RJO Futures Website

October 27, 2015

Volume 9, Issue 22

Featured Article

Upcoming RJO Futures Webinars

Upcoming RJO Futures Webinars

 

Trading Energy Futures
Wed, Oct. 28, 2015 at 11 a.m. CT

Register now! Energy commodities are arguably the most political and tactical commodity in the global economy. The price of energy not only affects industries but affects every man, woman and child; every time a light switch is turned on or motor vehicle is started, energy comes into play.

Trading energy futures has long been the realm of the professional trader but these markets are available to everyone to capitalize on the long-term trends that regularly occur. In this webinar we will look at the following:

  • Energy Commodities 101
  • Benefits of trading energy futures
  • Basic technical analysis and trading strategy applicable to these markets

 

Begin Trading Futures like a Pro
Wed, Nov. 4, 2015 at 11 a.m. CT

Register now! An entry level view at getting started in trading futures. Understand the how and why of futures markets and what market may be right for you. Determine your trading style and understand how professionals approach the markets.

In this webinar you will learn:

  • What you need to know about futures 
  • Range of markets available 
  • Trading Style: Fundamental vs. Technical 
  • The right futures market for you

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Metals - Gold

Bad Economic News Causing Pullback in Gold

In the early morning trade, December gold currently is trading down slightly today at $1,165.9 an ounce. Gold has pulled back roughly $30 off its high of $1,191.7 back on October 16. December gold looks like it wants to pull back around the $1,150 handle before it finds support. The recent bad U.S. economic data is increasing gold as a safe haven play as long as the economic uncertainty continues. Also, the shiny one has found support as traders and investors alike believe the Fed will delay a U.S. interest rate hike until 2016. Furthermore for the bulls, The Gold Fields Mineral Services indicated gold demand had increased by 7% from the figures a year ago and China has reported a pickup of roughly 38 tons of gold from one year ago. I believe the gold market may be prone to rally and test the $1,200 an ounce handle by the end of the year.

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 Awaits Fed Announcement, Q3 GDP

Since the last eView it’s been a sideways stroll for the Dec silver market.  There hasn’t been too much in the form of news aside from some fairly positive U.S. housing numbers and some expanding European/foreign manufacturing numbers.  The FOMC beige book last week was met with no real surprises or clues, as traders continue to debate when the Fed will actually raise rates.  Although it’s not as expected at this week’s meeting, the element of surprise is one of the fun things that keeps traders coming back in the hopes of guessing a black swan event correctly. 

Barring any surprises tomorrow, Thursday we’ll receive the advance estimate of the third quarter GDP.  As per the above statement, if there are any surprises it could be the fuel to propel the Dec silver market above the very strong resistance of 16200.  This is the line in the sand for this market to have any potential for a bull to rear its head for the remainder of the year. The market is starting to reject some of the latest lows so some careful wording in an FOMC statement or weak GDP report could fuel this market higher. Stay tuned.

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

Recent Strength USD Putting Pressure on Crude Oil

RJO Futures Senior Broker Mike Sabo discusses the crude oil futures market. Reaching a potential short-term bottom in crude oil futures. Recent strength in the dollar putting pressure on crude oil. Feel free to contact Mike here to leave a question or comment on his video.

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Energies - Natural Gas

Natural Gas Tears Lower on Expected Warm Start to Winter

Over the last 10 trading sessions, Dec ’15 natural gas futures have only closed higher twice. Though prices have been falling nearly all year, the month of October has been particularly weak, pushing a new multi-year low by almost 30 cents from the lows placed in September. While many traders have hoped to see seasonal demand warrant bargain-buying, a quick look at a chart will show buying attempts have been futile. With weather expected to be unusually warm for the start of winter, the argument for a strong pick-up in demand right now is mostly unsupported. 

I am not suggesting bullish strategies should be ignored at this time. Just last year natural gas had shown similar weakness through the September and October period. Amazingly, by the middle of November the market was able to rally almost an entire $1.00/mmbtu off the October lows.  While a full dollar over the next few weeks is too much to reasonably expect, I do believe the market has the potential for an excellent pop. 

Technically speaking, the recent collapse lower has sent the Relative Strength Index (RSI) indicator on the December ’15 contract to its lowest level of the year – suggesting the market is highly oversold. This same contract also has an unfilled gap between $2.483 and $2.450, which I believe will be filled sometime in the near future. Until the RSI corrects and this gap is filled, selling pressure should be fairly limited. If the market can recover back above September’s $2.618 low, the resistance levels around $2.69, $2.75 and $2.84 should become targets again.

