RJO Futures Website

June 7, 2016

Volume 10, Issue 12

Featured Article

Webinar: Critical Trading Mistakes

Wednesday, June 8, 2016 at 7pm CT

Critical Trading Mistakes Webinar

In this webinar you will learn:

  • How to think in probabilities
  • Finding a proven strategy and believe in it
  • Evaluating moves in the market, not chasing price
  • Managing the emotional roller coaster
  • Trading decisions based on facts not guess work

 

To top

Metals - Gold

Gold Trading Down Under Pressure

Nicholas DeGeorge

In the early morning trade, August gold is currently in the red and trading at $1,243.6. In fact, even with weakness in the US dollar, gold is trading down today.  Fresh new highs in the June E-mini S&P and other equity markets could also be putting pressure on the shiny one. Furthermore, the Fed Chairman, Janet Yellen, also suggested she foresees gradual interest rate hikes through 2016--yet another reason for gold to sell off at least in the short-term.

If we take a look at the daily August gold chart, you’ll see that gold has failed to get above the 20- and 50-day moving averages. For the gold bulls, this market will have to get above yesterday’s high of 1251.3 to receive any kind of serious momentum buying. For the gold bears, if gold breaks the overnight low of $1236.9, then look for a selloff back down to $1,200.0 an ounce.

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.

Aug '16 Gold Daily Chart

Source: RJO Futures PRO

Gold Chart

To top

Metals - Silver

Will Last Week’s Low in Silver Hold?

Eli Tesfaye

Front month July silver futures is marginally lower, trading down 8 cents to 16.365. The prospect of a delayed rate hike coupled by weakness in the dollar seems to give silver bulls a much needed lift. By way of economic reports for the rest of the week, we have two reports that measure the health of the labor market; JOLT and Jobless Claim. I personally like the JOLT-hiring report. Basically, the stronger the labor market, the higher probability of a near-term rate hike. Good economic reports will continue to have bearish implication on silver price unless geopolitical concerns surface. 

From a technical prospective, silver is starting the week on a positive note. The short-term, 4-hour chart is showing a bull flag and, if completed, could suggest higher price actions. The daily chart below is showing a basic Fibonacci retracements analysis, from the December 2015 low of 13.72 to the May 2016 high of 18.06. Silver has pulled back to the 50-60% retracement levels. It looks like, the market is trying to bounce off these levels. In my view, a close above $16.60 is needed to encourage further buying momentum. From the long-term prospective, anything above $15.00 level is still considered positive. I have also included a weekly chart to show that the market had a “pin bar/hammer” type of candlestick formations that shows rejection of near-term lows. Traders most likely will pay attention to see if silver will continue to manage to hold above last week’s low.

Like I said last issue, although not impossible, it is still premature to assume that the May 2016 high’s would not be retested. Implementing options strategy might be an ideal way to trade these price actions. Please let me know if I could help in anyway. 

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 Chart

 

Silver Weekly Chart

Source: RJO Futures PRO

Silver Weekly Chart

 

To top

Energies - Natural Gas

Natural Gas Soars To Five Month High

After chopping through the month of May, natural gas prices finished the month off with an explosive rally that is continuing into June. So far each day of June has brought higher highs and higher lows to the July natural gas contract - a clear symptom of the market’s positive outlook. US weather models are starting to suggest that we may be due for a very warm summer, and natural gas will be in high demand to meet energy and cooling needs. Some also wonder if incoming hurricanes and tropical storms will affect production, despite us having the lowest rig count ever reported by Baker Hughes (US natural gas rigs have fallen from 1,606 in September 2008 to 82 rigs in June 2016). It is reported that Tropical Storm Colin has not and will not hurt rig activity this week.

Although this rally in natural gas looks quite well-founded, traders should be cautious of the slight overbought status of the market. Bulls appear to be targeting the early year highs just above 2.60. A pull-back to April’s highs around 2.43 would likely be very healthy for longer-term upside potential, and would help correct some overbought technical indicators. If weather cools and demand fails to surface this summer, I believe we should expect to enter the fall season with prices still in the low 2.00 area. If demand does surface as expected this summer, this may be the steam to finally help alleviate the US oversupply and push the market back towards the 3.00 mark.

