RJO Futures Website

September 29, 2015

Volume 9, Issue 20

Featured Article

Upcoming RJO Futures Webinars

Critical Trading Mistakes

Wed, Sep. 30, 2015 at 11 a.m. CT

Register now! Avoid the critical mistakes in this business of trading. Be a student of the markets and focus on mastering the basics of trading for profit while managing risk. Most amateurs take unlimited risks for limited gains, this is not a good business strategy. Learn from the mistakes that you make in the market and be persistent. Trading with a proven strategy can reduce these critical errors.

  • Learn to think in probabilities
  • Find a proven strategy and believe in it
  • Predicting moves in the market, not chasing price
  • Managing the emotional roller coaster
  • Trading decisions based on facts not guess work

 

Trading Agricultural Futures

Wed, Oct. 7, 2015 at 11 a.m. CT

Register now! Trading grains and various agricultural products requires knowledge of the underlying asset class and our goal in this webinar is to introduce new agriculture futures traders to the contracts available in this market. Knowing when to be out of the market is just as critical as knowing when to be in the market and we will introduce technical analysis basics to identify potential market entry points in conjunction with our fundamental knowledge of the agricultural markets.

  • Keys to understanding the agricultural markets
  • Benefits of trading the grains
  • What to consider before trading this market
  • Basic technical analysis techniques on the ags 

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Metals - Gold

Gold Looks to Nonfarm Payroll for Next Move

In the early morning trade, December gold is slightly down for the day and currently trading at $1,131.0 an ounce. Yesterday, the gold market did not benefit from the huge sell off in equities which is possibly indicating the fear of deflation outweighs the safe haven play. The gold market will look towards this Friday’s always important Nonfarm Payroll numbers.

Last week’s rally, failed to retest the August 24 high of $1,169.8, which caused the market to sell off roughly $30 from last week’s highs. The $1,120.0 price level will be significant support and if broken, December gold will probably retest the September 11 low of $1,097.70. For the gold bulls, if it can hold this level, watch for a retest of the August 24 high. However, the next direction will most likely depend on the Nonfarm Payroll number due out this Friday at 7:30 a.m. CT.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or ndegeorge@rjofutures.com.

 

Dec ’15 Gold Daily Chart
Source: RJO Futures PRO

Gold Daily

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Metals - Silver

Silver Continues its Downtrend

Silver’s continuing identity crisis is months in the making.  This market continues to be in a downtrend after peaking out near 50 back in 2011, only to continually trend lower year and year since.  After an initial push lower, the market typically develops a wide range for the following nine months, roughly.  Although trading sideways can be seen as a light statement, the last range was four full points and the previous range was very close to four points as well.  By comparison, the recent range of two full points is considered light, but considering the drop in price this could be the new range we’re involved with. 

The current range so far (key words) is between 1395 and 1595.  While this is two points smaller than the previous range this could be where the market now is, with the price of silver being a fraction of where this market was years ago.  It’s possible to suggest the market shall continue lower without any significant fundamental shifts, but that’s half the story.  Since it’s still early that this range was developed, pay close attention to these levels and we’ll see how the market acts within these parameters.  If the market stays within the range it could be coiling up for an even more explosive move. However, the direction it will go is yet to be determined so pay careful attention around the above mentioned levels.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or mrataj@rjofutures.com.  

 

Dec '15 Silver Daily Chart
Source: RJO Futures PRO

Silver Daily

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Energies - Crude Oil

A Market STILL in Consolidation

Since the last eView, November crude oil has continued with its consolidation pattern. The fundamentals have largely stayed the same except for seeing additional weak economic data out of China and a weaker U.S. equity market.  The weaker U.S. dollar has lent some support.  Last week’s EIA data reported a small draw of 1.925 million barrels which seemed be in line with most trader’s expectations, total stocks now stand at 453.969 million barrels which is well above the all-time high of 367.397 set back in 1990. Traders should continue to pay close attention to the weekly EIA reports and watch for draws or builds outside the expectation as this could help set the tone for short-term market direction. Traders anticipate seeing a small draw of about 300 thousand barrels.  The IMF has also commented on lowering its global growth forecasts – this should catch ALL traders’ attention.  Current oil production levels seem to be outpacing daily global demand by about 1.75 million barrels a day so it’s easy to see why oil has stayed under pressure.  Interesting to note though is oil has continued to trade in a fairly right range for most of September suggesting market consolidation.

Short-term technical indicators appear to be in neutral to slightly oversold territory – I remain cautiously bullish while the market continues to consolidate. The market has shown strong signs of a bottom in my opinion and a break to the upside should confirm this. In addition, the 10-day moving average is starting to cross over the 50-day moving average.   

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or msabo@rjofutures.com.  Also be sure to check out my weekly energy market update posted on our website.

