RJO Futures Website

January 5, 2016

Volume 10, Issue 1

Featured Article

Upcoming RJO Futures Webinars

Trading Currency Futures

Wed, Jan. 6, 2016 at 4 p.m. CT

Register now! 

Learning about foreign currency futures trading can add a broad range of new products to your trading routine. In this session we'll cover many of the critical elements that you'll need to know regarding currency futures (also known as FX futures). FX futures trade 24 hours a day, 5 1/2 days a week. This is a very technical market that traders can potentially utilize to trade the markets outside of normal U.S. stock market hours—with good volume and volatility. Depending on where you live and your work schedule, Forex futures may be a good fit for your trading enterprise.

In this webinar you will learn:

  • What makes FX a good market to trade?
  • Benefits of trading foreign currency
  • Typical trends within FX futures
  • An FX futures trading strategy

 

Trading Index Futures

Wed, Jan. 13, 2016 at 4 p.m. CT

Register now! 

This session will assist you in identifying good technical trade setups on the charts and the key components of your entry and risk in this market. Index futures are very technical in nature and are traded by professionals around the globe. Learn the index futures market and understand what you need to know when trading these instruments. Learn the Gap trade strategy to help build consistency in this market.

In this webinar you will learn:

  • Keys to the index futures market
  • Benefits of trading index futures
  • What you should know about trading these instruments
  • Using the Gap trade strategy to build consistency

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Metals - Gold

Gold Looks to Nonfarm Payroll for Next Move

In the early morning trade, February gold is still in consolidating mode, which started back on November 16. Gold is currently trading at $1077.6 and trying to hold on to its second straight day of gains to start the New Year.  However, I must note the last time the U.S. dollar was trading at this level ($99.56) gold was making new lows, so it’s important to see how gold reacts to current dollar prices. This Friday is the first Nonfarm Payroll job numbers of 2016, so it’s very probable gold will get its next direction off this data.

If you take a look at the February daily gold chart, you’ll see it has formed a short-term symmetrical triangle pattern and the shiny one is trying to break out of it to the upside. If gold could break above yesterday’s high of $1083.0 and close above that level, you could possibly see gold rally up to $1,142.2 which is where the 200-day moving average is resting at. For the bears, if gold breaks below the $1,045.4, watch for it to finally break below the $1,000 an ounce handle. I have highlighted some technical levels below on my daily gold chart.

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.

 

Feb '16 Gold Daily Chart
Source: RJO Futures PRO

Gold Daily

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Energies - Crude Oil

Up, Up and Away?

It’s the first eView of the year so let’s do a quick re-cap. Crude oil has been in a mostly downward trajectory since the beginning of November. Over the last week of trading it appears the market is now consolidating. The fundamental picture remains pretty much the same: big supplies and weak demand—the classic fundamental story of any bearish market. Yesterday’s weak data out of China which sent stock markets around the world plummeting only confirmed this. In addition, we are seeing very soft inflation data out of the Eurozone and here in the States we continue to see a stronger U.S. dollar which puts pressure on commodity prices in general.

Even the growing tension between Saudi Arabia and Iran hasn’t helped fuel much of a rally. The latest EIA Report shows current stock piles of oil at 487.409 million barrels, an all-time high for this time of year. Refinery capacity utilization remains weaker than year over year currently at 92.6% vs. year ago levels at 94.4%. OPEC has committed to maintain current production levels and many of the OPEC countries are producing oil at a price well below what they need in order to fund their social and government programs.

So as one can see, there are not a lot of reasons to be overly bullish about oil except that its cheap compared to last year’s price levels. However, this doesn’t mean it can’t go lower. With that being said, I do think traders should keep a very watchful eye on this market. When a rally does start, we may see some pretty big moves in a very short period of time, basically a short covering rally. Traders should watch this week’s EIA report for possible short-term market direction.

Short-term technical indicators still appear to be in oversold territory and I continue to remain cautiously bullish as long as the market doesn’t break the $35 mark basis February oil.  The market appears to be building a possible base at these price levels.  Watch for a close above the 10-day moving average which could signal an opportunity.  I would suggest using an option strategy or waiting for an inside day breakout to establish a long futures postions. 

