RJO FuturesCast

February 4, 2022 | Volume 16, Issue 5

The Markets

Metals -

Overall sideways trade this week for silver despite a promising push higher on Tuesday to 23.06 that it was not able to hold onto. Yesterday, we saw any weekly gains get erased with trade falling to a weekly low of 21.985. To start the last day of this trading week we are green with the market looking to close out on a positive note. Global equity markets were mixed this week and a weaker U.S. dollar is providing some support to silver and the rest of the metal’s markets. Despite all the inflation talk and hype building around silver and the other metals, the silver market hasn’t managed to do much, staying in a range of 22-25.50 for the most part looking back to Aug 21. The bullish side is looking for a move higher through resistance at 23 and 23.50 in order to see a continued breakout higher. The bear side would like to see weaker trade settle down to support at 22 before breaking that and pushing down to a new recent low. The 22 level has been a good base of support with most trading below that level being pretty short lived. At this time more fundamental drivers are needed to start a longer term trend higher and see silver back in the high 20s.

Silver 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 therrmann@rjofutures.com.
Energy - Oil Prices at Seven-Year High

Oil prices have continued their relentless march higher, surpassing a seven-year high and topping $90 a barrel for the first time since 2014. This comes as demand for petroleum products continues to outstrip supply. OPEC+, as largely expected, are going to continue with their gradual increase in supply of 400k barrels per day in March, while reports have shown that Iraq, the second largest oil producer, pumped far less than it’s January quota. Tensions continue to persist in Eastern Europe as the potential for Russian supply disruptions remain, while domestically, the recent winter storm in Texas has temporarily slowed US production and distribution in the Permian basin. Crude stocks fell -1.047 million barrels with the deficit remaining at -60.516 million barrels and the five-year average widening to -42.201 million barrels, according to the EIA. Strategic petroleum reserves (SPR) fell -1.19 million barrels to 588.91 million barrels, reaching the lowest since 2002. Oil volatility (ovx) continues to remain relatively elevated in the low 40s with the market remaining bullish trend with today’s range seem between 83.17 – 91.79.

Crude Oil Mar '22 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Coffee Still Consolidating, But Drawdown in Stocks is Bullish

Coffee prices have seen coiling action over the past few weeks that has kept the market well clear of its early January low. With tightening near term supply, the trend could turn higher at any time. The Brazilian currency extended its 2022 rally to a new 4 momth high, which provided coffee with a carryover support as it eases pressure on Brazils farmers to market their remaining supply. In addition, the more that 42% drawdown in ICE exchange coffee stocks since the end of Sep. has provided significant support to the market as that reflects tightening near term supply in major consuming nations.

The crossover and close above the 40 day MA is an indication the longer term trend has turned to the upside. That being said, the shorter term trend on the 9 and 18 day MA has indicated a possible downtrend. Resistance comes in at 23920 and 24255, while support hits at 23420 and 23235.

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 - Bullish Canola Count Intact Above Minimum 851.5

Posted on Oct 14, 2022, 07:42 by Dave Toth

On the heels of mid-Sep-to-early-Oct's steeper, accelerated, 3rd-wave-looking recovery, the past week-and-a-half's boringly lateral chop is first considered a corrective/consolidative event that warns of a continuation of the uptrend that preceded it to new highs above 04-Oct's 891.0 high.  This count remains consistent with our broader base/correction/recovery count introduced in 13-Sep's Technical Blog following that day's bullish divergence in short-term momentum above 07-Sep's 809.5 minor corrective high detailed in the hourly chart below.

The important takeaway from this month's lateral, sleepy price action is the definition of Wed's 851.5 low as the end or lower boundary of a suspected 4th-Wave correction.  A failure below 851.5 will confirm a bearish divergence in daily momentum and defer or threaten a bullish count enough to warrant non-bullish decisions like long-covers.  A failure below 851.5 will not necessarily negate a broader bullish count, but it will threaten it enough to warrant defensive measures as the next pertinent technical levels below 851.5 are 13-Sep's prospective minor 1st-Wave high at 813.8 and obviously 08-Sep's 766.0 low.  And making non-bullish decisions "down there" is sub-optimal to say the least.  Per such, both short- and longer-term commercial traders are advised to pare or neutralize bullish exposure on a failure below 851.5, acknowledging and accepting whipsaw risk- back above 04-Oct's 891.0 high- in exchange for much deeper and sub-optimal nominal risk below 766.0.

