RJO Futures Website

August 30, 2016

Volume 10, Issue 18

Featured Article

Webinar: Introduction to Options on Futures - Register Now!

Wednesday, August 31, 2016 at 11am CT

Intro to Options Webinar

In this webinar we talk about the basics of options, including:

  • The unique features of trading options
  • How to understand options terminology
  • Discover how options are priced and learn to read option quotes
  • How to trade the rising and falling markets using options

Webinar: Critical Trading Mistakes

Wednesday, September 7, 2016 at 11am 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

 

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Exchange Info

Eurex: Euro Yield Curve

From Euribor to Buxl, and from Spain, Italy, Switzerland, France and Germany, the futures and options of the Euro Yield curve is found at Eurex.

  • FOAT and FBTP -- French and Italian 10-year futures contracts each trade nearly 100,000 contracts per day 
  • Benchmark German FI futures and options trade over a million contracts a day 
  • Spanish Bono and Swiss Conf 10-year futures are available as well 

Learn More


Equity Index: A closer look at some of Eurex's volume growth leaders

STOXX® Europe 600, VSTOXX® and Mini-DAX®; setting monthly volume and open interest records, these products are quickly becoming the go-to Equity Index benchmarks for trading regional to broad based Pan-Europe

  • STOXX® Europe 600 = FXXP - One of Eurex's most actively growing broad based European Equity Indices covering 18 countries. 
  • VSTOXX® = FVS - Eurex's European Volatility measure based on the 30 day implied volatility of the EURO STOXX 50®
  • Mini-DAX® = FDXM - A smaller notional version of Eurex's benchmark German DAX® 30 Future.

Learn More

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Metals - Gold

Gold is Getting Bearish

Nicholas DeGeorge

In the early morning trade, December gold is trading slightly down at $1321.0. After bouncing around range trading yesterday, gold has continued its selloff which started on Friday after Yellen spoke. The recent strength in the US dollar should continue to keep metals and other commodities under pressure for further selloffs. However, gold may get a bounce here due to declines in DRD gold output and increased gold derivative holdings.

If we take a quick look at the daily December gold chart, you’ll clearly see that the technical patterns favor the bear camp. Last week it took out the old critical low of $1318.0, which is just below the symmetrical triangle pattern and may signal a selloff to the old Brexit low of $1259.1 back on June 24th. Also, the 20-day moving average is about to cross below the 50-day moving average, which usually means the selloff will continue to gain momentum.

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 Daily Chart

Source: RJO Futures PRO

Gold Chart

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Metals - Silver

Would $18.00 support in Silver hold?

Eli Tesfaye

New contract December silver is trading $18.70 and down 17 cents this morning. Weakness in silver price is attributed to the strength in the US dollar today. A takeaway from the Fed meeting in Jackson Hole meeting in Atlanta last Friday points towards a possible rate hike. All in all, there are two major bearish elements that are working against higher silver prices. First, silver is trying to “price in” the possibility of a rate hike in December meeting or early next year. Second, from the Commitment of Traders with Options report (COT) that was measured Tuesday Aug 23, 2016, shows that non-commercials and non-reportable traders still hold about 102,190 contracts long in silver.    

In Overseas markets, I don’t think anything changed from what I mentions from the last eView of the uncertainty over the outcome of the British referendum to leave the EU and also the impact of the recent monitory authorities in Japan to expand the money supply. Unlike Japan, the US Fed authorities are eager to tighten the money supply. The Fed here seems to think that the US economy is getting to “Full employment” in that it is justified to move forward with a rate hike.   

From technical prospective, seen in the chart below, silver is trying to hold above $18.00 support level. As I also mentioned in the last eView, silver price needs to continue to hold above $19.50 to discourage further price erosion. The chart tells a clear story below that the bears have the technical advantage working for them at the moment. In my view, from current price levels, the $18.00 is really at risk of being taken out. At the moment, it is hard to get excited about silver till you see a pop above $20.00 and it will not attract new longs until price heads above $19.50.  These types of price actions provide trading opportunities that I will be happy to discuss with you.

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.

Dec ’16 Silver Daily Chart

Source: RJO Futures PRO

Silver Chart

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Energies - Crude Oil

Energy prices are falling, weather affecting surges.

Michael Sabo

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

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Energies - Natural Gas

Natural Gas Double-Top Cautions Bulls

The month of August has been parabolic for natural gas prices. After an initial collapse at the beginning of the month fueled by weak demand and robust supplies, the market has now recovered all of that value on a variety of surfacing bullish fundamentals. For one, last Friday’s Baker Hughes rig count showed a reduction of two active drills, effectively ending the growing rig count trend that existed all summer. Also, threatening weather is currently moving up from Mexico and is pushing both warm temperatures and potential hurricanes into the southern US. If Gulf rigs are affected, any disruption to production would likely support the recent upside movement the market has seen. However, it is important to realize that only a small percentage of natural gas supplies come from off-shore Gulf rigs. The recent rush to shale-rock drilling should provide relief to any storm related supply damages off the coast.

