RJO Futures Website

February 2, 2016

Volume 10, Issue 3

Feature Article

Introduction to Futures Webinar

Wed, Feb. 3, 2016 at 4 p.m. CT

Register now! This webinar provides an entry level view at getting started in trading futures. Understand the how and why of the 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  

Intro to Futures

 

2016 Outlook Insight Guide

Request now! RJO Futures has put together some of the best insight into where the markets have been and what might be ahead for 2016. These papers aren’t just a quick overview, they average 20-pages of in-depth content and graphs. Papers include:

  • 2016 U.S. Economic Outlook
  • 2016 Grain Outlook
  • 2016 Energies Outlook
  • 2016 Metals Outlook

2016 Outlook Insights

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Metals - Gold

Is Gold Going to $1,200?

In the early morning trade, April gold is currently up slightly extending its three-month high as continuing bad news out of China fuels safe haven demand. After further contraction in U.S. and Chinese manufacturing, the shiny one has seen its demand boosted as a safe haven. April gold, which reached an overnight high of $1,131.5, is trading at the highest level since early September. 

If we take a look at the daily gold chart, you’ll clearly see that after it broke out of its symmetrical triangle pattern back on January 6, the shiny one has continued to make higher highs and lower lows also rallying more than $50 a troy ounce the last month. April gold is currently trading just below its 200-day moving average and if it breaks and closes above it, gold can definitely rally up and challenge the October 28 high of $1,184.0 or even test $1,200.0.

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.

 

Apr ’16 Gold Daily Chart
Source: RJO Futures PRO

Gold Daily

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Metals - Silver

Silver Awaits Economic News for Next Move, Holding 1424

The March silver market continues to tread water around 14. While it spent more time hanging out in the 13’s in December and January, since January 16, March silver has spent all of its time above 14. It briefly touched my key point of 1450, closed at 14515, then 1450 and finally sold off aggressively. Silver has been trading off of a downward trend line, giving extra help up the hill.

The 1450 level has been the point I’ve been looking towards for a bull. This immediate failure leads to caution but the fact that we’re staying above 1400, and now 1424, suggests this market could see more upside. It’s a tight range but the market is holding on. 

Tomorrow is the ADP employment report for January with expectations of 193,000. Friday we have the Government non-farm payrolls with expectations of 192,000. With the markets getting comfortable in this wedge, the news this week could finally be the fuel needed to get this market back into 1500 and follow gold to higher prices.

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. You can also follow Michael on Twitter @mikerscharts.   

 

Mar ’16 Silver Daily Chart
Source: RJO Futures PRO

Silver Daily

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Energies - Crude Oil

Crude Oil Under Pressure

RJO Futures Senior Market Strategist Mike Sabo discusses the crude oil futures market. Crude oil is under pressure. Demand remains questionable. Feel free to contact Mike here to leave a question or comment on his video.

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Energies - Natural Gas

Nat Gas Running Out of Time for Seasonal Bullish Fundamentals

Yet another rally in natural gas has been sold. After finishing off last week with an impressive push to $2.30/mmbtu, the March contract has already turned back around and broken below $2.00 in today’s session. While an isolated blizzard on the East Coast may have created a short-lived buying opportunity as temporary demand increased, the long-term bearish forces of the market have once again quickly regained control. With a little under two-months left in winter, hopeful bulls appear to be losing their optimism for any significant near-term recovery in natural gas. Unfortunately, the overwhelming supply of U.S. natural gas may make it through this season barely touched. So long as supply exceeds demand, basic economics make it very difficult to argue a fundamental bullish position at this time.

Clearly a $0.30/mmbtu move lower in two sessions is a lot ($3,000 USD per contract). Since the market is currently a bit oversold, a small pop may be likely to re-normalize price action. Traders should be very cautious of this potential pop as rallies have consistently been short lived. Until prices are able to sustain closes above $2.50, I don’t believe this pattern will change. While $2.40 appears to be an ideal spot for fresh sellers, I’m no longer under the opinion that we can see this price again in the near future. Closer resistance levels to utilize for considering short-entries in the March contract now appear around $2.20 and $2.08. On obvious primary target would be a re-test of the contract low of $1.91, though this level may very well be broken in due time.

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.

 

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

Nat Gas Daily

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Softs - Cotton

Despite Expected Reduction in Global Stocks, Cotton Remains Weak

Erik Tatje

Poor economic data out of China continues to wreak havoc on the commodity sector amid demand concerns. Recent news from the International Cotton Advisory Committee stated world cotton ending stocks would be down 14% for the 2016/17 season, however, cotton futures prices seem unaffected by the news and continue to trade with a slight negative bias. Concerns over Chinese demand could certainly be one of the reasons for the weak price action on the charts. Additionally, U.S. planting prospects are expected to increase in the coming year, which could likely reinforce the current bearish sentiment. In all likelihood, the 65.23 figure will continue to be a significant technical level and any corrective rally would likely need to surpass this figure in order to produce a potential reversal signal.

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

Fundamentals or Technicals?

Peter Mooses

Supply data helped cocoa move higher yesterday – a 131 point range with a close up at 2868. Ivory Coast mid-crop could be hurt by lack of precipitation and hot weather, helping the short-term push higher in cocoa prices.

There is still some uncertainty with Ghana’s projected output. Production may be better than expected, but Harmattan winds have damaged more crops than first thought, adding to the bullish fundamental news.

Technically, every time we see a rally higher, resistance levels are hit and profit-taking seems to halt the move. Cocoa has traded in 100 point ranges like it is the norm during the move lower since mid-December. Moving averages are providing targets on charts and strong support and resistance levels are also adding some guidance to the day’s ranges. By the end of the first quarter, with all the fundamental news on supply, cocoa prices should be back up at 3400.

