO Futures PRO


Agriculture - Grain

Stephen Davis

Good afternoon traders. Grain markets are weak this morning as May soybeans trade at 1002. The 50-day moving average is 1012 and a close below this support level would argue for a deeper correction. This is following Monday's technical reversal to the downside.

As the soybean technicals are deteriorating, the fundamentals are stale. South American soy production continues to be good and the weather here in US does not appear threateningly wet the last half of March.

The next big fundamental event for our grain markets is spring planting. Excessive rains are almost always bullish and the temperatures will eventually warm up as the days get longer. There are no signs of any prolonged planting delays as of yet. It is still early for this forecast. The March 31 planting intentions report looms at the end of the month. This will be a big government report and will set the tone of trading going into early spring. The grain markets can trade sideways going into this report on March 31. With the way the carry outs (sending stocks) look in our grain markets, there are enough acres to produce too much of everything.

There has been no announcement on daily soybean sales to China, and the Asian giant appears to be in no hurry to catch up with Brazil soybean purchases after their Lunar New Year Holiday. We need time to digest all the soybeans purchased over the past two weeks.

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.

May '15 Soybean Daily Chart

Source: RJO Futures PRO

May '15 Corn Daily Chart

Source: RJO Futures PRO



John Caruso

Last night we heard from the Reserve Bank of Australia on their current monetary policy outlook. More than 50% of economists surveyed expected a rate decrease of .25 bps to 2% from 2.25%. Instead of meeting expectations, the RBA decided to leave rates UNCH at 2.25% but left the door open for further cuts in future meetings.

"Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target" RBA Governor Glenn Stevens said. The March dated Australian currency rallied early in the trading session to put in a high at 78.50 +84 pts while the Japanese Yen also drafted support from the RBA and comments from the BOJ pushing it to +41 to 83.64.

Looking forward, we're skeptical that this action by the RBA can foster a turn-around in the overall bearish trend we've seen driving the AUS Currency for the better part of the last three years. While the "short side" of the trade does appear to be crowded, we may see a near-term rise, as some short-covering action could be warranted. Moreover, we still see steady increases in the value of the USD Index over long-haul, as higher-interest rate policy appears to be right around the corner here in the US. AUS Trend-Lind Resistance comes in at 78.85-79.00; Support 77.30. Continue to trade along the path of least resistance, Good Luck.

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.

Mar '15 Daily Chart Australian Dollar

Source: RJO Futures PRO

Equity Indexes

Greg Perlin

The S&P E-mini are mixed heading into the US trading hours, with a bout of weakness in Asia and marginally higher in Europe as of 8am CST. Yesterday, we saw contract highs in the S&P and the NASDAQ composite crossed the 5000 mark for the first time in over a decade with continued strength in the tech sector, with APPL continuing to post large gains.

The remaining economic calendar for the rest of the week should provide traders with a lot of volatility. Tomorrow we have the ECB decision and Draghi's press conference. Traders will key on any remarks that come out of the conference. Friday, we see the monthly employment report with early forecasts of 240K new jobs created. Traders should start to focus on seeing if we start to see wage growth as Wal-Mart increased wages for hourly employees recently. If we do see a pickup in wage growth, look for the Fed to start raising rates by June.

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 S&P 500 E-mini 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.


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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