RJO Futures Website

April 26, 2016

Volume 10, Issue 9

Featured Article

Upcoming Webinars

 

Trading Metal Futures

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Wednesday, April 27 at 7 p.m. CT

In this session you will learn:

  • Metals and metal futures basics
  • Benefits of trading this asset class
  • Technical analysis and trading strategy applicable to these markets

 

Intro to Futures

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Wednesday, May 4 at 7 p.m. CT

In this session you will learn:

  • What you need to know about futures
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  • Trading style: fundamental vs. technical
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Metals - Gold

Gold Market Awaits Tomorrow’s Fed Announcement

In the early morning trade, June gold is slightly up $5 and currently trading at $1244.7 an ounce. The gold bulls seem to be holding the shiny one above the critical $1230.0 support area as the Fed starts their two day FOMC policy meeting with a decision on interest rates expected tomorrow afternoon. Depending on the U.S. Federal Reserve’s decision tomorrow, the shiny one could possibly sell off under $1200.0, or if the meeting favors the bulls, watch for a rally up to $1300.0 an ounce.

Below is a daily chart of June gold, which you could see that it’s still in a short-term up trend and trading above all its major moving averages. However, the bulls have to be at least slightly worried that gold could not hold onto its strong technical breakout from last week and also with overnight news of a fresh three month high of Chinese imports of the precious metal.

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.

 

Jun ’16 Gold Daily Chart
Source: RJO Futures PRO

Gold Daily

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Metals - Silver

Trend Up in Silver

Eli Tesfaye

May Silver is up 13 cents to 17.13 and is having a positive day. From time to time, I glanced at the Thomson Reuters/Core Commodity (CRB) index because it helps me visualize the general direction of the commodity markets.

Looking at the silver market, the trend is clearly up. From technical prospective from 2013 high of $29.290 to the December $13.635, basic 25% Fibonacci retracement is around $17.50. In my view, once momentum turns up, it is possible that higher price action is possible. Just to look a little bit ahead, 38% retracement in Fibonacci is around $19.60.

Tomorrow, the FOMC will release their minutes. Traders don’t expect a rate hike announcement but it is in everyone’s mind that the language will be carefully scrutinized to find some sort of hawkish clues. I continue to suggest that weakness in metals should be an opportunity to participate in the upside. The value zone in silver continues to move higher.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or etesfaye@rjofutures.com.

 

Silver Monthly Continuation
Source: RJO Futures PRO

Silver Daily

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Energies - Crude Oil

Crude Trades with Firmer Tone

RJO Futures Senior Market Strategist Mike Sabo discusses the energy futures markets. Crude trading with firmer tone today. Record amount of inventory. EIA expecting another build. Feel free to contact Mike here to leave a question or comment on his video.

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Energies - Natural Gas

Natural Gas Breaks Away From Its Range

The choppy natural gas trade may finally be coming to an end. After oscillating between 1.97 and 2.14 for four weeks straight, the June contract has started to climb away from this range. Last week the market experienced a strong pop through resistance with a 16 cent gain on speculation of a cold start to May. Today the market appears to be using this previous level of resistance as a level of support. If the market closes back below this level today, I fear we will once again be trapped between 1.97 and 2.14. Though U.S. weather is temporarily cooling off, I don’t expect it to warrant a massive influx of demand for heating needs.

Last Wednesday the EIA reported domestic inventories at 2,484 bcf, 48.5% above the 5-year average. While this is a slight pullback from previous readings, the market is certainly still over-supplied. Until this glut is significantly diminished, the long-term fundamental tone for natural gas will continue to be bearish. However, the technical side of this market doesn’t seem to agree. With higher lows and higher highs trading since March 1, an ascending triangle formation and well-defined support, there is merit in looking for further upside in natural gas prices. The 20-day moving average has crossed back above the 50-day moving average and is adding fuel to bullish sentiment.

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.

 

Jun ’16 Natural Gas Daily Chart
Source: RJO Futures PRO

Natural Gas Daily

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Softs - Sugar

Sugar Marking Time, 17.00 Soon?

Joe Nikruto

This week’s eView comment finds the July sugar futures contract marking time awaiting the release of the latest report from UNICA, the Brazilian Sugarcane Industry Association. The UNICA office in Brazil confirmed the report is set for release on their website April 27 at 9 a.m. CST. The Hightower group this morning highlighted the idea that higher prices are in the offing barring any ‘bearish surprise’ in the report. Further, they highlighted the idea that dryness in growing regions is morphing from bearish fundamental, where dry weather allowed for uninterrupted harvest, to bullish fundamental as dryness may impact yield later. Sugar has been building an upward sloping flag pattern on the chart and the trend remains up.

