RJO Futures eView Newsletter - April 28, 2015 | Market Insight | RJO Futures

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April 28, 2015

Volume 9, Issue 9

Exchange Info

Express your market view with CME Equity Index products

With a significant portion of S&P 500 firms' earnings announcements arriving this week, you can use CME's suite of benchmark Equity Index futures and options on futures to hedge your risk or express your view of the market.

  • The second heaviest week for the earning season kicks off this week with AAPL earnings.
  • April End-of-Month Options expire this Thursday followed by May Week 1 Options on Friday. There is 400k OI between them with the put/call ratio at 2:1. Apr EOM 2145 and 2150 calls have 32k OI between them, while Apr EOM 1985-2000 puts saw an influx of new positions late last week.
  • E-mini S&P Healthcare (XAV) and Utilities (XAU) Select Sector Futures have seen elevated activity. Recently, XAU has been at ~10% of the equivalent ETF.

Take advantage of the actionable liquidity and cost efficiencies of CME Equity Index products.

Track Volatility Trends Here

ICE Equity Derivatives: First Quarter Highlights

MSCI® futures achieved new volume and open interest records throughout the first quarter of 2015, with all time daily records set for mini MSCI Emerging Markets and mini MSCI EAFE Index futures contracts. Russell 2000® Index mini futures ended the quarter with open interest at 310,000 contracts and Dividend Adjusted Stock futures quarterly volume, +146% Y-O-Y.

Click here to view the first quarter volume and open interest statistics.

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Metals - Gold

Nick DeGeorge

In the early morning trade, June gold is currently up slightly trading at $1204.2. However, the gold market will aggressively focus on a two-day FOMC meeting and many gold bulls are speculating that the Feds will push back on raising rates until September. We'll just have to wait until 1 p.m. CT tomorrow. Another bullish tilt for gold is that the Chinese central bank is building its gold reserve in order to back its currency for global trading.

If we take a look at the daily June gold chart, a rise above $1210.0 should take us to at least $1225.0 and if we break that level, look for a retest of the January 22 high of $1309.0. I believe to push aggressively above $1225, we'll need an announcement from the Feds that they'll delay raising interest rates until further this year.

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.

Jun '15 Gold Daily Chart

Source: RJO Futures PRO

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Metals - Silver

Michael Rataj

Even though the May contract is coming off the board, the same story is unfolding in the July contract. New support for the July is 1530.5, a level this market has bounced off of and gotten close to a number of times since November when it first established the support.

The first level of resistance is 1853, with a recent resistance of 1731. With the latest touch of 1530 look for a test of 1731 to be the defining or failing moment for the next few months in this market. If July silver can’t break above 1731 in the next few weeks, another 15% drop in this market would bring it to 1215. However, if 1731 can be broken, the market needs to break above 1853 to break the bear trend. But if these levels can’t be broken, look for 1530 to be tested again.

If you'd like to learn more about futures trading or the silver market specifically, please contact Mike Rataj at 866-536-8601 or mrataj@rjofutures.com.

Jul '15 Silver Daily Continuation Chart

Source: RJO Futures PRO

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Energies - Crude Oil

Oil has been consolidating over the last two weeks

Mike-Sabo

Oil has been consolidating over the last two weeks after a $12 move higher from the low on March 18 to the most recent high on April 16 (see chart below). Stock piles have continued to grow to new record highs for this time of year and yet prices have steadily risen.

The negotiations between the U.S. and Iran to reach a nuclear deal have been replaced with the U.S. "advising" Iran to turn their convoy around or face possible military action. Conflict in Yemen has continued but so far it does not appear to be developing into anything larger.

TheEIA last week reported a build in the stockpiles of 5.3 million barrels putting total stocks at about 489 million barrels, well above the record high for this time of year of 397.6 million barrels. Last week traders seemed to focus more on the demand/draw in RBOB stocks, the smaller build in stocks in Cushings, Oklahoma and the continued increase year over year refinery capacity utilization - basically suggesting increasing demand which I believe has offset the increase in overall stocks. Watch for tomorrow's EIA data and don't be surprised if we see yet another build (I sound like a broken record here), traders are expecting a build of about 1.75 million barrels. In addition watch for the next rig count which has continued to decline over the last 20 weeks - this week should be no different.

Short-term technical indicators are neutral in my opinion - I am still cautiously bullish but I would advise waiting for a breakout before aggressively taking a position. The 10-day moving average crossed over the 50-day moving average. Watch for the market to test the most recent high of just over $58 a barrel, if it breaks and closes above that the market could move to at least $60 a barrel fairly fast. If it breaks below $55.70 and closes below there, the market may look to pull back to about $54 which is the 50-day moving average– again I advise to take your position based on the breakout.

