RJO Futures Website

July 19, 2016

Volume 10, Issue 15

Featured Article

Webinar: Trading Energy Futures - Register Now!

Wednesday, July 20, 2016 at 11am CT

Webinar - Trading Energy Futures

In this webinar we will look at the following:

  • Energy Commodities 101
  • The benefits of trading energy futures
  • Basic technical analysis and trading strategy applicable to these markets

 

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Metals - Gold

Global Uncertainty and Strong Uptrend Support Gold

Nicholas DeGeorge

In the early morning trade, August gold is trading slightly up and currently trading at $1331.0 an ounce. The precious metal has been in roughly a $30 trading range over the past five trading sessions. Gold is trying to hold onto the $1,300.0 handle with global economic uncertainty and global security uncertainty as well. As long as there is global uncertainty of any kind, gold will try and make its way up to $1,400.0 an ounce. There has been reports that gold investor’s interest for gold is rising and maybe the news overnight that gold derivative holding have gone up might lift prices higher from current levels. However, the greenback has made fresh new highs overnight that it hasn’t seen since July 11th, which may keep prices in this tight trading range slightly longer.

If we take a quick look at the daily August gold chart, you’ll clearly see the consolidation over the last couple sessions. However, the shiny one is still trading in a strong up trend and currently trades above all its major moving averages with only a 54.81 on a 14 period RSI, which suggest this market is nowhere near overbought. For the bears, look for a breach of the $1,320.0 an ounce level because if broken, we could see a sell of down to around $1,300.0-$1,285.0.

 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

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Metals - Silver

More Consolidation in Silver?

Eli Tesfaye

September contract Silver futures is trading around psychological level of $20.00, down about 7 cents.  The dollar is materially stronger as we write this morning. Strong dollar usually has bearish implication for Silver contract. Long term view of Silver price is determined by the demand for its industrial use.  Slowing of global growth would probably keep Silver price in check in near term.

The Commitment of Traders with Option Report (COT) still shows heft net long for both non-commercial and non-reportable positions that was released Friday from July 12, 2016 reading.  It seems that front month Silver contract is struggling to hold any intraday gains. July 5th was a big day for silver reaching highs not seen since 2014. Since then market has been consolidating.  

From technical prospective, last e-view I mentioned that daily September Silver chart shows price actions is coming to a bit of overhead resistance above $21.00. Also, consolidation type of price action expected to continue. Today, price action suggested a break below from inside day type of price action from previous day. In my view, a break above $20.50 is needed to entice further price strength. Otherwise, you will probably see a slow price drift towards low $19.00 levels. Consolidation type of price action provides its own trading opportunities. 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 Weekly Continuation

Source: RJO Futures PRO

Silver Chart

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Energies - Crude Oil

Crude oil – more weakness ahead?

Michael Sabo

Since the last eView dated July 5th 2016, September Crude oil continues its downward descent.  The last 5 EIA Reports have shown small draws in the crude oil stock piles, but we currently have 521.804 million barrels in inventory which is well above the 5-year average of 386.519 million barrels.  Couple extremely high oil inventories with a strengthening US dollar and questionable global demand and you have a recipe for lower price action.  We have only seen some signs of positive news such as reports of fairly strong Chinese demand the 1st half of the year, and we have seen US shale output decline for 9 months now – interesting though that none of this has given the market enough strength to continue higher.  Be sure to watch this week’s EIA Report – current trader thoughts are that we may see a draw in the oil stocks of about 2 million barrels, this could provide slight support to the market in the short term, but I believe it will be short lived.

Short term technical indicators are starting to look a bit oversold in mind but the downside has continued for the last couple weeks. Following the last eView, the market took another “leg” down and has continued to stay weak.  I still believe the market is in a downward bear channel but is now trading about mid-range.  At this time I am still cautiously bearish and think traders can still play the bear channel that has been forming – I would stress that the market could jump up to trade closer to the top trend line before possibly selling off again. Please call me for more details and to discuss some strategies.   For more cautious traders, I would recommend using an option strategy.  If wanting to trade futures, I would wait for either for an inside day breakout to establish a futures position or for the market to trade up against one of the trend lines.

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.