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.

 

Feb '16 Crude Oil Daily Chart
Source: RJO Futures PRO

Crude Oil Daily

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Energies - Natural Gas

Understanding the Explosive End to 2015’s Natural Gas Trade

Natural gas was undoubtedly one of the worst performing commodities of 2015. The year’s average price was the lowest annual average in 16 years. Record breaking storage levels, roaring production, mild weather and a strong U.S. dollar all contributed to this collapse.  Amazingly in just the last two weeks of the year, the market was able to recover a sizable portion of what it had lost. However, after bouncing roughly 30%, the market appears to once again be under pressure.

While the recent rally does appear to have been fueled partly by falling U.S. temperatures, the dramatic size of the run-up can be attributed to short covering. With such a consistent and steady trend lower throughout the year, it’s understandable that funds, speculators and hedgers alike were holding short bets in this market. Once large clusters of stop-loss orders are hit, these types of moves are explosive.

Now that many shorts have exited the market and weather appears to be re-normalizing, will this rally be yet another selling opportunity? For now, I believe it will be. The February contract fell short of breaking a critical resistance level of $2.40, and appears to be both overbought and exhausted. If the market can remain under $2.40 resistance, I believe $2.18, $2.15 and potentially even $2.04 can be revisited. Until the market can get sustained closes above $2.40 resistance, the argument for further upside is hard 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.

 

Feb '16 Natural Gas Daily Chart
Source: RJO Futures PRO

Natural Gas Daily

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Softs - Sugar

March Sugar: Which Way from Here?

Joe Nikruto

This week’s comment on March sugar futures finds a market treading water trying to fight its way out of post-holiday trade. Volume is beginning to come back as traders dutifully fire up computers and return to trading desks across the globe.  March sugar is mired in a technical middle ground of the range set early in November and December. This range, a low of 13.93 and a high of 15.85, provides two solid sign posts for the direction sugar may travel in the first half of the New Year.

Up to this point, sugar has been rallying on the idea dry conditions from a strong El Niño, which affects key growing areas, will impact this year’s production negatively. Many in the trade believe it will not take much in the way of production decline to work through what has become almost a yearly surplus in the sugar market. This idea can be seen on the chart. The rally at the end of 2015 has taken the market from near 11.00 to almost 16.00, a 50% retracement of the downtrend that started back in 2014.  At this point in time, that appears to be enough.  Having changed the psychology behind what was a one way market, March sugar futures appear to be languishing in an area where evidence of reduced production will be required for another leg higher.

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

Bearish Outside Forces keep Cotton Strength Contained

Erik Tatje

With the U.S. dollar continuing to rally and U.S. manufacturing data coming in weaker than anticipated, it will be difficult for cotton to sustain any type of significant strength.  Outside forces add to this sentiment with yet another poor Chinese manufacturing number.  The RSI indicator has had a difficult time sustaining a reading above 60, which is often indicative of an “overbought” reading in a bearish market environment.  Should this indeed be the case, momentum traders may be able to use this information to identify potential trading opportunities in the market (for more on this, please contact me directly). 

At the present time, cotton will likely maintain its neutral to slightly bearish tone unless price action can produce a close above the previous 65.23 high on the Dec. 9, 2015.  Since bottoming in late September, the market has been able to produce relatively higher highs and higher lows. However, the intermediate trend still appears to be sideways to negative below the previously mentioned 65.23 figure.  If the recent negative momentum persists, the market will need to penetrate the currently significant area from 62.50 – 62.60.  A sustained close below this area has the potential to confirm the bearish sentiment, at which time traders could consider highlighting the 61.45 and 59.45 levels as potential downside targets. 

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

 

Mar ’16 Cotton Daily Chart
Source: RJO Futures PRO

Cotton Daily

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Softs - Cocoa

Fear in the Markets to Start the New Year

Peter Mooses

Although cocoa still has supply and demand concerns, it has not been immune to the negative start to the trading year. The Chinese equity drop carried over across all markets. Speculators have taken profits in cocoa and sold long positions the past few sessions causing about a 168-point drop in just two days. The 200-day moving average was ignored as prices shot down to 3051 during today’s morning session. 3050 did hold, solidifying that area of support. As I have said all along, pullback creates good buying opportunities.