The most interesting aspect of a current October natural gas chart is the obvious double-top built over the last month. Early in today’s session, natural gas bulls appeared to be in control as they pushed for a potential upside breach to this double-top. As of this writing, natural gas has reversed the rally and holds down over 7 cents. With technical resistance holding strong at 2.95 and the potential for a “buy the rumor, sell the fact” scenario, it is tempting to be a seller of this recent panic rally. I believe that if weather can normalize a bit and rig activity doesn’t fall too much before winter, prices around 2.60/mmbtu are attainable in the coming weeks.

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.

Oct ’16 Natural Gas Daily Chart

Source: RJO Futures PRO

Natural Gas Chart

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Softs - Sugar

Sugar waiting for UNICA data and coiling for next upside attempt?

Joe Nikruto

This week’s eView comment finds October sugar futures four trading sessions removed from an upside breakout of this month’s range.  In overnight trade on the 24th of August the market rallied up posting a high of 20.94, 2 ticks higher than the high from August 8.  Just like the price action around the 8th the market immediately sold off after forcing trend-followers into new long positions.  This move was dramatic and resulted in an ugly daily bar on the chart. But sure enough, in the last three sessions, the market has managed to move back near the highs.  A recent comment from the International Sugar Organization (ISO) may shed some light on why. Speaking to projections for the stocks to use ratio, ISO is calling it “the lowest level since 2010-2011”.  A quick look back at 2010-2011 shows sugar trading upwards of 30.00.  Also on the wires is talk of the size of the long position held by the speculative participants in sugar futures. 

Technically the market would have to move below 19.53 and 19.30 to force funds out of newly established long positions.  While this is certainly possible should the funds begin to head for the exits, it’s almost a chicken and egg scenario. Funds don’t typically liquidate until there is technical weakness and fundamentally the picture remains rather bullish.  The idea of the potential for technical weakness may not be enough to bring this market lower. Later today UNICA will release crush data.

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 - Cocoa

Cocoa Downtrend? Demand Outlook to Blame

Peter Mooses

Technically, December cocoa failed around the 200-day moving average. Throughout this trading year, this area has created strong resistance and short-term pullback. Traders have looked at options at these times in order to have exposure in the market. Cocoa has gone from a steady bull market to a sideways, range bound trade. The storyline remains the same – supply and demand. Currently there are concerns that the 15/16 production will be down around 200,000 tonnes, although this should be bullish, the lack of demand has caused this trend, and breakouts on the chart are struggling to form. Looking ahead to next year’s production, analysts are estimating next year’s production will be higher, further adding to the downward movement we are seeing now. When the futures prices hit around 3125-3150 profit-taking and long liquidation also stopped the market from heading back to contract highs we saw towards the end of last year.

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.

Dec ‘16 Cocoa Daily Chart            
Source: RJO Futures PRO

Cocoa Chart

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Softs - Coffee

High Volatility in September Coffee

Adam Tuiaana

In my last article, I advised traders to “Look for a test of the 13460 critical support level. If this area is violated, bearish traders should consider put option strategies to manage risk, while allowing themselves exposure to a potentially large selloff soon.” Subsequently, we have tested the 13490 level and failed to violate. Furthermore, we promptly rallied from that point, with strong volume and volatility. This failure to violate 13460 is, in fact bullish.

Although we’ll continue to monitor the Head and Shoulders reversal down pattern we mentioned last time, coffee prices appear to be holding strong and refuse to reverse from the overall uptrend.  Brazilian currencies along with US stocks have strengthened, and this is helping to support coffee prices. Weather issues related to El Nina will also attract many eyes on the upcoming Vietnam crop, as the Hightower Group has reported a “10 percent decline or higher from last year.”

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

Good Crop Conditions Among the Best Seen

Stephen Davis

Soybean, corn and wheat are all lower today led by double digit declines in soybeans we have had very good rains here in Northern Illinois. Yesterday’s Crop Progress update, once again, showed improving soybean conditions and corn being unchanged and at historically high levels. The unchanged corn conditions were as expected, while the 1% increase in good/excellent for soybeans was better than expected. Both row crops continue to see conditions among the best of the last 25 years.

The Midwest weather forecast is beneficial this week before getting unfavorably wet next week. The net impact will be to delay rather than reduce these large harvests. Like I mentioned on my agriculture video last week, the yield on soybeans continue to look good with the August rain in Illinois, Iowa and Minnesota aiding perhaps the best soybean crops ever.

With the dollar continuing to be strong and the weather looking good into early September the soybean crop is in very good shape. With the US harvest fast approaching and the highest soybean rating for late August in 34 years the remaining soy longs will be nervous ahead of a three-day Labor Day weekend with the negative September seasonal and chart patterns and a far more relaxed end user.

The rumor on corn is perhaps the yield is not as good as the USDA says. I am looking for a harvest low in early September for the corn market. We have the cheapest corn in the world today and I expect demand to continue to be stout.

