RJO FuturesCast

January 14, 2022 | Volume 16, Issue 02

The Markets

Metals - Gold Set for Best Week Since November

It has been a great week for the gold bulls out there as gold edged higher on Friday looking to complete its best week since November 2021. Gold prices are being bolstered by the weakness we are seeing in the U.S. dollar along with a decline in retail sails and lackluster consumer confidence. While the recent run-on inflation has been bad for most, it has done nothing but help gold. There is sentiment that the Fed will be more aggressive in their plan to raise interest rates to combat inflation in 2022 which would not be good for gold, but in the meantime the market is having a hard time trying to price that in and see it as a reality as we are still seeing rates near zero. After the news of a 1.8% decline in U.S. retail sales we saw gold jump a little bit higher and should everything hold steady we are looking at a 1.3% gain for the week. Whether this week a sign of a larger trend to come or if it's “fools gold” remains to be seen. Stay tuned for more updates.

Gold Feb '22 Daily Chart
Metals - Silver Eyeing Inflation Tick

The recent inflation reading of 7% had silver bulls thinking that the market is heading to a higher price in coming sessions. Attached is a rarely seen quarterly silver chart outlining this possibility. You will see there is a rather bullish structure appearing on the chart. The market is triggering a reversal up so, long as we hold above $21.00, a close above $23.50 will likely entice a technical buy. Any corrective pullback will probably be seen as a buy interest rather than sell. Any dip below 21.00 will signal deflation risk, which is least likely but not impossible.

To learn more about inflation, please take a look at our newly updated Inflation Special Report. If there is anything else I can help you with today, and please let me know.

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.
Energy - Oil Poised for Fourth Consecutive Week of Gains

Oil prices are edging higher as of Friday morning and are set for their fourth consecutive week of gains amid supply constraints as well as a softer US Dollar, which has developed an inverse correlation of about -0.70 on both a 15 day as well as a 30-day duration. This comes as the US and China are set to release crude reserves prior to the Lunar New Year Holiday with the US Energy Department stating on Thursday that it had sold 18 million barrels of oil. In addition, China reported that its 2021 imports declined for the first time in nearly two decades. Oil stocks fell -4.553 million barrels for the seventh consecutive week totaling -20.722 million barrels in that time. Stocks are now down -68.913 million barrels below last year and -35.879 million barrels below the five-year average. The market has transitioned to bullish trend with today’s range seen between 74.23 – 83.46.

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 - Technical Trade Taking Over in Cocoa Futures

Traders have been leaning on technical information to trade cocoa futures. With the recent leg up, March cocoa appears to be headed towards 2640. Key resistance levels have been broken, most recently, 2560. COT data shows a short position that may be weakening.

As for the fundamentals, there are a few developing stories that should boost cocoa prices higher in the coming months. Production issues in Ghana will support this current move higher. Ghana is well behind last year’s pace and it appears that things can only get worse.  Milder weather in key growing regions have thrown off production numbers.

Grinding data is around the corner, next week we will get Europe’s numbers from the fourth quarter of 2021. This paired with current currency volatility will likely lead to cocoa prices edging higher.

For now, traders should continue to keep a close eye on the charts and wait for the fundamental stories to develop.

Cocoa Mar '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or pmooses@rjofutures.com.
Agricultural - Grains - Minor Breakdown in March Corn

On January 7th I advised traders on the following “Today I would advise traders to watch for another breakout” I believe short term aggressive levels are $6.11 ¾ on the upside and $5.89 ¾ on the downside and the medium term breakout levels are $6.18 ½  upside and $5.83 ½ on the downside.” Let’s take a look at what has happened since last Friday. March corn started off the week continuing to consolidate between the short-term breakout levels I mentioned last Friday until yesterday. On Wednesday the USDA Crop Report was fairly in line with expectations and generally considered a nonevent.  Yesterday, we saw a broad-based selloff which pressured corn and took it below $5.89 ¾ triggering a short term sell for aggressive traders. Traders should watch to see if March Corn trades below $5.83 ½ , if it does, we could see additional downside pressure. Big picture I still remain bullish, but traders should remain alert to potential selloffs. 

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 Mar '22 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or msabo@rjofutures.com.
Equity - Stock Futures Losses Extended

Futures losses continued this morning adding to Thursday’s tech-driven selloff, while traders were watching a mixed group of bank earnings and a larger than expected drop in U.S. retail sales. Friday’s economic data came in much weaker than expected, adding to the current sell off. U.S. retail sales fell 1.9% in December month-to-month, far exceeding the estimate of a 0.1% drop making it the largest drop since February 2021.  The November number was also downwardly revised to 0.2% compared to the 0.3 percent previously reported. In Fed Governor Lael Brainard's hearing before the Senate Banking Committee on Thursday, she suggested the central bank could begin raising interest rates — a move that would tighten financial conditions and help bring down inflation — "as soon as asset purchases are terminated." The Federal Reserve is currently set to end its asset-purchase tapering process in March.

Support today is 460300 and 457500 with resistance showing 469500 and 476300.

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 888-861-1656 or jyasak@rjofutures.com.
Economy - Futures Market Insight w/John Caruso 01/14/2021

Just a few notes this morning,

*Stock selling has intensified a bit in the overnight SPY -0.65%, NQ -0.80%, RTY -0.80%. 

*The Russell 2000 has flipped back to bearish trend, SPY Bullish, NQ Neutral

*The USD has gained a little ground vs the euro, perhaps on a slight flight to safety bid. USD remains immediate OS vs euro here. 

*Japanese yen looks like it may have secured an intermediate term “bottom” that could lift JPY/USD back to 92.00

*Yields have ticked up to 1.73%; The yield curve has flattened for the 5th straight day to 80.5bps vs 82 yesterday, and 88 on Monday

*Copper back down -2.35%

Is growth slowing front running the inflation signal? Retail sales just bombed m/m to -1.9%. We saw more hot inflation data (highly probable it slows over the next 1 to 2 months), that takes us straight into Scenario 4. 

Be careful out there. Embrace the non-linearity of this market – Remember:  yesterday’s market is not today’s, and these market need not follow any patterns nor ANYONE’s rules.   Stay small….if you lose too much in a bad tape, you can’t participate in the good ones. 

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.

Coming Up Next Week...

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