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 Continued Bearish

Adam Tuiaana

March coffee has violated two areas of strong support, 11530 and 11365. In addition, notice the failure to break above the 12830 high from December 7 of last year. Lack of fresh bullish news prompted some long liquidation over the past couple of weeks, forcing a big selloff back down to the 113 level. It continues to look like the overall demand is taking a lead from the equities market, which has seen some serious weakness. However, we have also seen some U.S. dollar weakness, along with some higher gold prices, so these fundamentals may help to support the price of coffee and keep it range bound.

My opinion remains the same. The higher price action over the recent weeks should continue to 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 - Grains

Weather Major Factor for Grains

Stephen Davis

Soon traders and grain analysts will focus on potential acreage shifts between crops. We already know 3 million fewer winter wheat acres were planted last fall. Will these acres find their way into corn and/or soybeans? Expect some emotion to develop before the USDA survey of planting intentions is taken in early March and then presented in the March 31 planting intentions report.

The corn market gapped higher on January 19 and has never went back to fill that gap. Perhaps the function of the corn market is to trade to higher levels and buy as many acres as possible. A lot of the time we see either crops exceeding intentions or both crops failing to reach intentions. A very dry, warm spring would bring more acres into production, which happened in 2012. Cold and wet spring weather would be the other extreme and this would prevent all potential acres from being planted which happened in both 2013 and 2015.We really won’t know until mid-April what kind of spring weather we will get. The one predictability of long-term weather forecasting is its unpredictability.

This morning corn export inspections were in line with trade expectations but continue to be at levels less than what is needed to meet USDA projections. Demand is the key and corn export demand could use some improvement. Demand is currently stagnant.

There is more upside potential this spring and summer than downside potential. First, we need to understand these acreage shifts that lie ahead. Then Mother Nature and the next weather cycle will be the driving force.

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.

 

Mar ’16 Soybean Daily Chart with 50-day Moving Average
Source: RJO Futures PRO

Soybean Daily

 

Mar ’16 Corn Daily Chart
Source: RJO Futures PRO

Corn Daily

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Agriculture - Livestock

Discount of Futures to Cash, Weather Supporting Live Cattle Futures

Jeff Gilfillan

Cash cattle is trading more than $3.50 over April futures and $17 over August live cattle futures. The Annual Cattle Inventory Report on Friday was bearish all around. Although the numbers were over estimates, the charts tell us these numbers have been priced in at least temporarily. (Contact me if you want a copy of the complete report or our analysts' breakdowns.)

Key levels, as defined by RJO Market Insight's Dave Toth, in April 2016 live cattle futures are 136.25 on the upside and 132.55 on the downside. The LC futures have been consolidating since December lows and are poised for a decent breakout in the next month or two. My guess is the path of least resistance is to the upside given the strong cash markets, spec short, gaps on the upside, trend of lower weights and room for packers to share in tail end margins.

I expect the rubber band markets to continue in both the feeder and live cattle futures. There are technical gaps to fill produced during summer 2015 to the upside and a few more recent gaps just under the markets which were tested last week. The current range in both feeders and live cattle held for about two years from 2011 into 2013 and may very well hold now as the market deals with heavy weights and stable demand.

As written in my last update (01/19), short-term trends favor the short side and rewards patience. April live cattle futures should see intermediate resistance at 136-138 area and March feeders should get heavy around 161-163.

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.

 

Apr '16 Live Cattle Daily Chart
Source: GeckoSoftware.com

Live Cattle Daily

 

Feeder Cattle 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

In the Midst of a Global Currency War

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses the currency futures markets. We are in the midst of a global currency war. The big question is: how many U.S. rate hikes will there be? Feel free to contact John here to leave a question or comment on his video.

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Equities

E-mini S&P in Review

Greg Perlin

The E-mini S&P fell sharply overnight and during initial morning hours, with risk taking sentiment under pressure following significant declines in oil prices and weakness in global shares outside of China.   However, support for the market comes from a strong showing in Nasdaq shares.

While the equity market focus remains on China despite a lack of correlation overnight, the weakness in crude oil and corporate earnings remains in place. This has pulled the market down sharply overnight.  The bull camp has to be disappointed by commentary from Fed Vice-Chairman Stanley Fisher, who suggested market turbulence is a factor on growth and will be factored into the March rate hike decision.  This should reduce the number of potential rate hikes in 2016.  At least in the early action that we see today, the positives don’t matter and the slide below the prior low clearly puts the bear camp in control to start the day.

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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Interest Rates

Treasury Bonds Sprint Higher

Tarik Husseini

The prevailing theme of weaker oil prices and lower stocks sent traders into the shelter of U.S. government debt this morning. Yields at the long end of the curve are making nine-month lows, as investors domestically as well as globally are looking for a safe haven to park their money. It is a classic flight to quality trade. Strong demand for U.S. Treasury bonds is also being generated by international investors who are being faced with negative interest rates domestically, as central banks around the world are pulling out all the stops to spur consumer demand and inflation.

The search for income got harder last Friday after the Bank of Japan lowered some short-term rates below zero. The growing pool of negative-yield government bonds has made U.S. Treasuries a decent bargain for buyers. On the technical front, the consolidation at the top end of a two-year rally in the 30-year has been breached.  This is a classic continuation pattern which seems to portend a test of the 4/3/2015 high of 16627 on a continuation chart.  However, even with bullish fundamentals and technicals, I would recommend looking for strong headwinds for long-term treasuries at the current levels.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-672-0664 or thusseini@rjofutures.com.  

 

30-year Bond Daily Continuation Chart
Source: RJO Futures PRO

30-year Bond Daily Continuation

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