For futures traders, I recommend waiting for a breakout for options traders using the proper strategy such as a call-fly-spread or bull call spread which may help you take advantage of a move higher. Please call me for more details and 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.

Jun '15 Crude Oil Daily Chart

Source: RJO Futures PRO

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Energies - Natural Gas

Avery Burton

June natural gas futures opened today's session with a ~5 cent gap lower after settling yesterday's session at $2.514/mmbtu - the lowest close in nearly three years. Fluctuating spring temperatures have been affecting most of the U.S. and, in turn, demand has been very sluggish. Until temperatures heat up this summer, the demand scenario for natural gas should continue to look grim.

While it is significant that the EIA suggests natural gas inventories have grown for most of the month, traders should already be expecting moderate builds during this season. What I find particularly interesting lies in the Baker Hughes Rig Count data. The quickly declining crude oil rigs have been grabbing headlines for many weeks now, but many have missed that natural gas rigs have been falling as well. Last week's report showed that while crude rigs are still being shut down, those of natural gas have started to bounce back. A recovery in active gas rigs should help the supply side of this market and start to contribute towards bearish fundamentals.

Technically, the gap lower in yesterday's session has given the market reason for a short-term pop. While this set-up appears tempting to get long, I highly recommend waiting for a potential fill of the gap and using that rally to consider new short positions. Given the longer-term weakness of gas prices and the lack of near-term support, selling rallies continues to be my favored approach to this market.

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.

Jun '15 Natural Gas Daily Chart

Source: RJO Futures PRO

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Softs - Sugar

Joe Nikruto

This week's commentary finds July sugar futures moving higher. Fundamentally, it’s hard to make an argument for higher prices. There is no shortage of sugar globally. While there were calls for lower production this year, yet again we find global sugar consumers well supplied. But, talk on the news wires of refiners in the market and the Chinese bidding for supplies again are good explanations for recent price strength. The still rather large short position of the funds could also provide fuel to the sugar rally fire. It could be that the real story can be seen on the chart below.

The July sugar futures market put in a low in late March. From that low, 12.02, the market was able to rally into the middle of April to a high of 13.34. A dramatic two-day break off of that high was unable to put in a new low or even reach the previous low, putting in a swing low at 12.35. The resulting rally off that swing low has brought the July sugar contract above the 50-day moving average to today’s high of 13.47.

This leaves a well formed "cup with handle” formation on the chart. This pattern can signal that a downtrend has come to an end. It seems counter intuitive that a rally could be sustained in the face of another year of burdensome supply. But unless the July sugar futures manage to close below the 18-day moving average, 12.91 or ultimately the bottom of the 'handle', 12.35 a move over 13.88 and possibly 14.50 seems to be the path of least resistance.

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.

Jul '15 Sugar Daily Chart

Source: RJO Futures PRO

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Softs - Cotton

Erik Tatje

Cotton continues to build a base after bottoming at the start of 2015 and last Thursday's strong export number added to this theme as price action was seen as very bullish. Even with the strong number, July cotton appears to be having difficulty holding above previous resistance at 6650. After trading as high as 6750 on Monday, the market was unable to hold these highs and closed below the previously mentioned 6650 level. Near-term traders could consider using the 6650 resistance, as well as Monday's peak, as confirmation levels for a bullish argument.

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.

Jul '15 Cotton Daily Chart

Source: RJO Futures PRO

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Softs - Cocoa


July cocoa has continued its move higher - helped by a weaker dollar and supply concerns surfacing out of West Africa. The futures contract touched 2958 this morning, breaking a level of resistance at 2943. First quarter grinding data came in better than expected starting this reversal a few weeks back.

Technically, we continue to hover around good buying levels and bulls have been attracted back into the market. Consider 3100 calls in the September options. They are trading around 55, $550 real money before fees. If we can break the 200-day moving average, the next upside target is 3020.

Keep in mind - a weaker dollar, Greek debt concerns in Europe and supply and demand factors in production should help cocoa test levels we saw in September and October 2014.

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.

Jul '15 Cocoa Daily Chart

Source: RJO Futures PRO

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Softs - Coffee

Adam Tuiaana

Traders have witnessed some long liquidation, likely based on fairly strong production expectations from Brazil. We also need to take into account a sizeable crop outlook for next year as well.

The U.S. Dollar has been weak over the last few trading sessions, prompting some strength in coffee prices. We are now approaching the last corrective low of 13195 and a violation should have coffee revisiting the 128 level. Sideways consolidation that has been in place for a while should likely result in a large upcoming move.

