RJO FuturesCast

January 7, 2022 | Volume 15, Issue 52

The Markets

Metals - Lackluster Gold Rangebound×

Gold has failed yet again, to break out of this sideways range. The Fed Minutes the other day caused the gold rally to quickly reverse at that $1,835 level…again. This morning’s disappointing jobs number doesn’t seem like enough to lift gold prices back above $1,800, so the path of least resistance remains down. Perhaps back towards $1,770 to $1,760. Gold does seem to have based a bottom in that range. Continue to trade the range from the long side is my best advice. I still think that gold is under valued and will eventually move back above $1,900. Ten year note yields have rallied 25 basis points this week. The Fed has indicated that they will hike rates three times this year. Once gold traders get comfortable with the fact that rates must move higher, due to inflationary pressure, then I think gold can finally move higher also.

Gold Feb '22 Daily Chart
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.
Energy - Oil Headed for Third Straight Weekly Gain×

Oil prices are taking a breather early in the session after rising sharply on Thursday amid escalating tensions in Kazakhstan as well as supply outages in Libya and to a smaller extent in Nigeria. Kazakhstan currently produces about 1.6 million barrels of oil per day, although it has not been known that any oil production has been affected. Libya is down about 500k barrels per day due to maintenance and oil field shutdowns. OPEC+ agreed on Tuesday to add 400k barrels of supply in February. Crude stocks fell -2.144 million barrels and falling for the sixth consecutive week totaling -16.169 with gasoline inventories gaining more than 10 million barrels as supplies backed up at refineries, according to the EIA. Oil volatility (ovx) has broken through trend support which comes in the lows 40s as oil has transitioned back to the bullish trend with today’s range seen between 73.71 – 80.42.

Crude Oil Feb '22 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Coffee in Position to Close Higher for the Week×

While coffee has only had one positive daily result so far this week, it has been able to avoid a long liquidation washout from this years commodity index fund rebalancing. With the market on track for a positive weekly reversal from Monday's 7-week low, coffee can lift further above the 50-day MA. Global risk sentiment helped to fuel long liquidation, while high levels of new Covid cases in many regions of the world are likely to dampen restaurant and retail consumption.

Momentum studies are trending higher, which should support a move higher if resistance is broken. Support comes in today at 229.50 and 226.30 while resistance comes in at 233.90 and 235.20 for March coffee.

Coffee Mar '22 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or tcholly@rjofutures.com.
Agricultural - Grains - Consolidation on the Daily Chart×

n December 17th I advised traders “March corn continues to push higher and at the time of this writing it has hit a daily high of $5.98 3/4.  Traders should watch for the breakout above $6.01 ½ . Yesterday March Corn had an inside day which appears to have been a nice setup since the market is breaking higher today. Watch for the major breakout above $6.01 ½”.   On December 22nd March corn broke above $6.01 ½ and went on to make a high of $6.17 ¾ before backing off. Today, I would advise traders to watch for another breakout (see yellow highlighted box below).  I believe short term aggressive levels are $6.11 ¾ on the upside, $5.89 ¾ on the downside, and the medium term breakout levels are $6.18 ½  upside and $5.83 ½ on the downside. 

The “big picture” numbers remain the same and probably will for some time. I firmly believe a break below $4.96 could give the bears control of the market and a break above $6.39 ½ on the upside may have enough bulls behind it to propel corn to all-time highs. There are several minor areas of support and resistance inside this range that can help with short term market direction if violated. Call me directly at 1-800-367-7290 for more in-depth discussion on these numbers and to discuss trading strategies specific to your situation.

I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility has come down quite a bit from its most recent highs mainly due to the consolidation and tighter trading ranges. I have 25-years of grain market experience, feel free to call or email with any questions you may have. Be sure to check out my archived weekly grain market insight articles posted on our website.

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Corn Daily Chart
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.
Interest Rates - Interest Rates Moving on Hawkish FOMC×

Looking at the March 10-year note, we had an overnight high of 129-00, a low of 128-14, and currently we are trading at 128-19. Overnight we saw the yield reach the highest we have seen since last March, 1.75% and lowest in price at 128-14. The big move we saw yesterday was in response to the FOMC minutes where fed governors were extremely hawkish(bearish) and reiterated their belief that we will see at least two rate hikes in 2022 and stressed continued concern regarding inflation. In addition to the big down moves yesterday we saw across the cure in treasuries, the Nasdaq composite was hit extremely hard, and it is highly correlated in moves in rates.  Presently, the 10-year has stabilized a bit which is also leading to a rise in the technology sector. As stated earlier, seeing the note hit 1.75 % overnight is a psychological level where we might stabilize and it wouldn’t take much to come down a bit, especially if Powell or Fed governors come on tape and say anything that might be construed as dovish.

10-Year Mar '22 Daily Chart
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.
Equity - Economy Adds 199K Jobs in December×

While the unemployment rate dropped to 3.9%, the headline number came in well below the 425k jobs we were anticipating.  Labor force participation held steady at 61.9%.  This news follows a hawkish Fed minutes release on Wednesday that suggests we could see a hike in interest rates as soon as March.  Market response was pretty muted following the news, with the three major indices holding steadily near unchanged in the wake of the number, but they have since started to dip. 

The Fed minutes from the December’s meeting indicated that most Fed officials thought we were close to reaching or had already achieved full employment, which Powell has consistently stated was a prerequisite to rate hikes.  Seeing the unemployment rate dip below 4.0% can only help firm up their stance.  With inflation now being viewed as something that is here to stay rather than the retired “transitory,” the Fed would like to end its bond buying program and start to normalize interest rates. 

E-mini S&P 500 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or bdixon@rjofutures.com.

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