RJO Futures eView Newsletter - May 26, 2015 | Market Insight | RJO Futures

RJO Futures Website

May 26, 2015

Volume 9, Issue 11

Metals - Gold

Gold Retreats Back to a Trading Range

Frank J. Cholly

The August gold futures contract topped out last week at $1232.80. This was after a breakout above the key $1225 level, and two closes above the 200 DMA. That was a major head fake for the technical traders.

Today, August gold futures are trading almost $50 below last week’s spike high. If you look at the daily charts on gold and the U.S. dollar, you will see both markets reversed at the same time on May 18. The dollar found a bottom and caused gold to reverse.

What caused the dollar to rally? Greece.Renewed and growing concerns about Greek debt have bolstered the dollar. Dollar strength has pressured gold lower. Gold is stuck in a choppy, sideways range until something fundamentally changes. For the time being, it’s a currency trade. Longer term, I believe that demand side fundamentals will drive gold prices higher.

If you'd like to learn more about futures trading or the metals market specifically, please contact Frank J. Cholly at 800-826-4124 or fcholly@rjofutures.com.

Aug '15 Gold Daily Chart

Source: RJO Futures PRO

To top

Metals - Silver

Strength in U.S. Dollar Weakening Metals Market

Eli Tesfaye

The strength in the U.S.dollar this morning has the whole precious metal complex trading lower. Silver is no exception trading at $16.755 down around .30 cents. Several factors attribute to the overall weakness, but mainly the idea that the Fed will likely raise rates from its historical low level seems to be the prevailing theme. That said, trade anticipation along with the renewed confidence in the overall economy, Fed will likely take action in the later part of 2015.

Below is a silver chart on our RJO Futures PRO platform. The break below $17.00, in U.S. dollar term this morning, leaves possible drop to the support zone(16.12 and 16.30) area that I highlighted below. So, in the short-term, it is hard to make a case for upside price action. For now, I think more weakness is likely unless there is astrong rally above $17.50.If this occurs, price action will probably remain range bound.

If you'd like to learn more about futures trading or the silver market specifically, please contact Eli Tesfaye, at 800-367-7290 or etesfaye@rjofutures.com.

Jul '15 Silver Daily Chart

Source: RJO Futures PRO

To top

Energies - Crude Oil

Crude Oil - Ready to Buy?

Mike-Sabo

Crude oil is not quite ready to be bought but be on standby and, in my opinion, ready to position to the long side. July crude oil has continued to pullback since the last eView. Interesting oil stock piles have continued to shrink over the last three weeks and yet prices have declined.

The EIA last week reported a draw in the stock piles of 2.67 million barrels, the third weekly draw in stock piles, total stocks now stand at about 482 million barrels, still well above the record high for this time of year of 395 million barrels. The U.S. dollar has strengthened over the last couple of weeks helping to keep oil under pressure and we have seen recent weakness in the U.S. equity markets as well as the European markets which isn’t helping support higher oil either. According to Baker Hughes data we have seen an up tick in drilling activity in Wyoming and the south part of Texas - certainly not bullish. In addition, traders believe OPEC will maintain their current production output - that meeting is scheduled for June 5.

Traders should watch this week's EIA data for possible short-term direction - most traders anticipate seeing another draw in the stocks as commercial interest is strong at the refinery level and the refineries are enjoying better margins with the low oil prices and strong RBOB demand.

Short-term technical indicators are approaching the oversold territory in my opinion - I am cautiously bullish but there could be further downside in store. July oil is trading below the 10-day moving average and is still showing signs of weakness; a possible target area is $56.25 basis July oil.

For futures traders, I would recommend waiting for some consolidation before taking a position in the market. For options traders, I would recommend using a call-fly-spread or bull call spread possibly with a short put kicker as a way to take advantage of a move higher.

Please feel free to call me for more details and to discuss some strategies. Also, be sure to check out my once a week energy market update posted on our website.

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.

Jul '15 Crude Oil Daily Chart

Source: RJO Futures PRO

To top

Energies - Natural Gas

May Natural Gas Rally Fails on Reduced Demand Expectations & a Surging US Dollar

Avery Burton

After a very strong three-week rally for natural gas futures, the bear camp appears to have regained control. Today marks the fourth of five consecutive sessions that prices have significantly slipped back. The July contract is currently 33 cents below its price just one week ago (~10%)! While a large part of this move can be attributed to a simple correction of overbought conditions, the extent of the move requires further explanation. The most obvious drivers would be a surging U.S. dollar and the fading potential for an early summer heat wave. By removing much of the demand for natural gas powered commercial cooling over these next few weeks, surging supplies should begin driving the fundamental side of this market again.

Even with prices down 10% over five sessions, the market is far from oversold. If anything, the market has renormalized and appears ready to re-enter its longer-term sell off. The primary downside targets will be the major technical levels seen through April and the beginning of May. These levels are 2.79, 2.74 and 2.59. I recommend selling this market in anticipation of these levels being revisited before summer is in full swing by late June. It is my opinion the market will need multiple closes back above 2.90 in order to truly start changing the longer-term trend.

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.

Jul '15 Natural Gas Daily Chart

Source: RJO Futures PRO

To top

Softs - Sugar

Bears in Control of Current Sugar Market

Tony Cholly

Bears are in control as Brazil supply dominates market sentiment. Sugar prices remained on the defensive to finish out last week's trading week as they posted a moderate loss and a new monthly low by the close of Friday's trading session. A sharp sell off in the Brazilian currency weighed heavily on sugar prices, as that will give extra incentive for that nation’s export firms to market their supplies to foreign customers. El Niño weather could play havoc with sugar production in South east Asia and Australian production looks to be particularly vulnerable. The real threat might be seen in India where recent high temperatures have resulted in a rash of deaths.

