RJO Futures eView Newsletter - June 09, 2015 | Market Insight | RJO Futures

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June 09, 2015

Volume 9, Issue 12

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Metals - Gold

Possible Short-Term Bottom in Gold

Nick DeGeorge

In the early morning trade, August gold is up slightly and trying to continue its rally into its second day. Furthermore, global equity markets falling overnight, talks that the U.S. Fed will raise interest rates sooner and the continuing fall of the U.S. dollar are all contributing the recent rally in gold.

If you look at a daily gold chart of August gold, it’s clearly giving you a simple buy and sell signal. If you put a buy stop above today’s high of $1182.3, you’ll probably get a push up towards $1200-$1215 a troy ounce. Moreover, I would put a sell stop below last Friday's low of $1162.1 in order to protect your long position, or initiate a new short position.

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.

Aug '15 Gold Daily Chart

Source: RJO Futures PRO

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Metals - Silver

Silver Market Awaiting Economic Numbers

Michael Rataj

The latest behaviour in silver represents a typical consolidation pattern, save for a few blips out of the range. If this support is rejected, a move back up to the 1800 level could be in play with a close above 1800 to show the trend channel is broken and this market could be heading higher. However, if the top side of the channel fails, this market could be setting itself up for another leg (when markets tend to consolidate they continue the trend they were in before the consolidation, which in this case has been down). Continue to look at the economic numbers and if we receive some worse than expected news, it could be the fuel to send this market higher.

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 Chart

Source: RJO Futures PRO

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Energies - Crude Oil

Crude Oil: A Market in Consolidation

Mike-Sabo

Since the last eView, July crude oil made a low of $56.51on May 28 just one day after it was released and then went on to make a most recent high of $61.58 on June 2. Check out the triangle formation on the daily chart and yesterday's inside day followed by today's breakout. In addition the market, price action is back up above the 10-day moving average.

Oil stock piles have continued to fall. The last fiveEIA reports have all shown a draw down and we expect to see another draw in tomorrow's report. Current stock piles stand at 477.52million barrels, still well above the record high for this time of year of 391.29 million barrels and above the five-year average of 379.16. The U.S. dollar has weakened a bit since the last eView and is seen as supportive. In addition, demand for RBOB has remained unusually strong for this time of year. Refinery capacity utilization is currently running at 93.2% vs.a year ago of 90.8% and has been running higher than normal over the last five EIA Reports.

Basically, stocks are falling and demand has been running strong a great combo that can potentially cause oil prices to rise. Before we get too ahead of ourselves you need to remember we still have plenty of oil. OPEC is staying on course with production output and we are seeing weaker equity prices. Nonetheless, I recommend remaining cautiously bullish.Traders should watch tomorrow's EIA data for possible short-term direction. Most traders anticipate seeing another draw in the stock piles and with today's breakout this could be the time to get long.

Short-term technical indicators are a bit oversold in my opinion. I recommend being cautiously bullish with the breakout today after yesterday's inside day set-up. July oil has traded back up over the 10-day moving average and is showing signs of market strength.

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

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Energies - Natural Gas

Be Cautious of These Aggressively Climbing Natural Gas Prices

Avery Burton

It's hard not to notice that natural gas futures have finally started to recover this week. After basically collapsing towards the end of May, the low $2.50's were re-tested and the market is now starting to rally with conviction. Just today, the July contract is up over 12 cents! While this near-double bottom and the following bounce-back appeartextbook, traders should be hesitant to see if true support is in place.

Too many times this year have traders seen support get built-up only to be destroyed days or weeks later. While May's push above $3.00 and the most recent low coming in slightly higher than the previous low might be suggestive of a trend change, it is far too soon to tell.

I believe it is far better to be late and right than early and wrong. For this reason I am not convinced the trend is turning higher until we get two consecutive weekly closes above $3.00. May's high of $3.15 will be some strong resistance to tackle, but if support is firmly established at or near $3.00, I think a move to even $3.50 or $4.00 may be warranted by the year's end. Until then, I advise sticking with what has worked; selling rallies.

Clearly it is tough to pick the top of any short-term rally, but fortunately this market has provided traders with some excellent technical levels through the year's bearish chop. As prices currently sit around 2.83, I believe the next sell-entry point will be around the 2.88 price. Conservative traders may not want to risk a move above 2.94, but those with greater risk capital should consider stops just above the $3 mark. Areas to consider taking profit would be around 2.70, 2.64 and 2.56.