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.

 

Dec ’15 Natural Gas Daily Chart
Source: RJO Futures PRO

Nat Gas Daily

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Softs - Sugar

Are You Friendly to the March Sugar Futures Uptrend?

Joe Nikruto

This week’s comment finds the March sugar futures contract breaking out from recent consolidative price action.  While up only two points at the time of this writing, the last three days trading have seen a convincing breakout of the recent range, a test and hold of the 18-day moving average followed by a new high for the move.

One of today’s leads on Agrimoney.com highlighted bullish commentary by a large investment firm exhorting clients to “play the 2015-2016 global deficit story” and use weakness to enter or increase long positions.  It would seem much of the recent strength in sugar is predicated on this idea the El Niño conditions present in cane growing areas will result in less sugar produced.  Volume has been trending lower in the March sugar futures contract while open interest has remained relatively stable.  It may be helpful for traders to keep a watchful eye on open interest.  If open interest starts to drop, that may be a signal this rally was fueled by short covering and has run its course.  The other side of that coin is that sugar, as much or more than most commodities, is viewed as an investable.  The strength of the U.S. dollar and dissonance surrounding demand in emerging markets has kept sugar under pressure for the last year and a half.  Many players that view markets from the long side only have been forced to the sidelines.  But with investment banks in the headlines, it may be time for this money to be deployed in commodities with supply/demand stories, like sugar. 

As it stands, the trend is up and price action is positive.  Sugar is bumping into a 38% retracement level at 14.65 of the almost two-year downtrend and is quite convincingly chewing through resistance from the month long sideways trade back in April. The highs from that range trade come in right around 15.00 in the March contract and appear to be easily reachable.  After that, the 50% retracement level at 15.70 could be the next stop. With funds already long and likely to get longer as well as fundamental money waiting for weakness to enter the market, I am not sure how March sugar futures could mount a sustained break. I am still skeptical in regards to the bullish fundamental story but that idea crystallized in my obstinate futures broker brain back down near 12.00.  The last trade on the screen as I finish this missive to you, dear reader, is 14.40.

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

Heavy Rains in the South Seen as Supportive

Erik Tatje

Having traded above some key technical levels, the cotton market appears to have shifted to a neutral to slightly positive tone from a technical standpoint.  The recent lowering of Chinese interest rates has raised concerns over their demand for cotton; however, a significant uptick in rain in the southern cotton producing states of the U.S. has helped offset some of the Chinese demand concerns.  With additional moisture expected in parts of Alabama and Mississippi, the market appears to be well supported above 60.00.  Market participants should keep an eye on the 20-day moving average as it is quickly approaching a crossover with the 50-day, which would indicate a bullish signal on the chart.

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

Trick or Treat: Cocoa Futures

Peter Mooses

As I have said for months, the long-term trend is bullish in cocoa. Supply is an ongoing concern that will not go away. Buying opportunities continue to surface on pullbacks caused by liquidation and profit taking. Weather factors will provide support to the market over the next few months. The Ivory Coast election has been somewhat of a non-factor on the market as results come in.

Keep an eye on resistance at 3180; a break and close above should have us headed for 3200. Support at 3140 should hold and entice buyers.

When cocoa futures pullback, is that a trick or treat? – Treat it would appear, if you are a buyer and long the market.

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

Coffee Under Pressure Again

Adam Tuiaana

December coffee has given back almost all gains from September and October. The main focus and pressure has been coming from very wet weather in Brazil, which has put to rest much speculation about potential flowering issues the crop may experience. In addition, it appears the coffee market has been extremely overbought, and hedgers have locked in prices. Although bulls still may see some level of support coming from supply concerns and a recovering Brazilian currency, major technical violations have taken place over the past month.

A violation of the 123 level has seen some major follow-through selling, and should lead to a revisit of the 114 area over the next week before any support is found. As for our position today, we will sound like a broken record, and will weigh on the side of the trend, down.

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

Turn-Around Tuesday in Soybeans

Stephen Davis

Corn harvest was reported as 75% complete, right at the estimates above the 68% average. States like Minnesota and Iowa are going to carry some of the lower eastern Corn Belt production. A corn vessel left Monday from Brazil bound for Wilmington, North Carolina. It just seems strange with the big corn crop we just produced to be importing corn from Brazil to our East Coast!