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

Coffee Poised for Selloff

Adam Tuiaana

March coffee was able to clear some good resistance last week, but lack of fresh bullish news prompted some long liquidation yesterday forcing a big selloff back down to the 122 level. It’s likely the recent rally was based on some short covering from early December, along with a continued weak Brazilian currency. In addition, it looks as if the overall demand is taking a lead from the equities market, which has also been on the downside.

Let’s not forget last month we saw a violation of the 11780 level from September, which is significant. Subsequent to this, we saw what I believe to be an upside correction in the way of this most recent rally. I now believe the correction is finished, and a continuation of the downtrend is underway which should make for a good opportunity for traders to step in the on the short side, yet again.

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.


Mar '16 Coffee Daily Chart
Source: RJO Futures PRO

Coffee Daily

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Agriculture - Livestock

Lower Range of Monthly Value Area Holds in Fed and Feeder Cattle

Jeff Gilfillan

A pre-holiday firm USD, volatile stock market, questionable demand and momentum traders pushed live and feeder cattle prices to the low end of long-term value areas. Feeder cattle touched the 143 area and live cattle tested just under the 117.00 level I mentioned last blog as a lower price range target until spring.

The December 18 COF report reversed this trend sharply showing signs of lower weights, higher marketings and lower placements. As quick as prices dropped, they recovered into the Christmas weekend as retailers and feedlots took advantage of lower cash prices to fill the shelves and empty pins. 146 is the next upside objective in front month live cattle (Oct highs) and feeders are targeting 186 area in March. Get used to the volatility.

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 Monthly Chart
Source: GeckoSoftware.com

Live Cattle Monthly

 

Feeder Cattle Hog Monthly Chart
Source: GeckoSoftware.com

Feeder Cattle Monthly

 

Long Apr '16/Short Mar '16 Feeder Cattle Futures
Source: GeckoSoftware.com

Feeder Cattle Spread

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Currencies

Dollar Forges Higher

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses currency futures markets. Unemployment number biggest test for dollar as it forges higher. Broad based deflation in the commodity currencies. Feel free to contact John here to leave a question or comment on his video.

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Equities

S&P Weak during First Trading Session of 2016

Greg Perlin

U.S. equity markets sold off yesterday during the first trading session of 2016, with the March S&P E-mini falling to the 1980 level.  Early weakness came about in the wake of disappointing Chinese manufacturing data which showed the 10th consecutive contraction. This weak data out of China clearly inspired fresh slowdown concerns for the region.  With U.S. economic data yesterday showing a weaker than expected look at December ISM Manufacturing—the lowest since June 2009—there are also concerns of disappointing growth in other parts of the world.   Another issue that might have given the bear camp confidence was a suggestion from Fed President John Williams of the prospect of three to five U.S. rate hikes in 2016.

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.

 

Mar '16 E-mini S&P Daily Chart
Source: RJO Futures PRO

E-Mini S&P Daily

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Metals - Silver

Rate Hike Creates Unclear Future for Silver

The first eView of the year is the perfect time to reflect on the past.  On Jan. 2, 2015 this market opened at 15730 and closed the year out at 13825.  This was an almost 200 point, 12% move lower and the third year in a row this market closed lower. In 2014 the market was down almost 20% and lost almost 40% of its value in 2013 (31025 open, 19425 close).  If this market falls “only” 8% for the year this would put silver futures around the 1200 level by the end of this year.

This is the bear case.  However, with the FOMC raising rates for the first time since 2006 it’s hard to make a case for the way it’s been to continue.  Since this is something the markets haven’t experienced in almost a decade, it’s difficult to make blanket statements about how the market will actually react.  We’re currently working with support at 1370 and resistance at 1620 and 1850. 

The bull case is that the decline year over year has been getting smaller, so instead of the single digit drop we might see a single digit increase.  However, if we can’t get a close above the resistance the downside would be the direction silver heads.  Over the past few years we’ve seen silver make its yearly highs in February and never able to get back up there.  Will this year be different?

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.  



Mar '16 Silver Daily Chart
Source: RJO Futures PRO  

Silver Daily

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