RJO Futures eView Newsletter - July 7, 2015 | Market Insight | RJO Futures

RJO Futures Website

July 7, 2015

Volume 9, Issue 14

Exchange Info

Now Available: Trading at Settlement (TAS) in Agricultural Futures

CME Group announced Trading at Settlement in Agricultural futures, a flexible and efficient new order type that can help you manage settlement price uncertainty. Below you will find educational resources aimed at helping market participants better understand how Trading at Settlement (TAS) works and how it can help manage settlement price uncertainty.

For more information about TAS, please contact your RJO Futures broker.

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Metals - Gold

Gold Futures Suffering from Current Events


Gold futures and other precious metals have quickly come under intense assault today after a number of headwinds have shown their face. First and foremost, precious metals have not responded the way most analysts had anticipated after Greece rejected the terms of bailout offers from the EU. It looks like Greece is playing the "we have nothing to lose" mentality by standing firm. This in turn has pressured most currencies in a negative way by boosting the U.S. dollar considerably and killing safe haven demand.

The next major headwind to come forward is the almost completed deal with Iran with oil exports and nuclear arrangements. The exact terms are still a mystery but it is widely expected to see hundreds of thousands of new barrels of oil coming on the market. This shows that geopolitical risks are dwindling and again the safe haven need is just not there for gold.

Finally, Chinese equity has seen aggressive downside action causing investors oversees to meet margin calls and liquidating metals positions. When looking at support and resistance in gold back on March 17, 2015 it had ran into support at 1148.1 and the next level below that maybe an overshoot to 1100. Resistance up near 1200 looks like a light year away which leaves the Greek news of last Sunday night's high at 1174.4 as close in resistance.

If you'd like to learn more about futures trading or the metals market specifically, please contact Phillip Streible at 800-438-4805 or pstreible@rjofutures.com.

Aug '15 Gold Daily Chart

Source: RJO Futures PRO

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Metals - Silver

Silver Market Ignores Greek News, Still Waiting for a Rally

Michael Rataj

Even though the headlines, and probably most of the other articles in this newsletter, are constantly discussing the troubles of Greece the silver market doesn't have time for that. In doing so or in not doing anything rather, is possibly the most important part of this price movement. If this market were truly concerned about what's happening you'd expect this market to rally aggressively, but so far it hasn't.

Looking at the RSI the market is at the low of its cycle. Looking at the chart below this has been a common place this market bounces off of before returning higher. However since this morning silver has dumped to through support to 1462 and is coming back to 1489. 1410 could be the next level of support but with this much emotion there could be more volatility before this market can settle. Use options for limited risk exposure.

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.

Sep '15 Silver Daily Chart

Source: RJO Futures PRO

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Energies - Crude Oil

Crude Oil: Oversold? Time to Buy?

Mike-Sabo

Since the last eView on June 23, crude oil has seen a dramatic pullback. On June 24, oil hit a high of $61.57 after a small upside breakout. That quickly failed and hit lows today of $50.58 basis August oil (see chart below). The reason? Some traders seem to believe Greece is the reason. A country halfway around the world with a GDP smaller than half of the states here in the U.S. and produces/consumes very little oil, I don't think so. Sure it creates some great news headlines and some uncertainty but I think the bigger issue is the weak Chinese economic growth (hear that Donald Trump) and the P5+1 negotiations regarding the Iranian nuclear talks. Remember, there is a midnight deadline tonight!

In addition, the Baker Hughes oil drilling rig count jumped up last week breaking a 29-week string of declines. The EIA Report showed a small build last week but most traders believe we will see a small decline in stocks this week. The last several months the EIA Report has shown a steady decline in stocks. Traders should watch tomorrow's EIA data for possible short term market direction. With all this short-term bearish news on the table coupled with the oversold technical indicators and you have a recipe for a possible short cover rally.

Short-term technical indicators are indicating a strong buy in my opinion. I recommend staying cautiously bullish after such a large sell-off. August oil has been down the last five sessions with no retracement. I would suggest waiting for some consolidation, perhaps even an inside day, and then play the break-out.

For futures traders wait for the breakout. For option traders I would recommend using a bull call spread or ratio spread possibly with a short put kicker as a way to take advantage of a move higher. Please 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.

Aug '15 Crude Oil Daily Chart

Source: RJO Futures PRO

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Energies - Natural Gas

Normal Summer Temp's May Allow Natural Gas to Continue Lower

Avery Burton

Though natural gas prices have been sluggish nearly all year, the month of June provided some optimism and support to the market as traders followed weather models that suggested a very hot July. As we are now one full week into July, many of these weather predictions have normalized and abandoned the idea of unusually warmer temperatures. The market is once again struggling to find support as the expected demand for commercial air conditioners has largely been taken off the table.

