RJO FuturesCast

January 8, 2021 | Volume 15, Issue 01

The Markets

Metals - Gold Stuck in a Big Sideways Range

Once again gold futures most actively traded contract fails to break out above $1,950! I’m surprised that all the talk about additional stimulus checks going out isn’t more supportive. So now if $1,850 support fails to hold, the 200 DMA comes in at $1,852, then you should look for a test of $1,825 range. Buyers should get more aggressive in that range. I remain bullish metals. A bounce in the Dollar contributes a bit to the weakness, but I’m also aware of what’s going on in Bitcoin. It certainly looks like funds are reallocating from gold to BTC.  I don’t want to get off subject here, but we must watch outside markets and right now BTC is on fire. When, not if, the Bitcoin bubble burst you’re going to see a flight to safety in gold. Bitcoin will not replace gold.

Buying the low end of this current trading range should continue to work. The new administration will continue to print money and hand out checks and devalue the Dollar. Nothing changes. Maybe only gets more aggressive, so therefore gold prices will be well supported and eventually breakout above $2,000. There’s just too much cash out there and people like things that they can touch…like gold.

Gold Feb '21 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.
Metals - Silver Market Starting to See Pressure

After seeing a continuation of last week’s trend higher to start the week, the silver market is starting to see some pressure with lower days on Wednesday, Thursday, and to start Friday. Wednesday’s trading session got to a high of 28.105 on the March contract before closing lower on the day. The US dollar up off its lows with looks of strengthening and the stock market shaking off the lower trade on the first day of the year is pressuring the silver market. Better than expected jobs numbers and a calming of political tensions also give the bears an edge. The bears are watching for a stimulus package to be passed and more signs of inflation to provide support. It looks like there has been a change in the short-term trend with support being broken at 26.70. Right now the bears are in control with the next levels of support being 25.25 and then 24.25. The bulls are needing to see a close up of the low today and then trade above 26.90 next week to turn the trend back to the upside.

Silver Mar '21 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 therrmann@rjofutures.com.
Energy - Oil Continues Inflation Higher

Oil prices have continued to ramp higher taking its inflation to +42% since November and rising to its highest price since February after Saudi Arabia committed to supporting prices with voluntary production cuts earlier in the week. This includes a cut of 1 million bpd, which followed a meeting of OPEC+ with producers agreeing to steady output in February and March while allowing Russia and Kazakhstan to moderately increase output by 75k bpd for those two consecutive months. This comes amidst a much larger than expected draw of oil stocks along with a reported increase in fuel inventories, according to the EIA. This drop in stocks was supported by strong export numbers as well as refinery utilization. The market remains bullish trend but is signaling immediate term overbought with today’s range seen between 47.37 – 51.34.

Crude Oil Feb '21 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 Holding Support

March coffee futures have breached the 1.29 level, not seen since September of 2020. This level of past consolidation is largely due to the vaccine rollout, prompting optimism that more coffee shops and restaurants will ultimately return, with coffee-drinking customers. However, the rollout has been slow, with new shutdowns looming through the UK and the potential for others to follow suit.  March coffee prices continue to hold support above the 25-day MA, with high levels of volume and open interest.

From a technical perspective, strong support should be held at the 50-day MA, resting at 1.17. In addition, a break above the key resistance level of 1.29 is also very bullish, and the subsequent selloff back to the 1.22 level should be a great opportunity for bulls to step back in.

For more frequent commentary, please check out and subscribe to my daily futures market videos on coffee and other commodities.

Coffee Mar '21 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis - 01/08/2021
Stephen Davis discusses the latest news moving the grain markets this morning. China is looking to keep purchasing U.S. corn along with purchasing U.S. soy.
Currency - USD Should Continue to Bounce, but No Trend Reversal Yet

The USD has found a way to make another higher high for the move early today and this suggests we may see even more short covering ahead. However, we would not discount the potential for a flare higher off jobs data and potentially from the elevation of daily infections in the headlines. Apparently disgust and embarrassment of the US system is not a deterrent to strength in the USD, with the index apparently retaining some measure of flight to quality interest. In the end, we do not expect the downtrend to end and suggest a rally today could be a potential short entry point for more aggressive traders. Technically speaking, stochastics are rising from oversold levels, which is bullish and should support the market moving higher. Resistance is around 9007 and support hits today at 8945.

