RJO Futures Website

November 10, 2015

Volume 9, Issue 23

Featured Article

Upcoming Webinars

Upcoming RJO Futures Webinars


Trading Opportunities for Busy People
Wed, Nov. 11, 2015 at 11 a.m. CT

Register now! Whether you're trading full-time or part-time, trading the markets is a business. Create a plan to determine what trading opportunities suit your lifestyle and work life. Know what kind of trader you are—or want to be—and then engage the markets with a pre-defined trading strategy.

In this webinar you will learn:
• Swing trading vs. Day trading
• Trading opportunities that suit you
• Time saving tips
• Using a defined trading strategy

 

Futures Trading Strategy

Wed, Nov. 18, 2015 at 11 a.m. CT

Register now! Understand how professionals utilize sound trading strategies to guide them in and out of the markets. What are the key components of a trading strategy, and how can you learn to understand price action to determine precise entries, stops, and profit targets.

In this webinar you will learn:
• Key components of a strategy and why you need one
• How technical analysis differs from trading strategy
• Why is price action so important?
• How to implement a trading strategy

 

 

Exchange Info

El Nino: One of the Strongest on Record

Get the latest economic highlights from Blu Putnam, Chief Economist of CME Group, with three new videos.

Highlights

  • One of the strongest on record; can affect agriculture prices.
  • Warm waters can feed into hurricanes and bring heavy rain, like Patricia.
  • El Niño can cause drought in Australia, Indonesia.
  • Strong El Niños can be followed by La Niñas, a cooling of ocean waters.

Click here to watch the video. 

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Metals - Gold

Gold to Fall Under $1,000?

In the early morning trade, December gold is continuing its more than $100 sell-off from its October 15 high of $1191.7 and is currently trading at $1086.0. I believe this is mostly due to Fed Chairman Janet Yellen’s testimony which was digested as mostly hawkish on a potential interest rate hike in December. Last Friday’s very positive unemployment numbers would support that decision by the Fed Chairman.

If we take a look at the daily gold chart, you’ll see it is a complete mess for any gold bulls. Although, there could be a short-term potential bottom in the gold market as it approaches the contract low printed back on July 24 of $1073.7. If this last level of support does not hold, then you might finally see gold fall under a $1,000 a troy ounce.

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

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Metals - Silver

Can Silver Find Support?

Silver, why do you do this to us? You line up the technicals so well, provide a false breakout to the upside only to make lows for the following nine trading sessions. What did we ever do to you?  Three sessions ago silver was resting on a downward consolidative trend line, which it promptly broke through the next day. We’re now looking at support of 1395 as the next target for this market to head to.

Why the weakness?  Some of it can be due to the better than expected Nonfarm Payroll numbers in the U.S.  This leads to the FOMC hinting…very lightly…at a possible rate hike in December.  These are hints and speculation but no real indication.

The weight on silver continues to be the downside, with RSI at the lowest level in over a year.  One thing to note is last year in the beginning of November this market found its footing and some support.  It didn’t last for long, but it could be intriguing if history can repeat itself.

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

Let’s Get Ready to Go…Nowhere?

Since the last eView published in October, crude oil has continued with its sideways move with most of November price action a touch weaker. The market appears to be consolidating after a four day losing streak.  The market appears mixed with questionable demand, good supply and weaker economic data both here and abroad.  We have seen the U.S. dollar strengthen and softer Chinese inflation data in addition to the Fed saying we could be moving closer to a rate hike possibly as soon as December. Personally I don’t think it will happen so soon but an interest rate hike could put a lid on risk taking.  The latest IEA monthly report is showing annual demand growth has had a difficult time staying above one million barrels per day and that investment in the oil sector is down approx. 20%.  Brent is expected to stay softer into 2020 with anticipated price action to stay around $50.00 a barrel. 

Tomorrow’s EIA Report is expected to show U.S. shale oil production declining for the eighth month.  At this time the market appears to be carving out a trading range which presents a host of trading opportunities.  OPEC has committed to maintain current levels of oil production but many of these countries are producing oil at a price below what they need in order to fund their social and government programs.  At some point things should give and we may hear chatter of production cuts which should help lift prices. Traders should watch this week’s EIA report for short-term market direction.

Short-term technical indicators appear to be in oversold territory and I continue to remain cautiously bullish especially with the way the market has pulled back the last couple of days. I would suggest using an option strategy or waiting for an inside day breakout to enter using futures.

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.