In today's session, August natural gas broke a major support level at 2.73. Though nearly every commodity is weaker today, the move in natural gas has redefined the bearish nature of the market and could be setting up a new great short opportunity. Traders may want to consider the further potential of a strengthening U.S. dollar, alongside building natural gas supplies and weaker demand. A short futures contract around 2.70 in August natural gas would allow for traders to use a stop at 2.75 in order to avoid risking more than $500 per contract. I believe the market currently has the right set-up to revisit the yearly low around 2.60.

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.

Aug '15 Natural Gas Daily Chart

Source: RJO Futures PRO

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Softs - Sugar

Sugar Market Constrained after Constructive Week

Joe Nikruto

This week's comment finds the October sugar futures contract struggling to hold hard won gains. Down 19 points at the time of this writing, the 50-day moving average of 12.64 lurks overhead. Up to this point, chart action for the last week has been largely constructive. The last four days have seen the October sugar futures contract remain over both the 10- and 18-day moving averages yet still constrained by resistance overhead.

The fundamental news flow is mildly bullish with the Hightower Group highlighting the switching from cane to ethanol in Brazil, reducing supply of sugar for export. Combined with the annual 'harvest delay' story the sugar market has enough fundamental cover to fit to recent technical action. This technical price action may be the real story.

Trend followers have reduced their short position by almost 31, 000 contracts but still remain long well over 70, 000 contracts according Hightower. The 12.80 level looms large as an area that should cause further short covering by the fund trader category while closes over 12.97 will have trend followers entering new long positions. If there is going to be wholesale change in ownership in October sugar futures contracts, with funds flipping from more than 100 thousand contracts net short to a new net long position, higher prices could be in the offing.

The commercial trader will likely to be happy to sit on her hands and let the funds bid the market up as they work to cover these short positions should the technical action merit. Closes over today's high, 12.69, could be preliminary indication the October sugar futures contract has the ability to turn the long-term trend up. The 'head and shoulders bottom' formation seen on the chart presents a trading opportunity. Price action above the 'neckline' speaks to a potential move to 14.00 and beyond. Failure of October sugar futures to post higher prices and an ultimate failure of the bottoming 'head and shoulders' pattern seen on the charts points to prices heading to 11.00 and possibly lower.

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.

Oct '15 Sugar Daily Chart

Source: RJO Futures PRO

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Softs - Cotton

Weak Acreage Report Proves Supportive

Erik Tatje

Choppy trading conditions continues to be the theme in cotton as a lower than anticipated acreage report fueled a brief breakout of the previous trading range, only to see the market revert back below the 67.00 pivot representing the upper end of the range. News of China releasing one million bales of reserve crop could translate to lower export demands. The chart continues to look strong with recent price action putting in a new relative swing high, thus confirming the positive tone of the market. The 20-day simple moving average recently crossed above the 50-day, again offering additional technical support. Any weakness in price could find support around the 66.00 level if the market intends to avoid falling back into a consolidation pattern.

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.

Dec '15 Cotton Daily Chart

Source: RJO Futures PRO

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Softs - Cocoa

Cocoa Supply Still a Concern


Cocoa remains bullish on fundamental and technical news. Looking at the chart, September continues to trade above the 9-day moving average. The short-term technicals are bullish; we could be headed back towards 3350. Supply is still a concern even though weather has been favorable in West Africa of late. For the second week in a row, the weekly port arrivals for Ivory Coast came in higher than last year's pace. The global markets are monitoring news from Greece and the carryover effect it will continue to have on the rest of the world. The dollar index rallied to 97.45 today as the euro fell to 109.27. As far as cocoa goes, look to buy call options on pullback – until this contract proves differently, this trend will remain bullish.

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.

Sep '15 Cocoa Daily Chart

Source: RJO Futures PRO

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Softs - Coffee

September Coffee under pressure

Adam Tuiaana

A steady, slow dissent into the abyss has been the story of September coffee prices lately. A continued violation of critical support areas began at 12875 on June 23 and shortly thereafter, the 12640 area was also violated. Traders should keep in mind that coffee prices have been consistently falling since October of 2014. If a trader were to view a monthly chart, they would see steady lower highs and lower lows.

As an extremely large new crop from Brazil and Columbia make their way to the world market, along with a lack of urgency in fresh buying from end users, I would expect continued additional pressure on September coffee prices. In addition, weather forecasts for major production areas of Brazil should be favorable.

