RJO Futures Website

March 1, 2016

Volume 10, Issue 5

Featured Article

Critical Trading Mistakes Webinar

Wed, March 9, 2016 at 4 p.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 risk for limited gains, this is not a good business strategy. Learn from the mistakes you make in the markets and be persistent. Trading with a proven strategy can reduce these critical errors.

In this webinar you will learn:

  • How 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 guesswork  

 

 

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

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Metals - Gold

Gold Pushes Higher Amidst Doubts on March Rate Hike

In the early morning trade, April gold is extending its rebound up another $3.3 and currently trading at $1237.1 an ounce. Global equity markets traded higher overnight mostly due to the Fed’s Dudley and his comments on doubts of an interest rate hike in March. This has given a lift to equity markets and commodities alike. Gold is also managing to push higher in the face of a stronger dollar, which has been impressive and something that the bulls and bears should pay close attention to if gold decides to push even higher.

If we take a closer look at the April daily gold chart, you’ll clearly see that gold broke above the bullish pennant formation overnight which should take it back up to the high of $1,263.9 made on February 11. Also today, the 50-day moving average just crossed above the 200-day moving average or also known as the golden cross, which usually means higher prices due to further momentum buying.

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

Old Support becomes New Resistance

What was once strong is now in a decidedly different light. May silver broke strong support of 1525 and sold off to 1461. The old adage becomes just as relevant here with old support becoming new resistance at 1525—the number May silver needs to close above to have any chance of a resumption of the bull trend.

If we were to link the big leg down on a piece of economic news, it could be last Friday’s second estimate of Q4 ‘15 GDP surpassing expectations and showing a 1% growth compared to 0.4% expectations. This was not as strong as some would have liked as the estimates are refined revising higher with more information typically being a good thing. This will further be hammered home tomorrow and Friday with the ADP and Nonfarm Payrolls. Previous ADP jobs added were 205,000 with expectations of 185,000 tomorrow.  January’s Nonfarm Payrolls were weak with only 151,000 jobs added, but folks are optimistic with expectations of 195,000 for February’s number.

As a technical analyst, my strongest news is 1525 and if the market can or can’t break above it. If the market can’t break above, the bull won’t continue. As the market settles back into the 14 handle and especially after such a weak trade this morning already, you can argue the market is comfortable in this level, if not lower.

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.  

 

May ’16 Silver Daily Chart
Source: RJO Futures PRO

Silver Daily

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Energies - Crude Oil

Is It Over?

April crude oil has been in a sideways market for almost two months and over the last week of trading, it appears the market is looking to breakout to the upside. The fundamentals are starting to look much better – yesterday the Peoples Bank of China cut the reserve requirement ratio basically freeing up cash to be lent. There has been better than expected employment data out of Germany, Baker Hughes drilling rig count continues to fall, there was a drop in February oil exports from Iraq along with bomb explosion at Iraq’s Kirkuk oil pipeline. U.S. oil production fell to 9.1 million barrels per day and there is a strong belief that OPEC and non-OPEC producers might be closer to a freeze in output. The latest EIA Report shows current stock piles of oil at 507.61 million barrels, which is still very high, and well above the three-year average of 391.33. Traders should watch tonight’s API Report and tomorrow’s EIA Report for possible short-term market direction.

Short-term technical indicators look bullish in my opinion and I remain cautiously bullish as long as the market doesn’t break the $31 area basis April oil.  The market has been showing higher highs/higher lows and is currently trading above the 10-day moving average as well as the 20-day moving average. I would suggest using an option strategy or waiting for an inside day breakout to establish a long futures position.

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.

 

Apr ’16 Crude Oil Daily Chart
Source: RJO Futures PRO

Crude Oil Daily

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Energies - Natural Gas

Has Natural Gas Gone Too Far?

Natural gas traders have continued to watch prices deteriorate this year as the April contract grinded to new lows for the majority of February. With unseasonably warm weather and an aggressively climbing U.S. dollar, the market has done very little to attract bulls. While yesterday’s fresh contract low of 1.69 was revisited this morning, the pressure seems to be slowly subsiding as symptoms of a highly oversold market are becoming apparent.

Although I am not ready to suggest one should fight the prevailing long-term trend of this market with an aggressive bullish position, I do see an opportunity in trading a short lived potential corrective rally around these levels. Between last Friday’s close (1.791) and this Monday’s open (1.711), an 8 cent gap has been created. While a rally to back to 1.791 from current levels is a sizable move (~5% bounce), I believe it would be essential for keeping the downside of this market healthy. As long as this gap remains unfilled, it will be a potential retracement zone and a risk for bearish positions. Cautious traders of this setup should utilize the contract low of 1.689 as a level for stop-losses.