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 Chart

To top

Softs - Sugar

October sugar futures: How high is too high?

Joe Nikruto

This week’s eView commentary finds the October sugar futures contract rallying yet again.  After reaching a price level not seen for almost a year, yesterday’s high was 19.33, the market pulled back and traded as low as 18.40 today, June 7.  The fundamental picture remains roughly the same.  Production challenges in drought stricken countries make for a theme commodity trading funds can run with and money is moving into sugar futures in record amounts.  With the 18-day moving average for October sugar futures currently at 17.59, traders who are recent arrivals to the party could be under pressure quickly.  This has left sugar longs profitable but vulnerable to profit taking.  Even with the size of the fund trader’s long position being record large it could still be the case that they have more firepower and October sugar futures have room to run. Today’s price action may portend further upside as the market was unable to remain below 18.50 for more than a matter of hours.  It is difficult to gauge how high will be too high on this recent move in October sugar futures but a significant pullback is overdue. Trend followers won’t be driven out of long positions until the October contract trades below 16.40 -16.20.  Pullbacks to or below the 18-day moving average should be met with new call positions by traders who have yet to enter the market on the long side.

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.  

Oct ’16 Sugar Daily chart

Source: RJO Futures PRO

Sugar Daily Chart

To top

Softs - Cotton

Strength in Cotton Looks Poised to Continue

Erik Tatje

Last Friday’s miserable employment figures sent the USD tumbling, which allowed commodities across the board to trade seamlessly higher.  Cotton was no exception as the market has been trending higher for some time now.  Wetness in key growing regions continue to provide support in this market and the threat of tropical storm Colin adding further wetness to the Mississippi Delta will likely continue to prove supportive to price.  Technically the market looks strong as well with a pretty well-defined trend line originating from early March.  Relatively higher highs and higher lows continue to be the theme in the cotton market and the positive momentum appears to remain in play above 60.25. 

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 Chart

To top

Softs - Cocoa

British Pound, Euro vs Dollar and Cocoa Futures

Peter Mooses

With the Euro zone’s portion of global grindings and the rally in the Euro and drop in the Dollar we’ve seen a boost in demand from Europe so cocoa prices have increased. If the Pound continues to drop from concerns of an exit, traders would continue to buy puts in the currency and calls in the cocoa. The recent move in the Pound has helped the short-term cocoa recovery. All these factors are leading to the London cocoa trading at its highest level against the New York market since September 2010.

Over the past week we have seen very technical trading for the most part. 9- and 20-day moving averages crossing point provided support Friday with 9-day moving average providing support yesterday. With demand back from Europe and the old crop still looking bad we saw a rally Monday.

Long-term, new crop may be better than expected so supply may be larger than we thought so 3100 and the 200-day moving average will be hard to break and hold above. Rally may be short-lived…

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 Chart

To top

Softs - Coffee

July Coffee Soars to Test May Rally High

Adam Tuiaana

July coffee prices are sky rocketing to challenge resistance levels set last month. This comes promptly after a major selloff at the tail end of last month, and we can now see that support held at the 118 level.

The key level to monitor in July coffee will be the 13530 high from last month. This price level represents that last major rally high. Should this level be broken, July coffee prices will likely soar back to the highs from March, 13820 in particular.

The “risk on” appetite for commodities is fully in play here, and we’re seeing rally’s throughout the soft commodities sector. In addition, the Hightower Group has reported “a stronger Brazilian currency and improving equities markets helped to support” this last rally. In the short term, look for a run to test the 13530 level, in which case July coffee prices will either soar to the next level of resistance (13820), or crash and burn on a volatile dive back down to the 122 level.

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.

Jul ’16 Coffee Daily Chart

Source: RJO Futures PRO

Coffee Chart

To top

Agriculture - Livestock

Risk-on vibe and cash premium overriding seasonal and supply

Jeff Gilfillan

The key technical boundaries are holding in fed cattle futures. I believe traders need to favor the long side of the beef market until old lows are breached. Supply and questionable demand was the theme in early 2016 but as we have seen with other commodities demand has been good at early 2016 low prices and demand is there albeit sporadic.

