RJO Futures Website

July 5, 2016

Volume 10, Issue 14

Featured Article

Webinar: Trading Agricultural Futures

Webinar: Trading Agricultural Futures - Register Now!

Wednesday, July 6, 2016 at 11am CT

In this webinar you will learn:

  • Keys to understanding the agricultural markets
  • Possible benefits of trading the grains
  • What to consider before trading this market
  • Basic technical analysis techniques on the ags

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Metals - Gold

Powerful Uptrend in Gold

Nicholas DeGeorge

In the morning trade, gold is up over $15 an ounce and currently trading at $1,356.5. After the selloff in metals last week, the shiny one has rallied back to where it was after the BREXIT announcement. Also, with sharp gains in Treasuries putting in an all new time lows in yields has added some more safe haven vibes to push up gold even more. Furthermore, the largest gold ETF saw their holding increase by 3.86 tonnes. 

If you take a quick look at the daily August gold chart, you’ll clearly see that it is in a powerful uptrend with it almost breaking new fresh contract yearly highs and trading above all major moving averages. I believe the financial environment and the chart pattern favors the bulls at this time.

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

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Metals - Silver

Overhead Resistance for September Silver

Eli Tesfaye

September contract silver futures is trading at $19.92, up about 33 cents on the day as I write. The dollar is a bit stronger as well this morning. It’s always interesting to notice positive price actions for both US dollar and silver. Last week of course was a big week for silver with prices reaching highs not seen since 2014. So far today, we are seeing a follow-up type of price action.  The rest of the week is packed with economic reports including FOMC minutes that could bring a bit of volatility to the silver market.

Something to note, The Commitment of Traders with Options Report (COT) that was measured June 28th 2016  and released this past Friday was already showing hefty net long of 97,963 contracts for both Non-commercial and Non-Reportable positions. I pay close attention to the COT extreme level reports to see any type of potential topping type of price actions.   

From a technical prospective, the daily September silver chart shows price actions is coming to a bit of overhead resistance above $21.00. In my view, with the overnight spike price of $21.225 in September contract, the chart suggests more or less consolidation type of price action to be expected. With more volatility expected this week from the slew of economic reports, using options in combination of futures contract could be a good approach. Please contact me to discuss specific strategies.

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.

Sep ’16 Silver Daily Chart

Source: RJO Futures PRO

Silver

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Energies - Crude Oil

Crude oil – signs of a top?

Michael Sabo

Since the last eView August Crude oil appears to have started to top out.  The Baker Hughes rig count showed a fourth increase out of the last five weeks – this I think will continue to affect the oil market as additional supply of oil comes on to the market.  In the last eView I mentioned if the UK voted to leave the EU it could cause the oil market to pull back, as we now know the UK did vote to leave and it has helped cause global uncertainty which has put pressure on oil.  In addition, it has helped push the US dollar index higher which has also helped put pressure on oil prices.  Something I also think is worth mentioning is the latest Commitments of Traders Report on June 28th shows traders holding sizable net long position of 351,170 contracts – this leaves the oil market wide open for technical selling as traders could race to exit.  Be sure to watch this week’s EIA Report for a possible build in stocks.

Short-term technical indicators look overbought and the market looks like it has started to trade in a downside bear channel (see chart below).   The following are some of my comments from the last eview on June 23rd “Today, so far the market is having an inside day – a sign of market consolidation.  I would suggest watching for a breakout assuming the market completes an inside day today.  As of right now I remain cautiously bearish - the market is currently trading below the 10-day moving average suggesting additional weakness.”  August Crude oil did in fact have an inside day on June 23rd and broke to the downside thereby giving a sell signal in my opinion – at this time I am still cautiously bearish and think traders can play the bear channel that has been forming recently. Please call me for more details and to discuss some strategies.   For more cautious traders I would recommend using an option strategy or waiting for an inside day breakout to establish a 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

Aug ‘16 Crude Oil Daily Chart

Source: RJO Futures PRO

Crude Oil Chart

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Energies - Natural Gas

Natural Gas Collapses After Impressive June

Natural gas futures are collapsing today after pushing over 20% higher through the month of June. Although profit taking is expected after such massive gains, a small shift in the market’s fundamental outlook appears to be rattling bullish positions and confidence. As of late last week, weather models continued to suggest a hot and dry start to July. Now these same models appear to be retracting some of that heat potential, particularly with the western US shifting into probable “below-normal” conditions over the next two weeks. With weather starting to turn more neutral, a glut of natural gas still in supply, and a large long position held by Commercial traders, it’s understandable to see this market vulnerable to sharp breaks.