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 Soybean Daily Chart

Source: RJO Futures PRO

Soybeans Chart

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Agriculture - Livestock

Front-month Live Cattle aligns with Cash, Fall/Winter Deliveries Collapse

Jeff Gilfillan

The strong dollar and heavy supplies weighed on live cattle futures prices since the early August short-covering pop. New lows are in and the charts do not show long-term value support until 92. There may be some light support at 100, then 98-99 area. Cash trade does not look to be strong enough to support an under bought bounce this week. Though I have noticed a strong tendency of futures markets in general break new highs/lows only to swiftly reverse, this market may not have the participation and lacks a heavy spec short to fuel short covering this week/month. If you were following RJO Market Insight’s Technical Blogs in LC, you were advised to pare bullish exposure under 113.60 in Oct. futures on 08/05. On 08/11 a cautiously bearish exposure was advised under this level using 116.35 as a risk level. The key short term risk level has since been lowered to 111.80. Feeder cattle has a washout area long-term around 125.

If you are a cattle trader and would like direct access to RJO's extensive in-house and independent insight and my personal client newsletter, contact me directly for a trial. Contact me at 888-861-0382 or jgilfillan@rjofutures.com. You may also follow me on Twitter @RJOJeffGil.

Oct ‘16 Live Cattle Daily Continuation Chart
Source: Track'nTrade

Live Cattle Daily Chart

 

Live Cattle Monthly Chart
Source: Track'nTrade

Live Cattle Monthly Chart

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Currencies

What you need to know from Jackson Hole (which was largely uneventful)….

John Caruso

  • Yellen held hawkish on an interest rate hike/possibly as early as Sept.
  • Hike odds for Sept now 42%; the highest we’ve seen.
  • Bank of Japan’s Kuroda is possibly loading up for more Sept QE measures and possibly cutting rates further into negative territory.

So on the hawkish pivot from Yellen, the USD got a shot in the arm higher, gold initially rallied then faded, and bond yields ripped higher.  So the real question here is whether the Fed will actually make a move on a September rate hike or not.  Judging by yesterday’s trading action, (SP500 +0.5%,30 Yr bonds +1.0) the market still remains very skeptical that the Fed will act in September based on recent economic readings, which of course will place even greater emphasis on this Friday’s Non-Farm Payrolls Report.  A positive reading on Aug payrolls should set the tone heading into the Sept FOMC meeting, and will most likely reignite the long USD vs short Euro trade.  If Aug payrolls and July revisions show any sense of weakness on Friday, be on the lookout for a pullback on the USD/EUR trade as we’re fast approaching overbought levels on a near-term basis. 

On a side note, I’ve mentioned this before, and will mention it again, if the FED does move in Sept, this could also be a big catalyst for higher gold prices moving forward.  Gold has traded much like a currency, and believe it or not has had a positive correlation to the USD for a good portion of the year.  Much like in Dec ’15, the Fed raised 0.25%, which set off the YTD rally in gold (+25% YTD) as investors flocked to safety.    

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

Currency Chart

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Equities

Stay Informed with Upcoming Reports

Greg Perlin

U.S. stock futures traded near break-even on Tuesday as investors weighed additional comments from Federal Reserve members that hinted at the timing and pace of rate increases.

Federal Reserve Vice Chairman Stanley Fischer 'said on Bloomberg TV early Tuesday that it is impossible to say whether the next interest rate hike would be "one and done" Fischer's comments underscore remarks he and Fed Chairwoman Janet Yellen made on Friday at a retreat in the Rocky Mountains, indicating that the time to lift rates again was nearing

Investors are also monitoring shares of Apple Inc. (AAPL), after the European Union antitrust group ordered the Irish government to recover as much as 13 billion euros$14.5 billion in taxes from the Cupertino, Calif., iPhone maker. Stock-trading volume hit the lowest level of the year on Monday and is expected to continue to be fairly thin as investors and traders typically vacation ahead of the Labor Day holiday in the U.S.

Tuesday is likely to be one of the quieter days in an otherwise busy and important week for the markets, with investors having one eye on Friday's U.S. jobs report following Janet Yellen hawkish comments at Jackson Hole on Friday. In her Jackson Hole comments, Yellen said the U.S. economy is improving, and that strengthens the case for an increase in interest rates this year. The nonfarm-payrolls report at the end of the week will be assessed as to how it affects the prospects for tighter policy, and whether that could come as soon as the September meeting. The Fed's policy setting Federal Open Market Committee is set to meet on Sept. 20-21.

Should we get a strong jobs report for August, then the next FOMC decision in three weeks will absolutely be a live meeting, whether markets want to accept that or not. A weak report probably leaves us back at square one from where the markets are positioned, because even now, they're reluctant to buy what the Fed is selling.

Economic docket: Meanwhile, consumer confidence for August is due at 10 a.m. Eastern Time. It is expected to slide back to 97.0 from 97.3 in July

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

Equity Chart

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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.

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