Funds and market sentiment are still overly bearish which leaves plenty of room for a grain/soy like short covering run. Cash is still at a decent premium to futures. Still a gap up at 158 in LC.

I believe the structure of the LC futures market currently is incentivizing feedlots to market more COF and recent placements indicate supply is ample through 3rd and 4th quarters. Feeders are appropriately selling off in line with live cattle. I do believe future placements will not continue to surprise.

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.

 

Aug ‘16 Live Cattle Daily Chart
Source: Track'nTrade

Live Cattle Chart

 

Feeder Cattle Weekly Chart
Source: Track'nTrade

Feeder Cattle Chart

To top

Currencies

US Dollar Takes Big Hit

John Caruso

RJO Futures Senior Market Strategist John Caruso discusses the currency futures markets. USD takes big hit after unemployment miss, euro rips higher. Brexit vote could put fear into currencies.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or jcaruso@rjofutures.com.

 

To top

Interest Rates

Rate Hike on Hold

Tarik Husseini

With last Friday’s employment report coming in far below expectations, the Fed timetable for increasing interest rates has become murkier.  The report showed the smallest jobs gain in more than five years.  Chances for a rate hike in June, once standing at 30%, have evaporated entirely.  This manifested itself in a sharp rally in the 30-yr bond with traders covering short positions, as others jumped on the upside momentum.  The probabilities of a July Increase dropped from 58% to 20%.  Based on the current data, bets are that September is pegged as the month the Fed will move.  However, this can change if data improves in the interim. 

In her speech on the economic outlook to the World Affairs Council of Philadelphia on Monday, Federal Reserve Chair Janet Yellen said that the state of the US labor market in May was “concerning” and “disappointing”, but also stressed that it would be wrong to over-emphasize one month’s data.  It is worth watching next month’s employment data, to see if the hiring slowdown is a temporary aberration, as the Fed will be keeping a close eye on it as well.  If there is a marked improvement, a hike could be back on the table sooner rather than later.

Following the jobs report, the fundamentals look to give an underpinning to bonds as the threat of a rate hike has dissipated in the near-term.  Focusing on September 30-yr bonds, the technicals look slightly bullish as Friday’s action following the Jobs report propelled the bonds through solid resistance at the 16516-16600 area.  The last two sessions have seen Bonds staying above prior resistance and consolidating between 16600-16700.  It will take a close below 16516, to push the bonds back in the previous three month range of 16000-16600.  The catalyst would be better economic numbers going forward, particularly in the employment arena.

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

Sep ’16 30-Yr Treasury Bond Daily Chart

Source: RJO WebOE

30-yr Bond Chart

To top

Equities

Equities Edge Higher in Face of Scheduled Data

Greg Perlin

A dovish Fed, gains in international equities and more gains in WTI crude oil overnight have lifted the global equity markets to another round of fresh highs.   Earlier afternoon comments from Fed Chair Janet Yellen yesterday indicated that the economic progress continues and the positives are outweighing the negatives.  Given reduced near-term prospects for a Fed Interest rate hike the trade is at least temporarily cheered by the idea that the historically low interest rates are expected to remain in place for a while longer.  The bull camp has started out today’s session with an edge and we can’t argue against more gains in the face of scheduled data.   We do suggest traders be on the lookout for a near-term top as a lack of positive momentum in the US economy should have eventual limitations.   Uptrend channel resistance today is seen at 2122-00, and more at 2126-26, contract high and support moves up to 2106.-00

One correlation that has been working well is the USD/JPY trade vs the S&P.   As the USD/JPY goes lower it often limits the upside in stocks and conversely, when the USD/JPY goes higher, it often gives a bid to the equity markets.  To sum that correlation, it is a risk on/risk off type of trade and I recommend traders view the correlation for trade ideas and location for the next big move.

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

Equities Chart

To top


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.

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.

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.

© 2016 RJO Futures
222 South Riverside Plaza | Suite 1200 | Chicago, Illinois 60606
800.441.1616 | 312.373.5478

 To top