In the long run it now appears likely that we will continue to trade below $2.00/mmbtu, as about a 30 cent recovery will likely require a major change in fundamentals. Once the large gap up to 1.791 is filled, I expect sellers will once again become very active.

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.

 

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

Nat Gas Daily

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Softs - Sugar

May Sugar Futures Consolidate Higher After ISO Inspired Jump

Joe Nikruto

This week’s eView comment on May sugar futures finds  our market flagging higher after a surprisingly large price jump on February 23. The move came courtesy of a report from the ISO, or International Sugar Association.  ISO, according to their website, “is the only worldwide forum for the exchange of views by major producing, consuming and trading countries at an intergovernmental level.”  So, when the ISO suggested the global production deficit will exceed 5 million metric tons, up from the previous month’s estimate of a 3.5 million metric ton deficit, market participants caught off guard were forced to react. The ensuing move left a daily bar on the chart that measured 107 points from bottom to top and put trend following traders with short positions perilously close to being stopped out. The next two days’ price action saw May futures trading above 14.00 and trend followers were forced to the sidelines. 

Since then both volume and open interest have waned which has many traders calling into question the ability of the May sugar futures to hold above the 50-day moving average, 13.86.  At the time of my last writing the market was sitting on recent lows, roughly 13.00 in the May contract. The chart looked like the May contract would be headed for lower territory still. The ferocity of the move higher off the 12.50 level has left me currently not correct, otherwise known as wrong, and caused me to pause. I would certainly not advocate bearish traders fight the tape right now. But, a move below the 13.86 level will open the door to a test of the previous high from the February 9 of 13.48.  Trade in this area is going to look like a technical failure and the market’s inability to hold above the 50-day moving average will have recent longs feeling the pressure.  May sugar futures proximity to the recent highs near 14.70 and a demonstrated ability to continue to chew into what was an extended period of sideways price action overhead should be respected. 

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.  

 

May '16 Sugar Daily Chart
Source: RJO Futures PRO

Sugar Daily

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Softs - Cotton

Domestic Planting Expectations Seen As Bearish

Recent data shows U.S. planting expectations are for 9.4 million acres, up 9.6% from the previous year.  Additionally, there have been talks of China selling their reserves, which may adversely affect demand prospects out of China for the coming year. Large U.S. planting prospects coupled with a reduction in demand out of China could be seen as bearish influences on the markets and may be reason to blame for the recent weakness in price. May cotton made a new contract low yesterday followed by what will likely be another day in the red today.  The current trend in cotton appears to be very bearish and, until market fundamentals begin to turn, participants may anticipate further downside pressure on price.

If you’d like to discuss potential trading strategies in the cotton market, I encourage you to contact me directly at 866-397-8195 or etatje@rjofutures.com.

 

May ’16 Cotton Daily Chart
Source: RJO Futures PRO

Cotton Daily

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Softs - Cocoa

Supply and Demand, ADP Employment Report and Friday’s Employment Situation

Peter Mooses

To start a data filled week in the markets, cocoa traded higher yesterday. The May contract had a high of 2970 and traded in an almost 80-point range. Today is a little bit of a different story. Unlike most days in cocoa, today’s range is much tighter. Cocoa has been stuck between 2929-2940 for most of the day breaking above 2965 but unable to hold above 2950. Technically, cocoa futures continue to trade above the 9-day moving average, which supports the short-term bullish trend. We also have been making higher lows – another positive short-term trend. Support is at 2915 and resistance is at 2970. Trading should continue in this range until the outside markets can help push cocoa above 2970 and then 2995.

Fundamentally, cocoa beans in the primary growing regions have shown damage. The supply and demand concerns continue. The rainfall in West Africa could help the mid-crop but analysts don’t think it will be a big enough boost. The equity markets and other outside data should carryover to commodities and the softs this week. The ADP Employment Report will be released on Wednesday; consensus range is 165K to 205K. The data for February’s Employment Situation will also be reported on Friday. Nonfarm payroll consensus range is 168K to 217K. The unemployment rate is expected to be between 4.8% and 5.0%. Look for a positive tone to carry over to cocoa.

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.

 

May '16 Cocoa Daily Chart
Source: RJO Futures PRO


Cocoa Daily

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Softs - Coffee

Coffee Poised for Selloff

Adam Tuiaana

News of decent weather ahead for the Brazilian crop has apparently added some continued pressure on the May coffee futures this morning. We haven’t seen prices this low since January, and a continued bearish outlook for coffee prices is widely agreed upon.

Technically, it appears the January lows of 11335 are within reach. Prices have violated the critical support level of 11455 over the last two trading sessions. Failure to even come close to the 125 level has left coffee prices to suffer from strong outside forces. Clearly, strong fundamentals are in play and it will take huge demand news to sway plummeting prices.

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 - Grains

Grains Slightly Lower as March Trading Begins

Stephen Davis

Welcome to March!