Going forward one must decide whether this dip is a buying opportunity or a sign of a shifting trend. Technically speaking, today’s sell off in the August contract has done a great job of correcting the overbought RSI and stochastic indicators while simultaneously holding price above the 20 day moving average. Aggressive bulls may wish to enter on this dip in expectation of some sideways to higher consolidation after such a move, with a close eye on key support of 2.65. If 2.65 is broken, I feel that we are likely to see a quick move to 2.50, the 50% retracement level of this year’s range. If 2.65 is avoided, another test of 3.00 may be likely as the supportive trend will remain well defined.

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.

Aug ’16 Natural Gas Daily Chart

Source: RJO Futures PRO

Natural Gas Chart

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Softs - Sugar

Funds and fundamentals could conspire to take sugar higher.

Joe Nikruto

This week’s eView comment for ICE sugar futures finds the October contract mired in holiday trade. Muted volume for Friday’s session in front of the celebration of Independence Day here in the US followed by an aggressively unchanged market today should not lull traders to sleep.  The bull case remains in focus in the sugar market.  Whether it was profit-taking or risk-off, the move lower around the Brexit event was short lived and shallow.  October sugar futures were unable to remain below the 18-day moving average for more than a day.  Clearly not a signal of an impending bear market in sugar.  It is my opinion that Asian buyers are behind on purchases and the market is going to do its best to make them pay for waiting. The commodity trading funds are very long but the technical picture and fundamental outlook remain in agreement and could cause this position to swell.  Sugar ‘feels’ high as it moves over 21.00 but history shows that there could be much more upside to be had for traders with patience and the risk tolerance to stay long or get long at levels that ‘feel’ expensive.  18.52 and 17.90 in October sugar are technical levels that will have to be violated for the fund trader to be chased to the sidelines.  Fundamentally it is difficult to see what might change to alter the bullish supply narrative. With no change in that story and no price weakness the path of least resistance will likely be 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.  

Oct ’16 Sugar Daily Chart

Source: RJO Futures PRO

Sugar Chart

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Softs - Cotton

Bull Trend Remains in Play Despite Recent Consolidation

Erik Tatje

December cotton has sustained an impressive rally over the past few months and, so long as price action doesn’t close below the 63.28 swing lows, the market will continue to hold a bullish bias.  After topping out above 66.00, the market has “coiled” over the past 4-6 weeks between the 63.28 and 66.64 area on the chart.  Continue to monitor these range extremes in the coming days as they may provide solid entry points for range-bound trading strategies.  The 50-day SMA appears to be right around the 63.44 level of technical structure and market participants should monitor price action around this level as a bounce from here would confirm the structural support. 

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.

Dec ’16 Cotton Daily Chart

Source: RJO Futures PRO

Cotton Chart

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Softs - Coffee

September Coffee Looking Strong

Adam Tuiaana

September coffee prices continue to rally with a strong breakout of the consolidation range that we’ve been stuck in for most of June. Earlier in June we saw coffee prices fail to break above the high of 145 (from 6/9/16), and then promptly got stuck in a consolidation range. We can assume this failure and consolidation was an opportunity for buyers to up their game and step in again, as we are now testing price levels we’ve not seen since February.  The recent breakout of June’s consolidation zone may spark a buying frenzy that could easily have September coffee prices racing for the 160 highs from January 2015.

Lower than expected exports from Honduras, along with recent El Nino issues in the Central America have likely helped to support strong September coffee prices. In addition, we’re seeing the US equities markets fight their way back from the depths, which could mean a stronger, long-term demand outlook for coffee. For now, continue to ride the wave, which is moving higher. Look for a test of that 160 level in the next month or so.

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.

Sep ’16 Coffee Daily Chart

Source: RJO Futures PRO

Coffee Chart

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Softs - Cocoa

Cocoa Supply & Demand – Hershey Merger?