Historically, sugar is one of the trendiest futures contracts.  This means once sugar is moving in a direction, either up or down, it has a tendency to continue in that direction. However, so far this year, trend followers have been savaged by the sugar futures market as they have been flipped from flat to short and back to flat and then long and back to flat and now long again. This is only worth mentioning because, while the fundamentals currently fit to the price action, sugar is a commodity that also benefits from money flow. The idea that inflation could pick up faster than global central banks are currently allowing for may have commodities back in fashion as a hedge against inflation. Sugar, as well as other physical commodities, will benefit from this.  In the meantime we have to trade what we see on the chart. The trend is up. Two higher lows are evident on the chart and the July sugar futures contract appears to be poised to make a run to 17.00 or better.

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.  

 

Jul '16 Sugar Futures Daily Chart
Source: RJO Futures PRO

Sugar Daily

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Softs - Cotton

Weak USD and Below Average U.S. Planting Seen as Supportive

A weak domestic currency has lent a supportive hand to commodities across the board with cotton being no exception. Factor in that adverse weather has delayed planting progress in parts of Texas and the Delta, bringing weekly cotton planting reports to 10% vs. the 10-yr average of 15% for this time of the year. The technical price action continues to be supportive of the current rally as well as the market has produced a distinct bull trend line and appears to be well supported above the 60.00 level with near-term support emerging from 62.70 – 63.00. The 20-day SMA has produced a positive cross above the 50-day SMA, highlighting the near-term bullish momentum. Additionally, the RSI indicator has risen above the 60 reading and now appears to be transitioning to a neutral/bullish range in the momentum indicator.  All eyes will likely be on whether or not July cotton can surpass its previous high of 66.31 made back on December 9, 2015. 

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

 

Jul '16 Cotton Daily Chart
Source: RJO Futures PRO

Cotton Daily

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Softs - Cocoa

Cocoa Comeback Solidified

Peter Mooses

West Africa supply concerns are the base of this recent rally in cocoa. This is the time of year when our core numbers roll in and can give the market some real guidance. Weekly arrivals continue to fall below comparable 2015 periods. As expected, El Niño and excessively dry weather has hurt production and damaged harvest. 2016 has brought more precipitation in key growing regions, but it seems to be too little too late.

The chart attached shows cocoa’s favorite color is green right now. Since April 8, July cocoa has been on the up and up. The 9-day moving average has been tightly followed and closes continue above it. The 200-day moving average has been broken and we are now flirting with new highs for 2016.

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.  

 

Jul '16 Cocoa Daily Chart
Source: RJO Futures PRO

Cocoa Daily

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Softs - Coffee

Weather Major Concern for Coffee

Hector Galvan

The coffee market has been trading in a range now for the entire month of April.  Many investors are becoming frustrated with the idea that coffee cannot find any direction. A solid supply of coffee has satiated demand now for over six months and left many investors with no reason to worry about price volatility. However, one could now argue the poor weather in many parts of the world may soon bring all the dull days to an end. Drought in the Robusta growing regions of Vietnam and Brazil have led to a shortfall in Robusta coffee. Vietnam is the largest producer of Robusta coffee in the world with Brazil and Indonesia only trailing slightly behind. Dry weather over the last growing period has left a large part of Vietnam’s crop damaged and Brazilian Robusta beans are being rated poor quality. Yet, for now it seems that many investors are still slow to digest this information and trade that risk premium into the market.  A few weeks ago it looked as if traders were finally going to push the market higher in March when suddenly the market failed and withdrew back to its previous trading range. In times like these it would not be farfetched to imagine that further breakouts may be in coffee’s future. I would use the last break out as a map of how far the market can trade and plan accordingly. The July coffee 135 call options are defined risk priced around $863 and can generate a nice profit should the market make it to and beyond 135 by June 24. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 877-963-6484 or hgalvan@rjofutures.com.

 

Jul '16 Coffee Daily Chart
Source: RJO Futures PRO

Coffee Daily

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Agriculture - Grains

Planting Moves Ahead, Weather Forecasts Strong

Stephen Davis

The corn market traded slightly higher overnight on light fund buying and talk of potential planting delays this week. 30% of the corn is planted compared to 16% on average this time of year. This is a great start, however, the lead over the average will narrow this week. Like I mentioned on my agriculture video on YouTube last week, there will be a lot of corn planted the last 10 days of April.

If the soybean market stays up, there will be some acres shifted to soybeans. Just 2% of soybeans were planted so far. The Asian funds are focused on soybeans. China may become a new exporter of feed grains so they have no interest in buying corn from our great country USA. It is soybeans that they want to own and corn and wheat just follow along. The month of May is not very far away so the ideal time for a seasonal high in soybeans is nearing.

