RJO FuturesCast

January 29, 2021 | Volume 15, Issue 4

The Markets

Metals - Gold Needs a Push Above $1880

April gold futures has had its fair share of dramatic swings over the past few months. Just when traders thought it was breaking out above 1950 on the way to a 2 handle, the market sold off $140 in 4 sessions. Now it appears gold is ripe for another push higher as an inverted head and shoulder pattern forms and a break above 1880 would signal a break in the channel lower it’s been in. Now, this isn’t the sign to go all in by any means, but it is a sign that 1950 and then the actual high point of 1966 is the next upside target as it’s a multi month high. In my opinion the only way to trade gold is from a position standpoint and hold over the course of several weeks or try and day trade it as the volatility seems to be enough to make money. Silver is stealing the show right now and gold doesn’t have the same industrial and safe haven hybrid use that gold does. I would be positioning long gold from these levels with sell stops beneath the recent spike low of 1804.70. A close or a violation of this level is a signal to anyone shorting gold to step on the gas and a retest of the multi month low tick of 1771 is coming. I’ve heard all of the fundamentals on gold and silver, but technical aspects are more important to watch at this point, and it appears that unless a push above the levels mentioned above happen soon, look out below.

Energy - Oil Prices Holding Steady

Oil prices are edging higher early Friday as the market assess the ongoing changes in supply and demand fundamentals. Saudi Arabia is expected to extend output cuts by 1 million barrels per day in February and March with OPEC+ supply cuts set to rise to 8.125 million bpd in February. US oil inventories posted a significant decline of 9.9 million barrels, according to the EIA. In addition, Chinese refinery run rates increased this week with Indian demand expected to return to pre – virus levels this upcoming quarter. This helped to largely offset concerns regarding the ongoing recovery in fuel demand amid stalling vaccine rollouts and new virus strains. The market remains bullish trend with today’s range seen between 52.00 – 53.73. 

Oil Mar '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Support in Prices for Cocoa Futures

Although the current cocoa chart is a bit confusing, it has been in a wide rangebound trade since the start of 2021. That being said - look for March cocoa to trade between 2500-2600 in the short-term. Chocolate companies reported weaker earning in 2020 due to the pandemic, but if the vaccines can help individuals get back to a new normal, 2021 should see an increase in revenue. The macro-sentiment of late has been slowly moving in a positive direction as more is learned about the vaccination process. More reopening, less lockdowns will be supportive for the “foods” prices in commodities.

The currency markets and equity markets are also providing support to cocoa prices. Weather premium in key growing regions must be accounted for too. West Africa is experiencing their dry season and it appears that it may be even hotter than previous years in the coming days. That being said, heat could potentially hurt production numbers but boost prices. Grinding data for the coming year is expected to be fairly in-line with last. If we see consistent levels, prices will hold or move higher on any data that comes in more positive. For now, traders need to be patient and see how the first quarter plays out on the macro side of commodities.

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 - 01/29/2021
Stephen Davis discusses the latest news in the grain markets. China still has to buy US grains as part of the Phase One Trade Deal and it will be interesting to see how it will impact the markets.
Agricultural - Strength in Lean Hogs Continues

The hog market is showing signs of strength and looks to continue higher as we are now moving into February. Cash hogs are expected to move higher due to the packer interest in keeping the processing speeds going at an accelerated rate. The 1/26 CME Lean Hog Index was up another $.72 to $66.95. The National Pork Carcass Cutout value was up $2.38 to $83.49 on average movement of 338 loads. Estimated packer margins were $45.75/head for non-integrators and $41.81/head for integrators vs. $42.18 and $37.02 the previous day. The weekly Export Sales data showed 52,855mt of pork booked on the week ending 1/21. That was the largest since October and was just the 6th weekly sale above 50,000mt since 2020 began. Weekly kill is down 2.83% vs. last year. USDA’s National Average Base Hog price was quoted at $57.01, up by $.26. Pork cutout futures closed with gains of $.20-$.40, save for a $0.97 drop in Feb.

The futures are rolling over and we are starting to see weights decrease steadily from the beginning of the year. Demand is very strong right now with the December cold storage report showing belly stocks well below last year’s number. Analysts think the April futures are in overbought territory with such a high premium to the cash market. The large supply of pork is being met with soaring demand and is helping to support the market, continued talk of African Swine Fever in China is one of the major reasons we are seeing these strong export numbers. April futures finished at $76.37 yesterday, I would be looking to stay long unless we see a close under $74.50.

Lean Hogs Apr '21 Daily Chart
Equity - Stocks Down This Morning

U.S. stock futures were down this morning after some negative news from Johnson & Johnson on the effectiveness of its one-shot vaccine to fight coronavirus.  Also, large amounts of speculative trading from the retail sector is also causing concern across the markets with the volatility it is creating.  JNJ released data this morning that their one-shot vaccine option was only showing a 66% effective rate compared to Pfizer and Moderna’s 95% effective rate for their two-shot dose. Robinhood removed some buying restrictions on stocks they had halted yesterday with the “short-squeeze” trades we have seen this week.  This caused GameStop shares to double in premarket trading today after $1billion was received from said investors overnight.  The thought of a continuing rise in these sorts of stocks is causing concern that it will carry over to more industries as funds will have to sell other holdings to raise cash for short positions held.  It will be very interesting to see how this day unfolds.

Resistance is 384500 and 389200 with support showing 372500 and 365000.

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.

Coming Up Next Week...

View Futures Calendar