Peter Mooses

As always, supply concerns continue to help cocoa futures hold support. After an inside trading day, cocoa tried to move higher. The 9-day moving average has been broken but the 20- and 200-day are the next levels of resistance. Demand out of Europe has been questioned as the Euro and British Pound move lower - a third of the global grindings are in Europe. Last week Hershey rejected an offer for a Mondelez takeover, which could help demand in cocoa in the long-run if any other companies jump in and make a bid. Even if demand doesn’t recover, West Africa has seen one of the worst El Nino seasons in years making the production recovery hard to imagine anytime soon.

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.  

Sep ‘16 Cocoa Daily Chart

Source: RJO Futures PRO

Cocoa Chart

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Agriculture - Grains

Weather Conditions Could Leave Corn Gap Unfilled

Stephen Davis

The lack of any extended periods of heat in the forecast for the US corn belt through the 15-day period, along with very good rains seen across the southern belt over the long weekend and forecast for solid rains across the northern half of the corn belt this week is all weighing heavily on the grain markets to start our week. Chinese soybean and corn futures were solidly lower overnight, while the energy complex is under pressure this morning as well. Corn pollination will be in full swing over the next two weeks and with no concerning heat in the forecast, a major risk concern of the market appears likely to pass without issue

The corn market is expected to trade lower on continued long liquidation. There were 385 deliveries posted against the July contract. Corn crop progress this afternoon is expected to show corn conditions steady

The soybean market is expected to trade lower in sympathy with corn. There were 237 deliveries posted against the July soybean contract. There were 642 deliveries against the July soybean oil contract. There were no deliveries posted against the July soybean meal contract.

Both corn and soybean contracts gapped lower to start the week. The $10 million dollar question is when and if these gaps will be filled. I wish I knew for sure. When I count the waves on my soybean charts, my opinion is the soybean market would go back and fill these gaps quickly. The corn market is different. With pollination in the next few weeks, and the weather looking cooler and very good rains forecast later in the week, it would be hard for the corn market to fill these gaps left from today.

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.

Dec ’16 Corn Daily Chart
Source: RJO Futures PRO

Corn Chart

 

Nov ’16 Soybeans Daily Chart
Source: RJO Futures PRO

Soybeans Chart

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Currencies

Gold the “Other” Currency

John Caruso

We’re seeing the British pound hit new lows this morning on the heels of Brexit and a dovish Bank of England promising more rate cuts this summer.  The ECB also announced “looser monetary policy” rules, and now the US Fed flipping back to dovish.  By no means is this an indication of a healthy global economy.  They are flat out telling you that the global economic outlook is in dire straits and Central Banks are quickly running out of ammunition. The Feds talk of higher interest rates seems to be a thing of the past and now the Fed Funds futures aren’t fully pricing in a rate hike until OCT 2018!  Global yields specifically the US 10-yr yield and German Bund yields are hitting all-time lows this morning and the gold/silver charts resemble a runaway freight train. The US dollar remains the “best house on a bad block” however with the Fed’s pivoting back to “Dovish”, this rally could soon run out of steam.  We’ve seen a vast amount of decoupling, specifically with gold and the USD.  What this tells me, is that faith is running low on Central Banking Policy and Global Currencies and investors our seeking safety in the other alternative currency, gold.  Take a look below, it doesn’t get much more bullish than this gold daily chart below.  DO NOT CHASE, AS WE ARE NEAR-TERM OVER BOUGHT. 

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

Aug ’16 Gold Daily Chart

Source: RJO Futures PRO

Gold Chart

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Equities

The Path of Least Resistance for S&P

Greg Perlin

The path of least resistance is pointing downward.  Global equities were mostly weaker overnight, but Chinese markets were higher off favorable economic data from China.  So far fresh easing from the BOE was largely discounted with some players suggesting the BOE move merely gives credence to fears of the negative remifications from last month’s vote.  While press headlines are attempting to fan current coniditons into a major market event, seeing initial declines in the S&P of only 10 points mitigates the anxiety somewhat.  However, as the trade moves toward the US employment report at the end of this week we suspect that the fear of too much slowing will dominate over the eventual track that the Fed will probably announce a move to the sidelines for the rest of 2016.  We suspect that prices will eventually post a low from the FED’s intentions. 

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.

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

Equities Chart

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