 

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

Crude Oil Daily

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Energies - Natural Gas

Natural Gas Struggling to Hold Rallies

December natural gas futures are once again fighting for sustainable upside momentum. A sharp break to $2.19/mmbtu on Oct. 30 marked a new contract low as U.S. weather remained unseasonably warm.  Traders are still convinced the warmer weather will keep demand weak for at least the next 10 days. Aside from the bearish weather pressure, a smaller than expected build in EIA inventory data last week opened the door for a great +10 cent pop. It seems that because the market has been so deflated this year, any glimpse of bullish hope has the ability to give the market a strong bounce. The question is, when will the market be able to sustain these rallies?

For now, the rallies continue to be sold. We won’t be able to confirm this pattern has changed until 2.60 is revisited, as this is the prior significant low that eventually broke in mid-October. A big task for the market will be in filling last month’s gap. This gap exists between 2.483 and 2.450 on the December contract, and is currently over 10 cents from the current price. If EIA data this Thursday comes in below expectations, traders should look for another potential bounce and maybe even a fill of this gap. Until then, the argument for sustained upside movement is a hard one to make.

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

Natural Gas Daily

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Softs - Sugar

Speculator Sponsored Sugar Surge Seen Stalling?

Joe Nikruto

This week’s sugar market commentary finds the March sugar futures contract bouncing hard.  Up 71 points at the time of this writing roughly 30 minutes before a USDA supply/demand report.  This is a sizeable move after the erosion we have seen in the last four trading sessions took March sugar from 15.50 down below 14.00. Open interest has been trending lower since we put in the high of 15.53 five trading sessions ago. Recent shorts with stops over 15.00 should find no comfort in the bounce today but recent wire service reports have highlighted the trouble sellers have had finding a home for physical sugar. Reports have also highlighted the willingness of speculators to jump on the band wagon of a commodity that may have a real supply disruption story.  The flip side to that coin is the ridiculousness of a myopic media lamenting the death of commodities day in and day out. 

Some of the best trades of the last year were in markets that were heading lower. Trend followers know this and sugar is a prime example of a market where traders can do very well when markets are trending either up or down.  It may be slightly early but traders should begin to watch the chart closely for the right side of a head and shoulders top pattern to develop.  This recent move higher has been dramatic and has found tremendous sponsorship from speculators. Trend followers who have been long from 13.00 and 13.50 will now be forced to the sidelines near 13.44 and 13.68.  The bulk of the move higher has been predicated fundamentally on anticipated challenges to production from the El Niño weather pattern. These effects are real and can be pronounced.  It remains to be seen if a significant reduction in supply will develop and if that reduction will be enough to offset the current ample supply that exists.

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

Cotton Calm Ahead of Upcoming USDA Report

After a strong start to October, the cotton market has cooled off a bit as some of the weather premium that was built into the market from earlier rains in the southern cotton producing states begins to dissipate.  Technically, the 61.61 and 61.28 levels could serve as near-term support as this market continues to churn within the broader range from 60.00 – 68.00.  Although near-term weakness may allude to a strong, quality crop, today’s USDA WASDE report may reflect some of the feared deprivation of cotton resulting from the previously mentioned wetness in the southern crop producing states.  Trend following traders should be cognizant of the fact that moving-average crossover strategies in a sideways trading market can produce “false-signals” and should do their best to avoid being “chopped up” in the market.

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

Cocoa: Chop and Slop

Peter Mooses

Over the past week March cocoa has not been able to find its way. One day up, one day down – March futures seemed to locate support at 3195 finally and has bounced higher today. With a high of 3288, can we test 3300? Cocoa moved slightly lower last week as demand remained in question. Although Ivory Coast port arrivals are ahead of last season’s pace, the Nov 2-8 period saw a decline compared to 2014. Does this mean West Africa’s supply is slowing down?

Although weather has been kind to West Africa as of late, the dry season is coming and El Niño is still a factor.

Technically, 3260 has already been broken, so look for follow-through with a potential boost above 3300 over the next few days.

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.  

 

Mar '16 Cocoa Daily Chart
Source: RJO Futures PRO

Cocoa Daily

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Softs - Coffee

Pressure Continues for Coffee

Adam Tuiaana

December coffee continues to see major pressure, even in the midst of a weaker U.S. dollar. The coffee market needs some bullish supply news (bad harvest, weather issues, you name it) in order to regain the losses suffered over the past month. December coffee prices are now approaching the October low of 11630, which, if violated, could send coffee prices back down to the 114 area. Brazil has reported an upcoming dry weather forecast, but it just doesn’t seem to be enough to resuscitate coffee prices at this point. Again, dry weather will need to be accompanied by some bullish supply news, which at this time is non-existent. Traders should expect to see coffee prices revisit 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

Economic News Shaking Up the Grains

Stephen Davis

USDA’s Crop Production and WASDE reports (World Agriculture Supply and Demand Estimates) will be out at 11 a.m. CT. EIA ethanol data will be out on Thursday and Export Sales will be out on Friday this week due to the Veteran’s Day holiday on Wednesday. The grain market’s trading schedule will not be impacted by the holiday.