There is no reason to take control away from the bear camp to start today as the charts look negative and Indian supply side threats are not being given that much attention yet. It would be surprising for July sugar to avoid a re-test of 1200 in the coming trading sessions.

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

Jul '15 Sugar Daily Chart

Source: RJO Futures PRO

To top

Softs - Cotton

Cotton Continues to Trade in Channel

Erik Tatje

Strength in cotton continues to buck the longer-term negative bias as price action in the July contract continues to put in relatively higher lows and higher highs. With that being said, a strong U.S. dollar could keep future rallies in check. The market has been oscillating within a well-defined trend channel on the chart, which could assist swing traders with anticipated entry/exit points. Often times using momentum indicators at these key trend channel extremes can be good way to "confirm" a potential trade opportunity as the market approaches the channel extremes. For more information on this strategy or if you"d like to discuss other potential strategies to apply in the cotton market, please feel free to 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.

July '15 Cotton Daily Chart

Source: RJO Futures PRO

To top

Softs - Cocoa

Supply and Demand is Cocoa's Continued Theme


July cocoa may be forming consolidation at this level. The July contract has traded at and around the nine-day moving average so far today; a close below could be the start of some pullback. The strong U.S. dollar has the majority of commodities trading in the red. Although outside market factors are not helping cocoa's rally any further, fundamentally there is still plenty of bullish news.

West Africa supply concerns continue to support the market and have helped cocoa have weekly gains seven of the last eight weeks. Looking at the attached chart, cocoa has rallied more than 400 points since April. Keep an eye on Ivory Coast crop production numbers for more fundamental support. Technically, watch out for long liquidators and profit taking. Today's close will be important to set the tone for the week.

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

To top

Softs - Coffee

July Coffee Under Pressure

Adam Tuiaana

A strong U.S. dollar has continued to keep July coffee under pressure. In addition, upcoming crop reports coming from the second largest producer in the world, Vietnam, are expected to be large. On the technical side, we cannot ignore last week Thursday, July coffee violated the critical low from May 6 of 12915. We have subsequently seen follow through selling and there is not much in the way of support to keep July coffee from falling to the 12260 level, not seen since January of 2014.

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

To top

Agriculture - Livestock

Cattle on Feed Supportive for Deferred

Jeff Gilfillan

Friday's cattle on feed report surprised analysts with an April placements figure of 1.548 million head. This was well below trade estimates and 4.6% lower than the same time last year. This is supportive for deferred futures going out to the fourth quarter. Traders selling bear spreads ahead of the report on the basis of seasonal tendencies or front-end supply fundamentals benefited and might consider taking some off the board at current levels, specifically if you are short August and long October.

The live cattle weekly chart is setting up for a potential head and shoulders. If the neckline is broken a potential move to $130 is in the cards. I am not sold on this based on the strength of the cash fed cattle and the feeder futures. One of our RJO livestock research contributors predicted a cash live range for 2015 from 164-148 in today's audio reports with a low predicted in late July. The futures spreads agree.

Like many commodity markets, the meats have fallen into a trading range with a lower tilt. Spreads are widening but choppy. Seasonal spread traders will benefit by trading with patience and selling rallies. Several RJO analysts have consistently recommended selling both cattle and hog calls on rallies over the last month.

The discount of futures to cash should provide good support to deferred live cattle futures. Feedlots will need to continue to keep a stubborn offer to get paid for firm feeder prices and will depend on cheap feed and higher weights to keep margins reasonable. Not sure what the catalyst maybe to roller the live cattle futures over into a head and shoulders sell-off but we'll keep a close eye on the charts and spreads for signs.

Please feel free to contact me directly 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 February 2016/Short October 2015 Live Cattle Futures

Source: GeckoSoftware.com

To top

Currencies

Daily Market Update - Currency Futures - 05/26/2015

John Caruso

RJO Futures Senior Broker John Caruso discusses currency futures markets. The U.S. dollar has resumed its uptrend while other currencies are trading down. The ECB is still undergoing QE.

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.

To top

Equity Indexes

Are Stock Index Futures Coming to an End of a Long-or Short-term Bull Market?

Jeffrey Friedman

Stock index futures rallied out of the big trading range for the months of April and May 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 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 120 days. Overall, favorable economic news (including Fed news) outweighed worries about the Europe (Greek concerns), Ukraine, China and Iraq.

This coming week highlights a variety of sectors. Both manufacturing and housing have shown sluggish numbers in the last 90 days. We move into more normal weather with this week's data and get updates on GDP and housing with the FOMC rate decision coming soon. The markets this week will focus on the Greek concerns, U.S. economic data and the Treasury’s $103 billion auction package.

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 2110 as a pivot number to turn the short-term up trend to sideways or down. The June S&P could go down to 2072 and then 2040 as a downside target. The June S&P was in a big trading range of 2110 on the up side and 2040 on the down side. The market broke out of this trading range in the last two weeks to the upside but is now sliding back in that big trading range.Are stock index futures coming to an end of a long- or short-term bull market?

Please call or email me if you would like more insight on the markets or if you are interested in trading these dynamic markets.

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 E-Mini S&P 500 Daily Chart

Source: RJO Futures PRO

To top


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.

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.

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.

© 2015 RJO Futures
222 South Riverside Plaza | 9th Floor | Chicago, Illinois 60606
800.441.1616 | 312.373.5478

To top