 

Nov '15 Crude Oil Daily Chart
Source: RJO Futures PRO

Crude Oil Daily

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Energies - Natural Gas

Natural Gas Continues to Slide as Traders Wait for Shift in U.S. Weather

The natural gas market has continued to grind lower as traders patiently wait for a seasonal shift in weather and demand. The market is showing clear symptoms of being oversold and it is sensitive to a corrective bounce and short covering rally. Buy stops on the November contract are likely to be congested around the 2.630, 2.675 and 2.740 technical levels. In my opinion, a break above 2.74 would revitalize the strong 2.74-2.80 range that carried the trade for the end of August and beginning of September. Until this range is re-visited, it is difficult to make an argument for anything higher–though the potential is certainly there. 

U.S. supplies are continued to be reported at very healthy and bountiful levels, but this is exactly what should be expected for this time of year and thus may already be factored into price. Interestingly, while supplies are overall strong, the weekly EIA data has recently shown some injections have been quite lower than the 5-year average would suggest.

Ultimately, the natural gas market should continue to trade with a sideways or bearish tilt until U.S. weather truly starts to shift. But shorts need to be cautious, if the fundamentals do gain more bullish momentum the market is extremely sensitive to a very quick and precipitous move higher. With over 200 thousand non-commercial shorts still in the market (as reported on Friday’s commitment of traders report), the potential for short covering on the November contract between now and October 29’s first notice day is high. Keep in mind that natural gas is a deliverable contract and any short who does not plan on making delivery must buy out before this date.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-741-0339 or aburton@rjofutures.com.

 

Nov '15 Natural Gas Daily Chart
Source: RJO Futures PRO

Nat Gas Daily

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Equities

Fed Causing Lack of Clarity in the S&P

Greg Perlin

The e-mini S&P is swinging between gains and losses this morning and is currently up $10 on a very good consumer confidence number. The street was looking for a print of 96 and the number came in at 103 (a very good number.)  The e-mini S&P has been very volatile in recent weeks amid confusion over the Fed’s rate tightening policy while concern lingers over whether an economic slowdown in Asia will curb demand for commodities and crimp global growth. 

New York Fed President William Dudley reiterated yesterday the prospect for the Fed to raise rates this year is still good.   It seems as if a different Fed speaker comes out daily and each has a different view on fiscal policy which has led to major volatility.   When we have spikes in volatility like we did at the end of August, it’s normally followed by some additional choppiness until it peters out.   My hunch is until we see some clarity in the Fed, some stability in the Chinese stock market, yields on treasuries start to rise and most importantly, bottoming action in copper and commodities, use caution when buying the market.    

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.

 

Dec ’15 E-Mini S&P Daily Chart
Source: RJO Futures PRO  

E-Mini S&P Daily

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Softs - Sugar

Upside Breakout or Fakeout?

Joe Nikruto

This week’s eView comment finds the March sugar futures contract on a mission. At the time of this writing, sugar has just rallied over 12.60, a price level not seen in the March contract since July 31.  The late rally comes on the heels of a successful test and hold of the 18- and 50-day moving averages, 12.14 and 12.09 respectively, earlier in the session. This rally also leaves in its tracks an unfilled gap, Thursday’s high of 11.88 and Friday’s low of 11.97. This gap was left as the March sugar futures contract sprang up through the tight grouping of the 10-, 18- and 50-day moving averages.  

I "feel" like I have been here before with wire services rife with talk of weather related harvest delays in producing areas and switching from cane sugar to ethanol in Brazil. But there is little value to be had in fighting the tape and the chart below is as straightforward as they come in depicting a market which appears to have bottomed and looks intent on finding a new trading range further up the right axis. Feelings aside, the chart below shows a few pertinent facts. The spike low from August 24 still stands. March Sugar futures recently found support at and rallied convincingly off of the 11.50 level. Today’s price action, accelerating rapidly away from an unfilled gap, clearly puts this market in breakout territory.  If you were short at any price in the last two months, that trade is under water. These facts are clear and still, fundamentally, I am not sure the situation is going to end up as bullish as the wire services would have us believe. If the breakout on the chart fails to hold, I will be pricing put spreads in the March contract.  Until then, I don’t want to fade the action on the chart.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-453-4494 or jnikruto@fjofutures.com.  

 

Mar '16 Sugar Daily Chart
Source: RJO Futures PRO

Sugar Daily

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Softs - Cotton

Fresh Contract Lows Confirm Bearish Sentiment

After posting fresh contract lows on September 18, the sentiment for the cotton market appears to have transitioned to a bearish outlook.  Moving averages appear to confirm this negative sentiment and trend following indicators will likely continue to favor a negative trade until price action proves otherwise.  Having dipped below the 40 level during the most recent selloff, momentum appears to be confirming the negative tone and overbought/oversold extremes may now be adjusted to 60/20 on the RSI.  Having posted new contract lows on the chart, the higher probability opportunity appears to be on the short side of this market and selling rallies into previous resistance areas could be a viable trading strategy going forward.  Initial resistance appears to be 6128 followed by a potential resistance band from 6180 – 6220.  Both of these important areas could be used to create potential trading strategies and, for more on this, I encourage you to contact me directly.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-397-8195 or etatje@rjofutures.com