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

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Softs - Sugar

October Volume, Open Interest Overtake July

Joe Nikruto

This week's commentary will likely be the last for the July sugar futures contract as the volume and open interest in the October contract begins to overtake the July. The technical picture for October looks slightly more bearish to my eye as the low from earlier in the year, 12.65, was taken out by about 50 points. The October chart has less of a 'double bottom' look to it than the July chart and this could be a function of traders closing short positions in July and re-establishing them in the October contract. The “cup with handle” formation and the ensuing upward channeling price behavior in the July contract has given way in the last two weeks to a wholesale resumption of the downtrend. The move up to 13.60 stopped out many trendfollowers who were then forced to re-enter the short side just two days later.

According to the Hightower Group, the COT report on Friday showed the fund trader short over 56 thousand contracts. While this is a sizeable position, it can and most certainly will get larger if support levels are broken. The fundamental song essentially remains the same. China is in the background, likely a willing yet patient buyer on dips and it may be the economic slowdown in the emerging markets is impacting demand for sugar there.

Global supply is ample. Brazilian harvest is upon us and we will be adding more sugar to a market that is more than adequately supplied already. It may very well be that the chart for October sugar futures, which looks more than a little heavy to me, is trying to tell us this. A quick look at a weekly chart shows sugar futures have been in a relatively tight range with attempts to climb out of the range soundly rejected, at least so far. Trendfollowers and market participants making directional calls have been chopped up pretty good lately. And yet, the chart looks heavy. While any market where funds hold a large short position is subject to abrupt, often violent short covering rallies, it will take more than short covering to sustain a rally in October sugar futures. This will be especially true if the dollar resumes its relentless upward trend.

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

Cotton Outlook Remains Unchanged

Erik Tatje

Cotton remains neutral to slightly bullish near-term as price action continues to oscillate around technical levels on the chart. Structurally, the market remains unchanged as price action has failed to make any noteworthy progress on the chart. The bullish trend line continues to provide local support; however, the RSI may be showing early signs of coming weakness in the market. Whether or not any sort of noteworthy pull back will materialize as a result of the weak momentum remains to be seen, but the RSI indicator did put in a series of bearish divergences and is having trouble holding above the 60 level. The 65.12 level as well as the structural support from the ascending trend line on the daily chart will like serve as a barometer for futures price action in cotton.

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

Ghana's Production Better than Expected?


The supply and demand story in cocoa continues to move the cocoa market. The second quarter trend should continue since the lack of global supply is still a concern. The dollar weakening will also help the demand side pushing cocoa higher, possibly testing 3200. For eight weeks in a row, Ivory Coast port arrivals fell below levels for last year. This should help build support in prices. Due to weather patterns in West African growing areas, too much rain and delayed drying, we could see an increase in damaged crops. Consider buying futures on pullback.

Longer-term, Ghana recently has shown signs that their 15/16 production could be higher than expected.This could change cocoa's outlook but the bullish move still has plenty of steam for now - this should not affect prices until the fourth quarter.

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

July Coffee Under Pressure

Adam Tuiaana

The 12920 low in July coffee (from May 15) was violated a couple weeks back, along with immediate follow-through selling and short covering. Bi and large, we are trend followers and believe this to be a good opportunity to sell/short coffee. Also, notice there was some resistance at the critical 61.8% Fibonacci retracement level of 13610 on June 15. Although we are trading over this level, the market looks poised to take a deeper plunge back down to the 125 area. Traders should position themselves bearishly, but use options 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 866-536-8601 or atuiaana@rjofutures.com.

Jul '15 Coffee Daily Chart

Source: RJO Futures PRO

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Agriculture - Grain

U.S. Planting Finishing Weaker than it Began

Stephen Davis

We have talked about a cycle low in our grain markets in early June and this is what has happened (see chart patterns below.) We started with just about a perfect spring for planting and now we end on a not so perfect end to spring. Soybeans are getting support from planting delays. The wet Central U.S. weather all sounds a little like last year when heavy rains hit Iowa and portions of Minnesota in mid-June. This year’s crops are a little more established, however, planting delays in Missouri and Kansas soybeans remain a concern.