Sep ‘16 Crude Oil Daily Chart

Source: RJO Futures PRO

Crude Oil Chart

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Energies - Natural Gas

Natural Gas Struggles To Hold Summer Buzz

The natural gas market has been very dull and sideways since the aggressive sell-off in early July. This summer started off with strong upside momentum as both speculators and hedgers positioned themselves for a potentially very hot summer that could’ve helped reduce the existing glut in supply. Although some areas of the US have certainly seen their share of above average temperatures, and more heat is in the forecast, the June demand hype now appears to have just been gossip . This opinion is supported by recent EIA data, showing natural gas storage up 202 bcf in the last four weeks and inventories at 3,243 bcf, 22.1% above the 5-year average.

A quick look at a daily September natural gas chart is likely to get technicians salivating. A clear head and shoulders pattern has developed over the last four weeks and may be an indication that there is more downside to come. Currently the market is well-supported by 2.66, but ultimately the market may look to consolidate around 2.50 (the 50% fibonacci retracement level for the entire year’s activity and the April ’16 high). I suspect natural gas will become a very technical market in the coming weeks as summer fundamentals fade and traders wait for information on the coming winter. 

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.

Sep ’16 Natural Gas Daily Chart

Source: RJO Futures PRO

 Natural Gas Chart

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Softs - Sugar

Sugar uptrend intact but higher prices needed to take fund trader finger off the trigger.

Joe Nikruto

This week’s eView commentary for October sugar futures finds our sugar bull market in need of a feeding.  The old traders saying is that you have to feed a bull market every day.  It has been more than a few days since sugar had any new bullish fundamental inputs to chew on.  Strong harvesting of higher sugar content cane in Brazil in the last month has brought the October contract down from the highs, just above 21.00, to its current price of 19.86.  Sugar seems now caught between two fundamental cross currents. In my opinion, increased Asian buying is inevitable. In addition, increased switching to ethanol over sugar in Brazil due to local currency strength is happening now.  And, the bullish supply scenario supports October sugar futures as well. Rapid harvest in good weather of high sugar content cane and an increasingly heavy technical picture conspire to weigh on sentiment.  The market has given up almost 2.00 in the last few weeks and is within spitting distance of the 50-day moving average, 19.06.  Volume and open interest have been trending lower. A move below 18.62 and 18.12 will force the fund trader to head for the exits. 

Fundamentally I can’t see what could develop in the October sugar futures market that would drive this market through those levels.  However, with the size of the fund position, large as it is, waiting for the fundamentals to become obvious could be like standing on the tracks to catch your morning train. At the risk of revisiting an ABC ( already been chewed) fundamental, I continue to think the job of the sugar market now is to force users who are not up to date on needed supplies or participants who might be looking to rebuild physical stockpiles to pay up.  This underlying support may be what the sugar market needs for the path of least resistance to continue to point up.  Technically there is something for both the bull and bear camp.  With a little imagination one can see 2/3 of a head and shoulders pattern developing on the chart below.  If the head and shoulders pattern plays out and the market goes lower, sugar may be headed for 16.  If the head and shoulders pattern fails and October sugar futures breaks out above the recent high of 21.20 this can be a powerful indication of even higher prices to come.

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

World Ending Stocks Send Prices Soaring

Erik Tatje

Fear of tightening world stocks sent cotton prices soaring last week following the USDA report; however, prices may be a bit overbought at these levels. This idea has played out in price action as Dec cotton actually saw a lower close yesterday following six sessions of strong prices. The market certainly has room to correct from here and these corrective pullbacks should be viewed as just that. The trend is clearly positive at this point in time with moving averages in agreement with this statement. Corrective pullbacks in the cotton market may stabilize around the 71.00 level, followed by the 68.00 – 68.50 area on the chart.

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 - Cocoa

Demand Needed to Reaffirm Move Higher

Peter Mooses

With all outside factors weighing on the cocoa market and no new demand to help the September contract move higher – traders look to supply for support. The 200-day moving average has been significantly broken today. The 3160 area of the chart brought in sellers and profit taking; a close above 3000 will keep the trend line that has provided support for a recovery after all selloffs since February. Weather in key growing regions is not any better for production so supply should continue to be a concern in future months. Traders are looking forward to the Asian grindings numbers that will be released later this week, this data could push the market back above 3100 on its own since the market needs some fresh demand news.