The speculative funds defended their long positions on Monday, something they are going to have to keep doing to keep our soybean market elevated. I think the soybean market is buying acres which can be friendly to corn. The slowed planting progress will make soybeans look more attractive compared to corn where soils have been wet in April. One problem in analyzing this is if the Asian funds have more money to buy soybeans, fundamentals and technicals will not be of any service. This is going to be a heavy weight battle between the flow of speculative money into soybeans versus the fundamentals of the large carryout of soybean in our country. The funds need to defend their buying with more buying and keep soybeans above the support levels. History tells us once our row crops get planted the price of our soybean is going to have a hard time staying elevated.

Weather is drying out where it needs to in Argentina for the soybean harvest and forecasts are wet where they need it for Brazilian corn. Neither of this will bring back crop losses but should stabilize crop conditions.

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.

 

Jul ’16 Corn Daily Chart
Source: RJO Futures PRO

Corn Daily

 

Jul ’16 Soybean Daily Chart
Source: RJO Futures PRO

Soybean Daily

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Agriculture - Livestock

Fed Cattle Futures Bearish but Oversold

Jeff Gilfillan

Our stance and resistance figures have not changed much in the last two blogs. Our resistance areas held and the trend is still lower. Current resistance in June cattle hover at 119 and 122.75. Dave Toth of RJO Market Insights points to 124.90 (04/11 high) as key level required to break in order to negate his bearish policy.

COT numbers suggest neither bears nor bulls have an advantage to covering in fed cattle futures. Hogs were overdone by small specs as of 04/19 and we might have saw a small squeeze earlier this week as a result.

April 1 Cattle on Feed report was considered neutral to bullish. The weights and overall numbers were down slightly less than anticipated. There was a notable decrease in cattle on feed over 120 days which suggests feedlots are finally making an attempt to be more current in the supply on feed.

Last blog I suggested June cattle was bearish but seasonal demand may limit the degree of a selloff and anything under 120 may be short-lived. Surprisingly the degree of the sell-off was similar to late 2015 and the stay under 120 has remained to be seen. Trade the charts and keep an eye on Dave’s posts in RJO Market Insights for signs of a reversal. Charts are still ugly but the selloff in the feeders, cheap feed (yes, it’s still cheap), increased marketings and lower dollar may provide feedlots that opportunity to recoup some of the lost margins this past year.

If you would like direct access to RJO's extensive in-house and independent insight, 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.

 

Jun '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

Looking Ahead to Fed Minutes

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses the currency futures markets. Looking ahead to the FOMC minutes. Dollar trading down, euro trading up, yen trading off the highs. Feel free to contact John here to leave a question or comment on his video.

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Interest Rates

Much Ado about Nothing

Tarik Husseini

The FOMC meeting starts today and wraps up tomorrow afternoon with a much anticipated “nuthin”.  The market has priced in a 0% probability of an April rate hike, so the April meeting becomes about the next time they meet, which is June. Traders have put a 19.6% chance of a June hike. There is some debate about how the Fed will word their statement, the consensus being that they may want to convey a crack in the door for a June hike.  This will be more of an attempt to keep the market honest, rather than telegraphing an actual move. With volatility plummeting, the Fed doesn’t want to see the market become too complacent, so some ambiguity about the timing of the next hike might be warranted. I think it would be useful to listen to the Fed’s statement on inflation, which was pointedly referred to in the last meeting as running below the Committee’s 2 percent longer-run objective. Last month the inflation indicators trended a bit lower rather than firming, which would also run counter to an early surprise hike.  So in conclusion, it doesn’t look like the Fed has much room to do anything unexpected.  Staying put will probably be the path of least resistance.  Tomorrow’s announcement should be a non-event.

Technically, bonds are at significant daily support at the 161 level in the June 30-year bond.  Below that is some room down to 157.  Bonds are at the low end of a two-month range, with 167 being the high end.  The market could find some buyers here going into the FOMC announcement, but as in previous articles, the overall trend is down, both fundamentally and technically.  Rallies to the upper end of ranges should be sold.

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: WebOE

30-year Bond Daily

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Equities

S&P Ahead of the Fed

Greg Perlin

While the S&P market trended lower throughout yesterday, it was weighed down by a pullback in risk-trading sentiment, soft U.S. economic data and uncertainty ahead of an active wave of corporate earnings. They have forged a slight recovery in the early morning trading today. I have to wonder if a sentiment shift has already taken place where positive data fosters fresh selling instead of fresh buying.  In other words, I can’t rule out weakness in stocks if durables or home prices show growth and that could fuel fears of a June interest rate hike. In fact, with equities in close proximity to record levels the market probably can’t tolerate much in the way of adversity right now. U.S. corporate earnings are expected from 3M, Dupont, Eli Lilly, Proctor & Gamble and Freeport-McMoran ahead of the Wall Street opening. Apple and eBay report after the close and the Fed comes out with a decision on interest rates tomorrow at 1 p.m. central.

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.

 

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

E-Mini S&P Daily

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