A little turn around Tuesday action in the soybeans today after yesterday’s sharply lower trade. Some traders were surprised at soy’s weakness yesterday after very good export inspections. The managed fund community is flat in their soybean positions .When and if soybeans rally, it will be a rally in a bear market. The one strong aspect of soy is the bullish seasonality of the protein rich crop as soybeans usually try to rally into the end of the year.

Yesterday’s sharp gains in the wheat market were largely the result of technical considerations following Friday’s CFTC data showing the funds holding a much larger short position in CBOT wheat short covering allowed technical levels to be penetrated and the wheat market was up and away. It is interesting to note that total open interest was unchanged yesterday. There is no fundamental reason on the price strength in wheat yesterday. There is still plenty of wheat in the world. Continued light U.S. farmer selling in corn and soybeans could provide some underlying support, as well, as front end basis remains firm. Corn open interest was up 5,000 contracts yesterday while soybean open interest was down 9,000 contracts on the lower trade yesterday.

Some of you have emailed me to write in eView my opinion of long Chicago wheat and short Kansas City wheat. One big item to remember is fund activity is focused on the Chicago wheat. When there is short covering and/or a big technical move in wheat, the Chicago contract will lead. It has more volume, more activity and dominates the wheat trade. Kansas City wheat is the hard red winter wheat the world wants and craves. The CME group bought the Kansas City Board of Trade a few years back and with CME marketing muscle you will see more interest in the KC wheat in the months ahead. Spreading wheat will grow considerably and that interests me a great deal. Notice the chart here of long Chicago wheat and short Kansas City wheat and the leadership that Chicago wheat has shown. That chart pattern is a nice picture.

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.

 

Long Chicago Wheat/Short Kansas City Wheat Spread
Source: RJO Futures PRO

Wheat Spread

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Agriculture - Livestock

Proteins Bearish with Demand concerns, Record Weights and Strong Dollar

Jeff Gilfillan

Pork and beef are both edging lower from demand concerns from a strong U.S. dollar and a recently published report from the WHO concerning cancer risk in processed meats; continuing the trend of more heavy supplies on feed and in storage and recent technical failures testing previous support levels.

Other contributing bearish factors to front-month futures include index rolls getting started with Goldman roll in the horizon. COF reports showed a continued trend of low placements and low marketings in cattle. Cattle slaughter needs to pick up to reduce the oversupply of fed cattle and retail prices need to find a happy place to compete with other proteins and win the consumer back going into the pre-holiday lull.

I anticipate the beef and pork industry to produce an effective response to the recent WHO report. While there will certainly be a social media click phase causing some demand concerning reactions, I do not believe the report will have much of a significant effect as most consumers already know processed foods are not healthy. You can buy a pig and a lamb now off the shelf at Costco so retailers are ahead of the game on this one. I expect both the livestock and the agricultural producers to hedge with less price sensitivity in the very near future.

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 Feb '16/Short Dec '15 Live Cattle Futures
Source: GeckoSoftware.com

Live Cattle Spread

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Currencies

Draghi Extending QE in the Eurozone

John Caruso

RJO Futures Senior Broker John Caruso discusses currency futures markets. Latest economic news has been a miss. Draghi extending QE in the Eurozone. Feel free to contact John here to leave a question or comment on his video.

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Equities

S&P Falls Ahead of Fed Meeting

Greg Perlin

The S&P fell on Tuesday ahead of the Federal Reserve’s meeting this week where investors will watch for clues on the timing of the first U.S. rate increase in almost a decade.  Expectations the Fed will keep interest rates lower for longer, along with the prospect for further stimulus from other central banks have boosted global stocks this month. 

Global central banks have either looked to pump more money into the system or delay interest rate increases since signs of a slowdown in China rocked financial markets in August. The People’s Bank of China cut interest rates last week.  The European Central Bank has hinted it could ease policy further in December, while investor expectations have grown due to further stimulus from the Bank of Japan.

The Federal Reserve decided against raising interest rates in September following financial market volatility and many economists expect it to remain on hold for the rest of the year. While the Fed is widely expected to leave short-term rates near zero at its policy meeting concluding Wednesday, its statement will be carefully parsed for clues about future action.

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 500 Daily Chart
Source: RJO Futures PRO

E-Mini S&P Daily

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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.

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