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.
Interest Rates - Interest Rates Up as it Looks Like Democrats Will Gain Control of Senate

Big news overnight in the treasury complex overnight as the 10-year breached 1% on a yield basis. This is significant as it’s the first time we have been at these levels since early 2020 when the pandemic started. There are a few reasons we are at these levels as investors believe once President Biden is sworn in we will see a major stimulus package before the end of the month which will put money in people’s pocket and hopefully increase consumer spending which should help in all aspects of the recovery. Another reason we are seeing a big jump in yields this morning is the because of the runoff elections in Georgia. It looks as if the Democrats will oversee all aspects of the government. As the Dems control taxes will most likely increase across the board which will result in higher inflation. Economic numbers this week will also be on trader’s minds as this morning we saw the ADP come in much lower than expected with a negative reading of 123k. The job outlook currently looks grim. Later this afternoon we will get the FOMC minutes which is a report that reviews economic and financial conditions in all four regions of the US. On Friday, we see the US monthly employment numbers which is expected to come in at 100K.  

10-yr Note Mar '21 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 - Jobs Number Misses

Today’s jobs data was expecting to see another 50k jobs added.  Unfortunately, the number came out as having lost 140k jobs.  The market initially reacted negatively to the news, but quickly recouped the losses.  The Nasdaq has even printed a new, all-time high. Very little seems to be able to shake this market for more than a day or so.  New record in positive coronavirus tests?  Meh. We’ve got multiple vaccines.  Political unrest/violence? Who cares? Not to mention businesses closing at an incredible rate, tax hikes a near certainty, etc.  This market is on, and has been on, a tear. I’ve listed plenty of reasons (there are plenty that went unmentioned) for investors to be concerned, but the market seems to believe they too shall pass. Each and every dip is getting bought, and those participants continue to get paid. Until that stops working, why change it up? 

E-mini S&P 500 Mar '21 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.
Economy - Futures Market Outlook w/John Caruso - 01/08/2021

“Remember when I asked for your opinion? Yeah me neither.” – The stock market to every political narrative

Good morning,

The rundown:

Stocks: that’s right, fresh All-time high’s yesterday, and of course “all-time is a long time”.  Stocks don’t care about hooligans storming the capitol, just like they didn’t care when our major cities were being torched by ingrates this summer.  Hello! McFly…It’s the cycle! It's always about the cycle!  Growth accelerating/inflation accelerating through the first half of 2021 as y/y comps of macro data and corporate earnings and profits may perhaps express the greatest rate of change acceleration since post WW2 – Scenario 2 in the model remains our call until further notice. On that note, stocks are now immediate OB within our range analysis – scale some back. 

Yields: the 10yr yield is up again overnight to 1.09% ahead of the US Unemployment report due out at 7:30am CST. Perhaps the most significant development this week was surpassing the 1.00% level in 10yr yields as growth and inflation is set to continue their acceleration through Q1/Q2 2021. We’re trade immediate OS this morning in the 30yr and 10yrs, trim some, so we can replant (get bigger) when yields move back to the low end of our range. 

US Dollar: No coincidence that the dollar has ceased its decline this week as yields pressed through 1.00%. But recognize that this trade isn’t likely to get too far on the upside in the near-term. We do believe the Dollar has entered a secular bear market that may last for many years to come.  We’re still sellers of USD AT the top end of our range within the longer bear market cycle. BONUS: gold and silver got hit overnight. Gold is now at the low end of the range, remains bullish trend, but not one of our favorite places to be at the moment in a rising yields environment. Remember up yields = up dollar = down gold, and this is precisely the action we’re seeing today. Ultimately we expect gold to remain range bound for the near-term. 

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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