USDA 2014/15 grain and soybean ending stocks will be released tomorrow at 11:00 a.m. CT. This is not a key report as the bulk of the pollination season for row crops lies ahead here in North America. There is talk that soybean stocks could be lower due to consistent demand for soybean meal as the soy crushers continue to want soybeans. Short covering in corn, wheat and soybeans can continue thru the month into the very important June 30 acreage report. Fund short covering will only support the soy market so long with the absence of adverse weather due to the fact that China is not buying U.S. soybeans like they have in previous years.

The wheat market, to me, is the most vulnerable to this short covering as there continues to be a large fund short position in wheat. The major fundamental in wheat is, we do not know the size or the quality of the winter wheat crop at this time. This brings uncertainty to the winter wheat market and markets do not like uncertainty.

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.

Jul '15 Wheat Daily Chart

Source: RJO Futures PRO

Jul '15 Corn Daily Chart

Source: RJO Futures PRO

May '15 Soybeans Daily Chart

Source: RJO Futures PRO

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Agriculture - Livestock

Meats Falling into Lower Tilt Trading Range

Jeff Gilfillan

Deferred live cattle futures and spreads are showing strength as fourth quarter supplies may be light based on the last COF report's placement figures. It's a choppy market with near-term cash and futures prices reflecting soft end user pricing and ample front-end supply and deferreds benefitting from excess feed supply and much improved grazing conditions. Packers and feedlots need to continue to hold offers reasonably priced and supply limited to reflect the high cost of feeders going into late 2015. I believe higher prices should hold at the retail end. However, the U.S. dollar, oil prices and the equities market will have a lot of input. Momentum funds are still long and will likely remain stubbornly long over 148 front month live cattle.

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 "yet" based on the strength of the cash fed cattle and the feeder futures. I am not sure what the catalyst maybe to roll over the live cattle futures into a head and shoulders sell-off but we'll keep a close eye on the charts and spreads for signs.

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.

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 Monthly Chart


Source: GeckoSoftware.com

Weekly Feeder Cattle Futures


Source: GeckoSoftware.com

Long February 2016 / Short October 2015 Live Cattle Futures

Source: GeckoSoftware.com

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Currencies

U.S. Retail Sales, Monetary Policy and Greek Debt Saga leave USD/EUR Trade in Limbo

John Caruso

The USD has seemingly cooled off in recent weeks and could continue its descent if we see any further deterioration in the U.S. Consumer data on Thursday. We've seen a string of poor U.S. Retail Sales data since the beginning of this year and that has certainly weighed upon quarterly and annual GDP estimates. With the decline of such data, further evidence is growing of a “lower for longer” approach on interest rate policy by the Federal Reserve. We'll have more evidence released on Thursday, with an expected uptick of 1.3% May U.S. Retail Sales. The USD will be looking directly ahead at this data for any near-term direction, but is likely to maintain its current trading range (94.75-97.75) until after the Federal Reserve Open Market Committee's decision and guidance on U.S. Monetary Policy due out next Wednesday, June 17.

Outside market factors also in direct conflict with the USD are the continuation of the Greek Debt Saga. With many reports coming in as of last week, hopeful that a deal could break any day now, other sources are less optimistic. Angela Merkel has warned that Greece is running short on time, and the latest proposal from Greece has left the euro currency trade, less hopeful. Key levels to watch for in the September euro currency trade are 1.1475 on the high end and 1.0825 as key support.

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.

Sep '15 Dollar Daily Chart

Source: RJO Futures PRO

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Equity Indexes

Global Equity Markets Lower Across the Board

Greg Perlin

Downside leadership is coming from a selloff in the Japanese Nikkei overnight. Also, softer Chinese inflation figures fueled a round of profit taking in China's Shanghai composite. Overnight in Europe, the selling intensified with the German DAX below the critical 11,000 level. As we start trading today in the U.S., the e-mini S&P is down $2 at 2076.50. Adding to today's pressure in the U.S. is the growing prospect that the Fed may move to hike interest rates sooner. This offers a reshuffling in risk attitudes.

Looking at the e-mini on a technical basis, the overall market remains in a bull trend, but yesterday's break signals a short-term turnover calling for an extension to the low 2060's. A breakout below 2060 implies declines to 2040. Any corrections contained within Monday’s range will keep pressing bear forces. A climb over 2094-2096 could motivate rebounds, but a close over 2112 is needed for a turn to higher levels.

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.

Jun '15 S&P E-Mini 500 Daily Chart

Source: RJO Futures PRO

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