Chinese corn futures were down sharply overnight on the continued Chinese government attention regarding the gigantic corn stockpile situation. China is mulling measures to heighten demand for domestic corn. China is considering offering feed mills subsidies to prop up domestic corn sales while also trying to reduce its massive state stockpiles of corn at discounted prices, according to industry sources cited by Reuters. They also say the country’s National Development and Reform Commission proposed cuts to the state corn support price for 2016-2017. Another analyst says that China may offer feed mills in southern provinces freight subsidies and a statement posted by the State Grain Administration noted that China will encourage downstream industries in major consumption areas to purchase corn from northeast areas and build stocks. There is a lot of corn in China.

There is a lot of wheat in the world as well. Egypt tendered for wheat for the period December 11-20. All of the wheat tenders were from Ukraine, France and Russia. There were no U.S. wheat offers in any of this Egyptian business.

I think The Wall Street Journal summed it up well in a quote this week. “China is still slowing, the Fed is still likely to hike in the coming months and global growth remains an issue. This is also a prescription for a stronger dollar and a major headwind for commodities to overcome."

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

 

Jan ’16 Soybean Daily Chart
Source: RJO Futures PRO

Soybean Daily

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Agriculture - Livestock

Demand Concerns, Record Weights, Strong Dollar Bearish Proteins

Jeff Gilfillan

The charts look ugly. Rancher and feedlot margins are not pretty and packer margins are getting thin in the beef trade. It will be a race to the bottom for competing proteins moving into the holidays as beef will have an edge following the WHO report on processed meats (processed meat includes bacon, sausages, hot dogs, salami, corned beef, beef jerky and ham as well as canned meat and meat-based sauces).

Consumers and retailers should benefit over the holidays. Consumers will need the extra cash saved on the shelves and the pump when they start peeling through their new health plans.

Technically I do not see any value in fed cattle until about 125 and a test of recent lows is just over 120. Seasonals were long hogs/short cattle from end of October through the week before Thanksgiving and reverse long live cattle/short hogs after Turkey Day into the Christmas holiday. See MRCI.com.

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. You may also follow me on Twitter @RJOJeffGil.

 

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

Fed Eyes December for Rate Hike

John Caruso

It’s becoming increasingly evident that Janet Yellen and the Federal Reserve want to move on a December 0.25% interest rate hike.  “Want” being the key word, not “should”.  Many believe with present levels of inflation, or deflation rather, along with the slowing global growth outlook, it’s quite possible the Federal Reserve could be making a policy mistake. However, it’s also becoming obvious  the Fed wants out of ZIRP, and it’s also rumored the Fed does not want to risk politicizing a rate increase during the 2016 Election Year. 

The blowout 271 thousand U.S. Unemployment Data released last Friday seems to be what many believe to be the final catalyst determining a December rate increase.  The commodity and currency markets also seem to think so.  The U.S. dollar has rallied over 550 points with the past month of trading, fueled not only by an increase in the odds for a December rate hike, but also collateral foreign monetary policy.  The ECB and Draghi will continue to forge ahead with their QE program and the People’s Bank of China lowered its benchmark rate to 0.25% at their October meeting. 

Strong dollar, great news?  Well, here’s the catch.  A strong U.S. dollar vs. other major foreign currencies, continues to fuel lower commodity prices and can further strain corporate earnings, by hampering United States exports.  With such a strong divergence in domestic and foreign monetary policy, and anemic commodity demand from the rest of the world, especially China, the Fed could be steering markets down a dangerous path by raising rates in the face of a global economic slowdown.  Maybe, maybe not, but it’s certainly worth pondering the consequences of an early rate hike.  

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or jcaruso@rjofutures.com.  Also be sure to check out my bi-monthly currency market update posted on our website.

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Equities

E-Mini S&P Update

Greg Perlin

E-mini S&P pointed to a drop at the open this morning putting the e-mini on track to fall for the fifth session in a row. International equity markets were mostly weaker overnight with some European markets managing to buck the trend with modest gains. Wrangling between the UK and EU was seen overnight and that seemed to prompt some dollar strength.  The U.S. economic calendar presents October NFIB Business optimism index, as well as October import prices, which are anticipated to have slipped from the -0.1 month over month decline in September.

The E-mini S&P pushed lower throughout yesterday’s session, with the December contract falling to a new six day low.  It appears the market continues to reassess the impact of Friday’s strong Non-Farm Payroll data and growing prospects for a December interest rate hike.  Another issue that could undermine the markets today is talk that the ECB might be poised to hike rates as many feel that type of move is the result of the U.S. move and not because of the economic conditions.  Critical support in the December E-mini is seen at 2064, which happens to be a double bottom.

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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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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