There are several strategies that traders can apply in this situation. Please feel free to 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

Grains Fail to Execute a "Turn Around Tuesday"

Stephen Davis

There is no turn around Tuesday in the CME grain markets today. Corn is down 3 cents and off its worst level of down 11 this morning and soybeans are down 22 cents off their worst level of down 32. The corn market is lower as corn ratings failed to decline last night as the trade had expected. The same reason for the soybean market trading lower as ratings last night held steady, which was a mild surprise.

Most all commodity markets are down hard today lead by crude oil and the stock market. It certainly is a risk off trading day. Monday's COT report (commitment of traders) shows the fund trader shifted from a net short position in corn from 43.000 to a net long position of 111.000. I believe this is a record move over this short of this report time frame. These are big moves.

Soybean planting nationally were marked at 96% complete, meaning there are three million acres of soy left to go based on the June 30 data. Missouri represents half of that figure. Yesterday marked the last planting report for the year.

Friday we have the July crop report and traders are looking for lower acres, tighter stocks and possibly lower yields. This report does not have the bullish potential last Tuesday's acres and stocks report had as we look forward to the most important 60 days in North American grain growing season.

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.

Nov '15 Soybeans Daily Chart

Source: RJO Futures PRO

Dec '15 Corn Daily Chart

Source: RJO Futures PRO

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Agriculture - Livestock

Cash Cattle Supportive, Outside Forces Bearish

Jeff Gilfillan

The beef market is strutting its marketing prowess. Outside forces are currently bearish but overall, supportive. The restaurant index continues to remain strong despite declining slightly in May. The strong dollar is supporting importing burgers but having less effect on exports for higher grade beef. Retailers are selling smaller portions and maintaining good margins and packers are spot buying a softer cash cattle market and generally staying in the green. These fundamentals, however, I believe are holding prices firm for the time being but a firm equity market correction could change things swiftly.

Technically the live cattle futures market appears vulnerable on the daily, weekly and monthly charts. If the funds continue to liquidate a test of 144 area, a minor value area is in the cards. This would turn current support at 148 into resistance and a sell candidate for an overall bearish test of longer-term support at 130. If global demand forces take a back seat and fall supply drives the market this move could be in the cards come pigskin season.

Like many commodity markets, live cattle 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

RJO Futures Senior Broker John Caruso discusses currency futures markets. The CRB index is hemorraging, the USD is surging ahead and the euro is plunging. IMF is concerned about the U.S. raising interest rates too quickly.

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

A Spike in the VIX, a "No" Vote for Greece and a Selloff in China

Joe Kobel

Global equity markets all around the world have been anything but a dull ride since the beginning of June. Prior to the summer months, the VIX had been trending lower and lower while the U.S. equities (our benchmark will remain the e-mini S&P 500 futures contract) stayed within a wide, yet well-defined channel. The past two weeks alone we have climbed from end to end on this channel while the VIX has lunged to the upside through all of its major moving averages to levels we haven't seen since April. Chinese government intervention, fears of the U.S. FED raising interest rates along with reemerging Greek government debt defaults have plagued headlines around the world pumping renewed and much sought after volatility into markets worldwide.

Let's now turn our focus to Greece and the Eurozone as this is main catalyst for the current volatile state. During the past two weeks, we have seen U.S. equities open over 30 points lower in the Sunday night trading session due to resistance from Greece to cooperate with its creditors and their terms to restructure the debt. Each of the selloffs have been almost entirely mean reverting with yesterday's session even closing in positive territory (I will give credit where credit is due - the extreme drop in crude prices on the day is more than likely a major catalyst for this) so traders must be quick to act and keeping their eyes on the board especially during the overnight.

We have a lot of economic data out between now and the end of the month where we will receive further dialog from the FOMC regarding monetary policy their intentions on raising interest rates. The data dependent FED has been graced with downward revisions in GDP numbers and on par unemployment figures which is undoubtedly been driving some turmoil and disagreement amongst key members. At this stage of the game regarding a hike in interest rates, we must look at the situation rationally and logically.

The point is this, market participants need to stay abreast and make use of all of the tools they have available to them – including looking to other areas to park their capital after seeing the returns they have from the past several years of record high stock markets. Active management of your portfolio as well as trading with synthetic positions are a must for the well- versed investor and the ability to adapt to new market conditions will prove to be paramount for those who are not looking to relive 2008 and 2009. 401Ks should be hedged and action needs to be taken for the inevitable shift in market conditions that lie ahead so feel free to call the trade desk at 800-826-1120.

If you'd like to learn more about futures trading or the equity indices market specifically, please contact Joe Kobel at 800-826-1120 or jkobel@rjofutures.com.

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

Source: RJO Futures PRO

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