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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Softs - Coffee

September Coffee looking Strong

Adam Tuiaana

September coffee prices continue to look extremely strong after a convincing break above the 14805 high from July 16. Shortly after this break of resistance we’ve seen some good corrective price action and a rally, which looks to test the 160 level.  This strength in coffee prices have likely been due to a strong demand outlook.

Earlier in June we saw coffee prices fail to break above the high of 145 (from 6/9/16), and then promptly get 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 May of 2015. 

It also looks as if the trend channel is tightening a little bit, which could prompt a big move to the upside over the next month. For now, continue to ride the wave, which is moving higher. Look for a test of that 160 level over the next week 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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Agriculture - Grains

Grains weaker on favorable temps and rainfall

Equity markets are slightly lower at the mid-point of US trading. August gold futures are up, trading near $1,331 (+2). The September S&P contract is down near 2157 (-3 pts.) and the Dow is up by 18 points at 18,468. September bond futures are in the green at 13206 and 17200 for Notes/Bonds respectively. Crude oil is bearish, trading roughly $45.87 in the September contract, while natural gas is higher, in the green at $2.750.

Grains are much weaker, despite good export numbers, with a surging US dollar. Corn ($3.52), wheat ($4.42) and soybeans ($10.35) have fallen substantially as the 6-10 day weather outlook is bearish in terms of temperature and precipitation.

The weekly soybean conditions report showed 71% was rated good/excellent compared to 71% last week and 62% last year. The 10 year average for this time of year is 61%. Corn conditions showed 76% as good/excellent, identical to last week and higher than last year, 61%. The decade average for corn at this point is 64%.

Export inspections showed corn slightly above expectations (52.3 mil bu), beans at the top end (13.5 mil bu) and wheat in line (16.1 mil bu) with analyst’s forecasts.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-373-5470 or jkennedy@rjofutures.com

Dec ’16 Corn Daily Chart
Source: RJO Futures PRO

Corn Chart

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Currencies

US Dollar Gains on the Euro Following Weak ZEW Data

John Caruso

For the past few weeks the USD and Euro trade have largely stayed range bound. The prospect of further economic stimulus prospects by the ECB have largely kept the Euro out of favor, while the US still holds out hopes for higher interest rates between now and the end of 2016. I largely hold a near-term bullish bias towards the USD and following this morning’s weak German ZEW data, we’re seeing the Greenback gain further on the Euro currency. Any further pull-backs in the USD should be bought, and with a clear break out of the current trading range of 95.50 and 96.85, we should see further upside in the immediate-term. Notable data releases coming up are next Wednesday with the Durable Goods Orders, followed up by Q2 GDP. Any upside surprises in those key data points will keep the trend of rising USD intact, as well as the prospect for a September interest rate hike by the Fed. Take note of the break-out of the 3 week range in the chart below.

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

Sep ’16 US Dollar Index Daily Chart
Source: RJO Futures PRO

US Dollar Index Chart

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Equities

The Secret Effect of the Yen on the S&P

Greg Perlin

Global equities were weaker overnight as the markets digested softer than expected German ZEW readings.  The stock market has now entered earning season with IBM and Netflix reporting yesterday.   IBM beat expectations, while Netflix in the heavily traded tech sector missed badly.  As you look, you can see that this morning is weighing heavy on the NASDAQ.  On a positive note, the Nikkei continues to post gains which is weighing on the Yen.  A good indicator of direction of the S&P is the Yen.   If the Yen goes lower, S&P goes positive.  If the Yen goes higher, the S&P goes negative.  I continue to believe that as the Bank of Japan continues to ease, putting pressure on the Yen should act as a main support for the near-term in the S&P.  

The S&P continues a pattern of lower-highs, and it would appear as if the corrective posture is set to remain in place early today.  Clearly, the German ZEW figures undermined investor sentiment, and we can’t rule out a near term return to a series of closing levels around 2146.  However, some trades think the September S&P is closer in support at even numbers of 2150.00. 

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

 S&P Emini Chart

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