RJO FuturesCast

January 15, 2021 | Volume 15, Issue 2

The Markets

Metals - Silver is Looking to Benefit From Stimulus Check

Silver is trying to start the new year on solid footing. Of course, the silver market hasn’t had the kind of run Bitcoin has been experiencing. With more stimulus looking to get passed with the new Biden administration, any major sell-off in silver resulting from US dollar strength will probably be met by bargain buying interest. Silver price structure suggests that sideways to slightly higher price action might be in the cards in the coming weeks. If traders are not inclined to chase Bitcoin, they could consider using options to get involved in the Silver market. You can reach out to me to further discuss trade ideas.

From a technical perspective, a close above 26.20 is needed to get more upside interest in the short run. Though the long term, Silver could have a better run in 2021 than it did in 2020.

Silver Weekly 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 etesfaye@rjofutures.com.
Energy - Oil Alerts for Pullback

Oil prices have continued to ramp higher as of Thursday afternoon on the back of Chinese 2020 imports jumping 7.3% despite a 15.8% decrease in imports for the month of December as well as an expansion in Chinese refineries. Concerns regarding global demand prospects appear to have been renewed as restrictions and lockdowns across Europe and parts of Asia have come back into effect. OPEC+ left its world demand forecast unchanged, suggesting oil usage will rise by 5.9 million barrels per day to 95.9 million bpd noting, however, that the outlook remains clouded due to the ongoing pandemic. The market remains bullish trend and will continue its inflation higher as oil volatility (OVX) breaks closer to/below 30. However, currently the market signaling immediate term overbought with today’s range seen between 48.65 – 54.49.

Crude Oil Feb '21 Weekly 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 - Cocoa Futures - New Year, Same Story

Although we turned the calendar to a new year, most of our market stories remain the same. How will Covid restrictions affect supply and demand? How are the global markets and political unrest going to affect commodity and currency prices?

Two weeks into the new year and the March cocoa contract has found a range to trade in. On the chart, after a short sell-off, prices have consolidated. The market seems to like cocoa prices between 2450-2550 for now.

As the European and US stock markets move higher and continue to act like any news is good news – cocoa hasn’t been able to find its direction. Demand continues to be weak for cocoa and production remains strong. Volatility in the currencies, mainly Pound, Euro and Dollar, have added stress to an already uncertain market.

Once restrictions are eased and more openings occur, cocoa prices should head back to 2800. Traders should consider buying calls in further out months.

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 - Grain Futures Update w/Stephen Davis - 01/15/2021
Stephen Davis discusses the latest news moving the grain markets including the very real possibility that the U.S. may have to start importing soybeans come summer time,
Agricultural - Questions in Short-Term Live Cattle Demand

Cash cattle has been trading within the 107-110 range this entire week and continued to trend lower as there have been some trades in Kansas reported at $108. There still seems to be some doubts that short-term demand just won’t be there along with the increased weights seems to be putting negative pressure in the market. With those factors accounted for we have seen a jump in beef prices to the highest levels since December 11th, a shift towards the harsher weather in the plains for the second half of January could cause the market to have some support. The USDA boxed beef cutout was up $2.49 at mid-session yesterday and closed $2.37 higher at $213.37. This was up from $205.81 the previous week and was the highest the cutout had been since December 11. Cash live cattle continued their drift lower on Wednesday, but reported volume was light as of the afternoon. Average dressed steer weights for the week ending January 2 came in at 920 pounds, up from 913 pounds the previous week and 912 a year ago. The 5-year average weekly weight for that week is 902.6. US beef export sales for the week ending January 7 came in at 16,835 tonnes, up from 7,775 the previous week and slightly above the four-week average at 16,254. Cumulative sales for 2021 have reached 202,243 tonnes versus 148,762 last year at this time and a five-year average of 107,783. With the current short-term weather forecast and a solid recovery on the close for the April Cattle off what looks to be the 117 support level, the market looks to retest the recent highs of late December around $120.

Live Cattle Apr '21 Daily Chart
Equity - Stocks Down on Biden's Relief Package

U.S. stocks futures are lower this morning after a $1.9 trillion COVID-19 relief package was released by President-Elect Biden’s team. This package will boost unemployment benefits, include a $1,400 stimulus check to individuals and fund the distribution of COVID-19 vaccines.  This package also included a proposal to increase the national minimum wage to $15 an hour, creating some fear with investors. This morning also saw the Commerce Department releasing a surprising drop in December retail sales of 0.7% from the prior month with an adjusted number of 1.4% in November from the previous stated 1.1% decline. This negative news adds to the hit that the U.S economy took at the end of 2020 with rising COVID numbers, increased lockdown restrictions and a loss of 140,000 jobs in December which was the first decline since April.

Resistance today is showing 380500 and 382800 with support at 377500 and 376000.

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 888-861-1656 or jyasak@rjofutures.com.
Economy - Futures Market Outlook w/John Caruso - 01/15/2021

Buy the damn dip!?

Stocks- pulling off this morning, a well deserved break by the bulls. We’ve got downside in the S&P 500 to 3737 with a compressed volatility index. So long as the VIX remains bearish trend, S&P 500 bullish trend, and within Scenario 2 G/I accelerating, AND the IVOL remains at a heavy PREMIUM (which of course says the market is FEARFUL and hedged for downside risk….we fade that action – we’ll be buying the damn dip. Same goes for the Nasdaq. Wonder why the Russell is setting the pace? That’s an easy one…A. The bastards of 2020, are now the darlings of the reflation trade. B. 26% of the Russell Index consists of bank and other various financial stocks and we all know what financial love….Rising Yields! Banks borrow at the short end of the curve via the Fed overnight lending rate of 0.00-0.25% and lend to the private sector at the long end of the curve via 10yr - 30yr loans. I haven’t sent an index signal out in a while, we’ve been doing well playing the commodity and bond game, but I’m warming up to it. 

Bond Yields- I pressed some of our shorts in bonds yesterday, we’ll see how that works out. I think it’s going to workout very well, so long as A. Scenario 2, B. rates remain bullish trend, and C. the stock and commodity bull persists. There will be rallies in bonds throughout the year, but likely within their bearish trend, but we think the 30-35 some odd year Bond bull market is sinking slowly but surely. Honestly I think the Fed wants a steeper yield curve for the health of the banks and also to attempt to stave off any potential for rampant inflation coming down the road. Remember, the new administration, although they’ll never admit it, subscribes to modern monetary theory. Deficits are no big deal and a net positive for the private sector so long as inflation doesn’t become a problem….and remember the Fed has the ability to manipulate the yield curve if necessary to fight inflation. 

Gold- not doing anything here, as a matter of fact I’ll probably short it if it gets to the top of my range. That’s it….it’s neutral trend, likely range bound for now. It gets ugly if it breaks 1816 from our assessment. If I may, let me share the below chart with you, that show’s two highlighted areas on the chart that look eerily similar, which is why Gold is a risk on the long side that we’re not willing to take:

Disclosure: I’m not a technician so…. 😊 and I know some of you are, so bear with me here….

So you’ve got the break down candle in both of the highlighted areas – we went from bullish (green candles) momentum straight into bearish momentum (red candles). In the first highlighted area from mid-November, you see the breakdown, then about 6/7 trading sessions of sideways action, followed by another 100 point drop. The right shaded area looks to be the same, could this time be different ABSOLUTELY, but this pattern looks unresolved and way too risky for my taste.  Besides being in the wrong Scenario, and Neutral trend….Hopefully this further clarifies my stance on gold for the moment.

Implied Volatility Ranges
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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