RJO Futures Website

May 10, 2016

Volume 10, Issue 10

Featured Article

Webinar: Trading Opportunities for Busy People - Register Now!

Wednesday, May 11 at 7 p.m. CT

In this session you will learn:

  • Swing trading vs. day trading
  • Time saving tips
  • How to use a defined trading strategy

 

Webinar: Futures Trading Strategy - Register Now!

Wednesday, May 18 at 7 p.m. CT

In this session you will learn:

  • Key components of a strategy and why you need one
  • How technical analysis differs from trading strategy
  • Why price action is so important
  • How to implement a trading strategy

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Metals - Gold

Gold Moves Higher in Morning Trade

In the early morning trade, gold is currently trading slightly lower at $1,264.7 and continuing its sell-off from recent highs. The news tilt on the recent sell-off seems to be due to a large number of speculative longs who appeared to be taking profits or bought at the high and were forced to sell their losing positions. Also, the U.S. dollar continued its rally and gave the bears another reason—at least in the short-term—to take control over the gold market. However, for the bull camp, derivative holdings rose overnight by 207,660 ounces and the world’s largest gold ETF (GLD) saw their holdings rise the most since 2013.  Moreover for the bull camp, gold is coming into some nice support around $1250.0 an ounce. Below I’ve highlighted the support level on a daily June 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.

 

Jun '16 Gold Daily Chart
Source: RJO Futures PRO

Gold Daily

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Metals - Silver

Silver Weaker as USD Strengthens

Eli Tesfaye

July silver is down about a cent to $17.075 and is having a flat type of day. In my view, the market has been correcting since the May 2016’s high of $18.05 and the overall trend is up.

Weakness in silver could be attributed to strength in the U.S. dollar in the past six trading sessions as well as the overall theme that the Chinese economy is experiencing a slow growth period. Another factor lending to weakness in metals across the board is the growing sense that U.S. Fed members anticipate a possible rate hike in June.  

From a technical prospective, the daily chart in silver below shows the market is consolidating and moving higher. In my view, a break above $17.60 could signal the retest of the May highs of 18.05.

In the last eView, I discussed the technical outlook on the monthly chart and I still think the high above the May 2 high opens a possibility of exploring higher price action around $19.60 and a break below $16.00 would be a change in bullish sentiment.

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.

 

Jul '16 Silver Daily Chart
Source: RJO Futures PRO

Silver Daily

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Energies - Crude Oil

Crude Higher Heading into Tomorrow's EIA Report

RJO Futures Senior Market Strategist Mike Sabo discusses the energy futures markets. Crude showing strength. Looking to EIA report tomorrow. USD strength could put pressure on oil. Feel free to contact Mike here to leave a question or comment on his video.

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Energies - Natural Gas

Natural Gas Struggling to Hold April’s Rally

Natural gas futures experienced a sizable rally through the second half of April on the prospect of lingering cold U.S. temperatures. While the start to May has shown mostly sideways price action, the fact that the April lows have not been revisited is quite impressive. Although temperatures have indeed been generally cool, weekly EIA announcements have reported building natural gas inventories in four of the last five weeks. Ultimately, whatever demand remains is being outpaced by production. Additional support for natural gas may be coming from a down-trending U.S. dollar and speculation on how a potential La Niña event would affect energy demand this summer and fall.

Last Friday’s Commitment of Trader’s report suggested that both non-commercial and nonreportable traders alike are building a substantial net short position in this market. This large short position does create the potential for aggressive short-covering, but also suggests the April rally is continuing to attract fresh bears.

A decisive area for July natural gas is currently in the 2.20-2.22 range, just a few ticks below today’s low. This strong level of support coupled with a downward pointing trend suggests a descending triangle formation is developing, which may open the door for an aggressive sell-off. If support is broken and the market does take a dip, it will be very interesting to see how prices deal with the choppy 2.10-2.20 range from late March and early April. The long-term bearish trend line for natural gas remains intact unless prices surge another 35 cents to the +2.60 area.

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.

 

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

Natural Gas Daily

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Softs - Sugar

Big Down Last Week: Preview of Trend Change or Dramatic Technical Correction?

Joe Nikruto

This week’s eview commentary finds the July Sugar futures contract consolidating after May 5’s new high for the move and subsequent 115 point drop. While no satisfying fundamental emerged as a catalyst for the sell off the volume present at the top of the day’s price action suggests pricing by producers and maybe even profit taking by shorter-term funds concerned with the possibility of a double top near 17.00. With nearly 100k contracts traded on May 5 and a mere 11k contract decrease in open interest, many traders are waiting for this week’s Commitment of Traders report to see exactly where each category of trader stacks up. The thought prior to May 5 was the fund trader was extremely long and the market was subject to long liquidation should this trader category head for the exits. Typically, longer-term, trend following funds don’t take profits on new highs. However, a 115 point move has the potential to drag even the longest of time frame traders to the sidelines. Friday’s COT will offer a better idea of where the funds stand. It wouldn’t surprise me to see the funds holding more longs than the trade anticipates and the commercial trader become the active seller on last week’s break. 

While no real technical damage was done to the chart, a near 150-point three-day move, after putting in new highs, can leave even the most bullish trader skittish. The fact is, July sugar futures were unable to penetrate the 50-day moving average of 15.41.  At the time of this writing the market was above the 18-day moving average, 15.86.  The trend remains solidly up, but every day July sugar futures spend not making new highs is going to contribute to the double top argument and make this market look heavy.              