 

Dec ‘15 Cotton Daily Chart
Source: RJO Futures PRO

Cotton Daily

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Softs - Cocoa

Same Story, Different Week

Peter Mooses

As I have said all along, the long-term trend in cocoa is bullish. Concerns of production levels from West Africa and Indonesia continue to support the trend. Markets have been very volatile over the past month across the board. As we end the quarter, traders seem to be taking profits in cocoa and liquidating commodities. This could create a good buying opportunity if the fundamentals remain in line. A close below 3200 could have us test August prices in the 3020 to 3050 range.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or pmooses@rjofutures.com.  

 

Dec ‘15 Cocoa Daily Chart
Source: RJO Futures PRO

Cocoa Daily

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Softs - Coffee

December Coffee Under Pressure

Adam Tuiaana

December coffee is seeing some positive gains this morning, due to some bullish supply news. We’ve seen a break above the 12245 critical high from September 9, which grabs our attention, however, the Brazilian real continues to remain a problem and we will likely continue to see said currency issue weigh heavily on coffee prices.  We’re still looking at slow demand for coffee along with a questionable supply ahead.

Although we have seen a recent pullback for Vietnamese and Columbian currencies, I still believe coffee will require much lower than expected Brazilian production in order to find a bottom to falling prices. 

As for our position today, we will sound like a broken record and will weigh on the side of the trend, down. In the daily chart of December coffee, we can notice a strong violation of the 116 level, which should be strong support. Also, notice that prices have continued to make lower lows. Being a trend follower, we should continue to keep on the bear side of this trade, and I’d expect a visit back down to at least the 116 area soon.

There are several strategies that traders can apply in this situation. If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or atuiaana@rjofutures.com.  

 

Dec ’15 Coffee Daily Chart
Source: RJO Futures PRO

Coffee Daily

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Agriculture - Grains

Grain Markets Await Upcoming Crop Report

Stephen Davis

Soybeans and corn have rebounded from Monday’s sell off with soybeans leading amid the September crop report on September 30. History has shown this September report to be a high risk report. One feature this year is the variable production from region to region. Iowa and Minnesota for example have their best corn crop ever and will certainly carry some of these less productive states.

The wheat market has a sizable fund short position and I would be careful being short the wheat market. Although the fundamentals of the wheat market have not changed, i.e. there is plenty of wheat in the world, the market seems crowded to the short side.

U.S. farmers are going to store their row crops this year if they do not have immediate need for cash. This is bullish in the short-term. CZ15 has a gap at 4290 and perhaps the function of the corn market is to rally up into that gap area (that is a 43 cent rally.) Keep in mind history shows us that soybeans and corn rally 10 or 20% after harvest into the end of the year. Will that happen this year? I do not know.

The October 9 Crop Report is shaping up as a very big event. We shall get a better handle on the supply of crops and thus allowing the market to focus on demand. Demand is challenging as other countries have cheaper grain to sell due to our strong dollar.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7181 or sdavis@rjofutures.com.  Also be sure to check out my weekly grain market update posted on our website.

 

Dec '15 Corn Daily Chart
Source: RJO Futures PRO

Corn Daily

Dec '15 Wheat Daily Chart
Source: RJO Futures PRO

Wheat Daily

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Agriculture - Livestock

Weekly Head & Shoulders Target Near

Since the late August equity sell-off, the notion of inelastic end user demand in beef went by the wayside. Pork and chicken always taste better once the tuition bills appear and notions of new stock market highs diminish. Even the well-healed Volvo families are shaking their heads at the stock market and the vulnerabilities within.

The collapse in the beef market came as no surprise if you are a technician. I reserved a paragraph in every eView since mid-May mentioning the weekly head and shoulders setting up in live cattle. The first time through faked and retraced above neckline but resumed in force alongside stock market selloff. 125-126 are the intraday and end of day targets which is also the 50% level since 2009.

While demand and effective marketing kept prices firm this year, the supply side eventually overwhelmed the trade. Cattle on Feed as of September 1 showed record average carcass weights and steer weights. Cattle on Feed over 120+ days are 10% over year ago levels and projected to continue. Orderly marketings are essential to cut through this front end supply.

While front end supply is heavy, slower placements (two consecutive months of record lows) should keep deferred contracts slightly firmer and provide opportunities to bear spread fed cattle futures.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-0382 or jgilfillan@rjofutures.com

 

Live Cattle Weekly Chart
Source: GeckoSoftware.com

Live Cattle Weekly

Weekly Feeder Cattle Futures
Source: GeckoSoftware.com

Feeder Cattle Weekly

Long February 2016/Short December 2015 Live Cattle Futures
Source: GeckoSoftware.com

Live Cattle Spread

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Currencies

Will Draghi Extend QE?

John Caruso

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