CME grain markets started out mixed to slightly lower overnight and rallied in the anticipation of a turnaround on Tuesday. U.S. and world grain markets have been hammered in recent trading sessions and a bounce is expected today.

Whether the CME grain can bounce and be sustained is unknown, but the Chinese Dalian corn futures did rally strongly overnight and world cash wheat prices are steady. Corn and soybeans are likely to take some sort of a stab of a recovery as they bounce off prior contract lows. However, most research would suggest any bounce will be rather limited amid the rapidly expanding South American harvest and the sharp seasonal decline in U.S. export demand.

May soybeans closed lower for the fifth session in a row yesterday and experienced the lowest close since January 4.While outside market forces, including a firm Brazilian currency, were seen as positive factors, the continued bearish weather forecast in South America, higher than expected deliveries and weaker than expected export inspections are negative forces.

There certainly is an active debate on whether the lows are being put in with all this bear news fully discounted or if markets are poised for another leg lower in a bid to trim the 2016 planted area. Spring weather will give us the answer.

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.

 

May ’16 Soybean Daily Chart
Source: RJO Futures PRO

Soybean Daily

 

May ’16 Corn Daily Chart
Source: RJO Futures PRO

Corn Daily

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Agriculture - Livestock

Dollar firm, Trend Sideways

The beef cash trade has been stubbornly firm. Lower feedlot prices may have to come from another year of cheap feed and herd rebuilding. Retailers so far have been patient with buyers moving into grill season but the firm cash trade may not let up and cause some volatility this spring, even with the shorter hours. The path of least resistance is still higher.

Dave Toth of RJO Market Insights commented last week 137.875 in April live cattle will provide some resistance and 134.775 should serve as short-term level that bullish traders should use as a fence.

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.

If you wish to peel back my short-winded blog and analyze RJO's extensive in-house and independent insight (including Dave's tech blog), contact me directly for a live two-week trial.

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: Track'nTrade

Live Cattle Daily

 

Feeder Cattle Weekly Chart
Source: Track'nTrade

Feeder Cattle Weekly

 

Long Oct '16/Short Jun '16 Live Cattle Futures
Source: Track'nTrade

Live Cattle Spread

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Currencies

Dovish Speech Expected out of ECB

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses the currency futures markets. Dudley's Fed speech came in dovish. Going into ECB meeting expecting dovish tone as well. Feel free to contact John here to leave a question or comment on his video.

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Interest Rates

30-year Bond Falls with Recent Economic Reports

Tarik Husseini

30-year Treasury bonds took a big spill today on better than expected ISM at 49.5 and Construction Spending up 1.5%. Those positive economic reports accelerated an explosive rally in the equity markets that had begun with a dovish speech by Fed Gov. William Dudley overnight.  This in turn deflated any flight to quality bid that had been supporting the bond market.  At this point, we are looking at the highest close since January 7 in the S&P market and nearly the same for the Nasdaq. For the time being, the anxiety that has gripped the markets over the last couple months seems to be subsiding. 

Watch for the all important Nonfarm Payrolls report this Friday with consensus estimates of 190 thousand new jobs created, and the unemployment rate staying steady at 4.9%. The Fed watches this number closely, and it may have an impact on the next FOMC meeting which starts March 16. At this point, according to CME Fed Watch tool, Fed funds futures are pricing in a 33% chance of a rate hike by June, and a 55% probability of a rate hike by December. There is almost no chance of a hike at the March meeting, but the FOMC rhetoric could signal a more aggressive stand if the Fed feels more confident that growth anxiety has indeed subsided. 

On the technical side, the June 30-year bond is trading at the 16216 mark, about six points off the February 11 contract high.  On a daily chart, it looks like a bull pennant formed over the several weeks has failed, and the bonds are poised to head lower into a consolidation area breakout that was formed between January 2015 and January 2016, in the 155 to 158 handle. 

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.  

 

Jun ’16 30-year Bond Daily Chart
Source: RJO Futures PRO

30-year Bond Daily

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Equities

S&P Shows Gains after Dudley’s Comments

Greg Perlin

Disappointing U.S. economic readings on Pending Home Sales and Chicago-Area Manufacturing yesterday undermined stocks but it is possible the trade is starting to embrace the idea of a hold from the Fed in the March FOMC meeting. In fact, with the Fed’s Dudley downplaying the prospect of a March rate hike, it is possible news is the primary driving force for the initial gains today. 

Gains in WTI crude oil are also contributing to the bullish tilt this morning. Some traders noted an increase in selling pressure when the S&P cash index slipped below its 50-day moving average yesterday at 1941 but that moving average will probably regain at 1944 today. Technically, uptrend channel support is seen at 1920.75 and that uptrend channel support line rises to 1930.50 on Wednesday. The path of least resistance is pointing upward.

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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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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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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