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 866-536-8601 or atuiaana@rjofutures.com.

Jul'15 Coffee Daily Chart

Source: RJO Futures PRO

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Agriculture - Grain

Stephen Davis

Good afternoon traders! The overnight grain trade has followed Monday's price leadership with soybean futures higher and the grains weaker. The volume of trade is active and much of the volume is spreading as traders roll their positions ahead of first notice day on Thursday. Also there continues to be active soybean and corn spreading as traders unwind midwinter trades that have not worked out. There is more talk of U.S. 2015 corn seeding above 90 million acres with nearly 50% of the U.S. corn crop planted by early May.

It is amazing how fast farmers can plant under ideal conditions. This appears to be shaping up as an early planted year and an early planted crop is tough to kill and all the intended acres get planted plus a few more. The USDA may acknowledge this next month in the May Crop Report on May 12.

The dollar is lower today and that can be key to the price discovery in the grains going forward. Every summer we typically rally at least a dollar in soybean and 50 cents in corn on some type of weather snafu. Perhaps a lower dollar and higher crude oil prices can help the grain markets rally this summer.

Cycle lows in corn and soybeans are due next month in May. I cannot for sure know when this cycle of low commodity prices will end, butI do believe that we are getting closer and closer to the low in this commodity cycle (look at gold the last couple day).

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 Corn Daily Chart

Source: RJO Futures PRO

May '15 Wheat Daily Chart

Source: RJO Futures PRO

May '15 Soybeans Daily Chart

Source: RJO Futures PRO

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Agriculture - Livestock

Jeff Gilfillan

Cash cattle is softening but packer interest is light. Recent offers were in the 161-162 range. The steep discount of futures to cash for summer/fall delivery is limiting downside momentum and the increasing supply of heavy cattle on feed is providing fundamental overhead resistance. April futures go off on Thursday and are trading at a premium to cash trade based on last week's trade.

Cash feeder prices continue to hold firm forcing feed lots and packers to tighten their belts and reduce capacity/production to keep margins manageable. This seems to be working recently for the packers as slaughter has been steadily reduced and feedlot prices slowly drop in anticipation of "steadily higher weights coming to market as a result of last fall's larger placements of heavy steers," (RJO Market Insight).

This is a short-term trading market as short-term small specs are trying to sell the charts and long-term funds are holding a stubborn fundamental long. It will take time for backend supply to bring the market back to long-term averages and more time if weather/disease issues currently not present become factors.

I advise selling October 2015 live cattle and buying February 2016 live cattle at even money up to a 70 point premium. Also, consider buying live cattle over hogs; feeder cattle over live cattle and selling hog puts.

Please feel free to contact me directly anytime with questions.

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

Weekly Feeder Cattle Futures

Source: GeckoSoftware.com

Long Dec 2015 / Short August 2015 Live Cattle Futures

Source: GeckoSoftware.com

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Currencies

John Caruso

RJO Futures Senior Broker John Caruso discusses currency futures markets. The U.S. dollar is trading down today while the euro is trading up. The Greece debt deal could be on the table in the near future.

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.

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Equity Indexes

Jeffrey Friedman

Stock index futures rallied out of the big trading range for the month of March and April 2015 after making all-time highs for a five-year bull market. Monetary policy remains in question, with the question being,"when will the Fed start to raise short-term interest rates?" It's all about the Fed and data. Labor market conditions are still soft despite a lower unemployment rate and inflation is low. The Fed is likely to stay loose for some time and be extremely gradual with policy moves.

The economy seems to be slowing modestly but corporate profits are favorable. Soft labor market conditions are seen as keeping Fed policy loose.Stocks futures have risen largely in the first quarter of 2015, despite skittish news from overseas which should have weighed on stocks futures in the last 90 days. Overall, favorable economic news (including Fed news) outweighed worries about the Europe, Ukraine, China and Iraq.

This coming week highlights a variety of sectors. Both manufacturing and housing have shown sluggish numbers. We move into more normal weather with this week's data and get updates on GDP, housing and the FOMC rate decision. Personal income, personal spending, construction spending, Michigan sentiment and earning are being reported this week also.

Technical outlook for the June S&P futures remain in a long-term bull market. The short-term trend is up, with most chart followers targeting 2060 as a pivot number to turn the short-term up trend to sideways or down. The June S&P could go down to 2030 and then 1970 as a downside target. The June S&P is in a big trading range of 2110 on the upside and 2040 on the downside. The market must break out of this trading range to show further direction.

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.

Jun '15 S&P E-Mini Daily Chart

Source: RJO Futures PRO

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