RJO Futures Website

August 2, 2016

Volume 10, Issue 16

Featured Article

Webinar: Intro to Futures - Register now!

Wednesday, August 10 at 11 a.m. CT

This webinar provides an entry level view at getting started in trading futures. Understand the how and why of the futures markets and what market may be right for you. Determine your trading style and understand how professionals approach the markets.

In this session you will learn:

  • What you need to know about futures
  • Range of markets available
  • Trading style: fundamental vs. technical
  • The right futures market for you

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Metals - Gold

Gold Prone to Rally Up to $1400.0 or Higher

Nicholas DeGeorge

In the early morning trade, December gold has extended its rally that started back on July 26th. I believe the two reasons for this move are the latest Japanese stimulus move and a weak US dollar. Usually, lower interest rates are supportive of gold and support the narrative of ongoing global anxiety for currencies.

Once we broke the resistance area of $1340.0 last week, it gave the shiny one a clean run up to the high of $1377.5 that it made at the beginning of July. If you take a look at the December weekly gold chart, you’ll clearly see that gold is prone to rally up to $1400.0 or even $1428.0, which is the high back on August of 2013.

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.

Dec '16 Gold Weekly Chart

Source: RJO Futures PRO

Gold Chart

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Metals - Silver

Retest of July’s High and More?

Eli Tesfaye

September contract silver futures is up around 19 cents and trading around $20.69 this late morning.  The dollar is weak this morning as well. As usual, weak dollar has a bullish implication for silver. Other factors that support the silver market have been weak including ISM on Monday, as well as Personal Income and Outlays report from this morning. Japan’s move to stimulate their economy has also contributed to silver positive price actions, adding uncertainty. Here in the US, we are to expect ADP and the Monthly Employment Situation reports for the remainder of the week. In my view, these reports may be the catalyst to send silver even higher given the outcome of the reports.   

The Commitment of Traders with Option Report (COT) still shows hefty net long of 110,403 contracts for both non-commercial and non-reportable positions from July 26, 2016 reading.  See the technical set up below, further upside price likely. It seems that front month silver contract is advancing to retest or take out the July 5th high of 21.225.

The last eView, I mentioned that a break out above $20.50, will entice further price strength. The market should continue to advance past the 2014 highs if more supportive news comes out this week.  From the chart below a “bull flag” type of chart set up suggest higher prices.   

Again, from technical prospective, trade still favors the upside, any close below $20.00 will probably signal a rejection of the highs. It goes without saying that today price action so far suggests momentum is to the upside. Please contact me for trading ideas in these markets or 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 Chart

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Energies - Crude Oil

Crude oil – close to a bottom?

Michael Sabo

Since the last eView Oct crude oil has moved significantly lower and the news hasn’t changed much - rig count continues to increase, supplies remain ample, the US dollar continues to be strong and global economic uncertainties seem abundant.  All of this has helped keep crude oil heading lower.  Brexit has come and gone BUT other EU countries appear ready and willing to leave.  Many dates have been set in other EU countries looking to hold referendums / votes on whether to leave or stay. This could truly be the start of the complete break-up of the EU, especially if other countries see the UK making it just fine. I think this will continue to keep the market on edge for some time. Be sure to watch this week’s EIA Report for a possible build in stocks.

Short-term technical indicators look very oversold in my opinion and the market looks poised for a small short covering rally.  I would suggest watching for a breakout assuming the market completes an inside day.  As of right now, I still remain cautiously bearish but am watching for a bounce higher.  The market has broken out of the bear channel to the downside.  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 a bounce higher and then hopefully seeing some market consolidation followed by an inside day breakout to establish a futures position.  Please call me for more details and to discuss some 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 msabo@rjofutures.com.

Oct ‘16 Crude Oil

Source: RJO Futures PRO

Crude Oil Daily Chart

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Energies - Natural Gas

Natural Gas Rejects End of July Rally

Natural gas prices are continuing to weaken after an explosive rally following last Thursday’s EIA inventory report. With analysts expecting a build of around 25 bcf yet seeing only a 17 bcf injection, the market opened the door for aggressive short covering and short-term bull speculation. After the initial 20 cent pop and the small followthrough on Friday, this week so far has been working to eliminate the effect of the move. Though the average estimate of 25 bcf proved to be too high for this inventory report, the number was indeed still positive and proof that inventories are still growing.

Interestingly, last week’s high was still roughly 8 cents lower than the early July high of 2.99 in the September contract. Considering summer is quickly fading away and temperatures are starting to look more stable, the recent demand story for natural gas is really starting to lose steam. Remember that domestic storage levels still hold 18.9% above the 5-year average, a very sizable surplus for this time of year.