Fundamentally, the narrative continues to focus on supply challenges in Asian countries. Today’s Hightower report highlighted difficulty in Thailand where production has come in at a 5-year low due to drought.  The news from Brazil is of better than expected production, but this increase doesn’t appear to be enough to cover the global production deficit. Unless July sugar futures can begin to close below the 50-day moving average in convincing fashion, the path of least resistance is 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.  

 

Jul '16 Sugar Daily Chart
Source: RJO Futures PRO

Sugar Daily

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Softs - Cotton

Cotton Pulls Back to Technical Support Ahead of USDA

Erik Tatje

Recent weakness in cotton has temporarily put a halt to the impressive rally originating in early March.  Profit taking ahead of today’s USDA WASDE report could certainly be one of the driving forces, however, regardless of who is currently driving the market lower, there does appear to be a handful of solid technical support levels in the near future for this market. 

A simple trend line from the spike low on 2/29 could be drawn as an initial level of support, which should keep prices above yesterday’s lows.  Below here, 61.00 is not only a 50% retracement of the previous range, but it’s also a nice round, psychological level that could certainly prove to be supportive.  In the event that a bearish report pushes prices below the 61.00 figure, market participants may look to the Fibonacci confluence zone from 59.70 – 60.00 as a potential significant area of structural support that has the potential to keep the near-term positive trend intact.  Additionally, the 50-day SMA intersects the market in this range as well, thus offering additional structure around this key area.  In the event that negative price action can take out the 4/15 low on a closing basis, this could negate the recent positive momentum of the market and shift the intermediate term outlook to a neutral to slightly negative outlook. 

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

Technical Rally in Cocoa Futures, Can Fundamentals Assist?

Peter Mooses

Today the 20-day moving average has proven to be resistance. 3120 is back and providing a roadblock for the recovery rally.  A break above the 200-day moving average couldn’t hold, but was a positive sign for the bulls. A close above 3100 should help the July contract get closer to erasing May 6’s dip. Technically, 3150 is the next target followed by 3180. 3235 is an interesting level as it could be our last stop before 3300.

Fundamentally, supply continues to be the main support for cocoa. Although the market is overbought and demand is a concern – supply is what will get this market higher. Ivory Coast port arrivals came in lower than last year again. That makes seven weeks in a row that this year’s arrivals are lower than 2015’s pace. Weather will also help the market recover as a dry, hot outlook in key growing regions is on the radar.

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

May Coffee Volatility Continues

Adam Tuiaana

May coffee prices continue to see volatile action since testing what should be solid support at the 119 level. Over the past couple of days we’re seeing what looks to be a re-test of the 130 level and I’d expect we will see it soon. Also, traders should note the Brazilian currency is continuing to gain some strength against the U.S. dollar which should help to keep prices above the lows.

In addition, we continue to see a strong equities market, with the S&P 500 still swinging in a price range not visited since December of 2015. This should bode well for continued higher coffee demand and prices.

Of course, continued strong demand will be a key factor to supporting a potential reversal up in coffee prices. The bull camp will look to re-test the 130 area and we shall see whether or not we are able to hold support up at that level. Traders should consider buying call options at this time.

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.

 

May ’16 Coffee Daily Chart
Source: RJO Futures PRO

Coffee Daily

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Currencies

Low Interest Rates Putting Pressure On USD

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses the currency futures markets. June rate hike unlikely. Low interest rates keeping pressure on the USD. Feel free to contact John here to leave a question or comment on his video.

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Equities

S&P has Positive Start in Early Morning Trade

Greg Perlin

A big range up extension in the E-mini S&P to start today probably puts the bear camp on its heels. However, there was a mixed international equity market overnight and some deflationary CPI readings from Greece. The trade did see a positive NFIB index in the early going and that probably emboldens the bull camp. On the other hand, the trade saw patently supportive talk of surging German construction activity combined with a definitely positive chart reaction early on to leave the bulls in control.  

Technically, a distinct reversal of the lows and the highest trade since May 3 should have some bears on the run early today. In fact, the June E-mini has also regained a month long downtrend channel resistance line of 2054.50 and that might leave little in the way of resistance until the 2076.50 level. While we don’t see a powerful risk on vibe, the bull camp certainly has control today. The yen is up almost ¾ of a percent early on and that too is adding to the positive start in the morning trade in equities.  

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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Agriculture - Livestock

Fed Cattle Futures Rebound – Major Reversal?

Jeff Gilfillan

In the last few blogs 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 but the stay under 120 was short-lived. Dave Toth at RJO Market Insights posted a piece yesterday with his updated key technical areas suggesting we may see a pullback after the recent gap higher down to 119 basis June.

Michael Langemeier at the Center for Commercial Agriculture at Purdue University posted a report on FarmdocDAILY projecting break-even prices for May and June fed cattle between $125-$127. The retail end needs to compensate producers some margin to not only stay current but to keep supply large enough to start competing with other proteins.

Don’t be surprised to see exports improve more than expected as the weak dollar benefits seem to be lagging in the commodity export side of the equation. Also, the abnormally cold spring should be creating a great deal of pent up demand. Housing sales, I believe, will continue to be very strong and grills will be busy.

See Dave’s RJO Market Insight post from 05/09 to learn more about his thoughts of a potential major base/reversal count.

If you are a prospective client and 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 Daily

 

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

Live Cattle Spread

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