September natural gas appears to be targeting the 2.62 major support level in this week’s move lower. Despite some headwinds from a falling US dollar, the market is grinding down in a calm and potentially sustainable manner.  Trader’s looking to take advantage of the seasonal effect of post-summer/pre-winter demand weakness should consider entering here without risking a move above last week’s 2.91 high. Though 2.62 looks to be the primary target in the current sell-off, I wouldn’t be surprised to see prices attempt to break the 2.50 mark by the end of the month.

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 consolidating. October contract ticks away from possible fund fueled cliff dive.

Joe Nikruto

This week’s eView comment for the October sugar futures market finds the contract in a precarious position. At the time of this writing sugar was just ticks away from a level, 18.60, that should it be breached could lead to increased selling by the commodity trading funds.   October sugar is trading below the 50-day moving average, 19.27, and consolidating.  Weaker crude prices have not helped sugar’s cause and the size of the spec long position is well known and burdensome.  If the funds are forced to take profits it wouldn’t be a surprise to see October sugar trade to 18.00 or lower.  I am not sure the fundamental situation has changed enough to warrant a move lower than 18.00 but the size of the spec long position should be respected.  In our last eView I mentioned 2/3 of a head and shoulders pattern becoming visible on the chart. That pattern is now in full bloom.  Bearish traders can use a move below 18.70, a violation of the neckline, to enter new short trades.  A close above the 50-day moving average, 19.24, would be a tight risk parameter traders could consider.  However, a close above the right shoulder, 20.11, would be required to negate the head and shoulders pattern and would speak to possible new highs for the move.

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@rjofutures.com.  

Oct ‘16 Sugar Daily Chart

Source: RJO Futures PRO

Sugar Chart

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Softs - Cotton

Cotton Keeps Climbing

With crop conditions continuing to decline here in the US (50% Good/Excellent vs. 52% last week) and concerns of dryness in several key cotton growing areas in Texas, the market continues to see prices move higher amid concerns over this years’ crop.  In additional to the bullish fundamentals, an argument could be made that a bullish flag formation is in the process of being created on the daily chart, as the market has taken a brief “pause” to digest the large directional rally.  Based off this formation, an upside price projection can be established from the flag formation low, putting an initial upside target right around 82.00 in the Dec’16 contract.  Continue to keep an eye on this formation as a sustained breakout above 75.00 could serve as a precursor to the next leg higher in the cotton market. 

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 Daily Chart

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Softs - Cocoa

Cocoa Supply Concerns Return

Over the past two weeks cocoa futures have come under pressure mainly from slack demand side fundamentals and US Dollar strength. Subsequently, there has been a sizeable liquidation of speculative long positions as reported in the weekly COT report on Friday. Technically the cocoa futures have quickly become over sold and it’s usually a level on the chart that turns a market around. There is good long-term support at the 2800 range and major long-term support around the 2750 range. After yesterday’s strong reversal, the market seems to have found a level where the selling has exhausted itself and the new buyers are finding the price attractive. Keep in mind that the supply side fundamental is supportive. Supply remains tight, we just needed to see demand return. On the technical side we will need to see some follow-through buying today. A close above 2960, September basis would encourage follow through rallies to test levels around the 3000 range. Tight supply side fundamentals do not change overnight. I would not be surprised to see a retracement back to the July swing high of 3166. Keep an eye on Ivory Coast port arrivals which at this time are approximately 13% lower than last season’s rate.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or fcholly@rjofutures.com.

Sep ‘16 Cocoa Daily Chart

Source: RJO Futures PRO

Cocoa Daily Chart

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Agriculture - Livestock

Live Cattle “Wash Out” Level Tested in July

My last eView post at the end of June discussed the 107 front month washout level as a potential risk level for bulls. We touched just above that level in August futures on 07/21 at 107.10. This was the low which hit not long before a COF report provided enough data for the quants to reverse course.

Fundamentally the market pulled back as basis overshot. Last week’s cash traded at 116.00. Technically RJO Market Insight indicated 111.25 in October futures and 123.55 on an active continuation chart as key short-term and long-term levels.

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 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 Daily Chart

 

Live Cattle Monthly Chart
Source: Track'nTrade

Lve Cattle Monthly Chart

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Currencies

John Caruso

Changes in worldwide currency values affect gold rates. Bearish outlooks on trades in the long term could prove beneficial as Japan's stimulus package takes effect. 

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

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