On a broader scale, the daily log scale chart above shows the developing potential for a bearish divergence in daily momentum that will be considered confirmed below 851.5.  This chart also shows the past month's recovery thus far stalling in the immediate neighborhood of the (888.0) Fibonacci minimum 38.2% retrace of Apr-Sep's entire 1128 - 766 decline).  COMBINED with a failure below 851.5, traders would then need to be concerned with at least a larger-degree correction pf the past month's rally and possibly a resumption of Apr-Sep's major downtrend.

Until and unless the market fails below 851.5 however, we would remind longer-term players of the key elements on which our bullish count is predicated:

  • a confirmed bullish divergence in WEEKLY momentum (below) amidst
  • an historically low 11% reading in out RJO Bullish Sentiment Index and
  • a textbook complete and major 5-wave Elliott sequence down from 29-Apr's 1128 high to 08-Sep's 766.0 low.

Thus far, the market is only a month into correcting a 4-MONTH, 32% drawdown, so further and possibly protracted gains remain well within the bounds of a major (suspected 2nd-Wave) correction of Apr-Sep's decline within an even more massive PEAK/reversal process from 17-May's 1219 high on an active continuation basis below.

These issues considered, a bullish policy and exposure remain advised with a failure below 851.5 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, we anticipate a continuation of the past month's rally to new highs and potentially significant gains above 891.0.

Agricultural - Grains - Let The Chart Do the Talking

On January 14th I advised traders on the following: “As you can see the medium-term downside breakout level held at $5.83 ½ with lows coming in at $5.85 ¼ before seeing moves this week to a high of $6.17 ¼ which was reached today after seeing a small inside day yesterday. With the break higher today the market has triggered a short term buy (for aggressive traders) in my playbook. As I said last week, I still remain bullish and traders should watch the medium term breakout levels for market direction.” As one can see by looking at the chart below on Jan 24th March corn broke out above $6.18 ½, a level I mentioned several times in my articles. By January 31st March corn reached a contract high of $6.42 ½ which took out another key level, in my opinion, of $6.39 ½ a level I have been advising on for months. With the small pullback to current trading / consolidation levels (inside day forming so far today). If today forms an inside day I would advise traders buying on a breakout above todays high. I remain bullish for now but traders should be prepared for additional volatility at these prices especially with the recent breakout.

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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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 - Could Fed Raise Interest Rates Today?

Looking at the March 10-year today, we have a high 127-24, a low of 126-30, and currently trading at 127-01. Certainly, the highlight news of the week was this morning’s non-farm payroll number that smashed expectations with a rise of 467K way more than the expected rise of 150K.  But that really doesn’t tell the whole story, all week most economists had been predicting a negative print, some as low as negative 200K. On Wednesday, ADP came out negative, so most were expecting the same for today’s NFP number. Looking deeper into the number, you will notice the key, hourly earnings shot up to 5.7% blowing away expectations of a rise of 5.2% which is what the fed is looking at closely in determining if and when they will raise rates. It would not be inconceivable if the Fed comes in and does a live hike at some point today, I am certainly not saying it is going to happen. But, the price of oil is now above 90$ for the first time in seven years and even though AMZN had great earnings yesterday they came out after the bell and said they are raising the price of their exclusive “prime”, arguably the most popular expense for most people. you can bet the fed is under great pressure to raise rates immediately to put a lid on prices of goods and services.

10yr Note 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 - Jobs Beats Number

Nonfarm Payrolls added a whopping 467k (150k exp), while the prior reading of 199k was revised up to 510k.  The unemployment rate ticked up a tenth to 4.0%, but we saw big increases in private payrolls (444k vs 150k exp) and average hourly earnings (0.7% vs 0.5% exp M/M and 5.7% vs 5.2 exp Y/Y).  This follows what was a pretty disastrous reading from Wednesday’s ADP report in which an expected 225k came out as -301k.  Despite this blowout number, stocks are selling off.  Tech is leading the way down.  Amazon did its best to save the market after the close yesterday, but the Nasdaq has now printed a new weekly low following the impressive jobs data.  One has to think that kind of reading paves the way for the Fed to continue down the hawkish path, and the markets are reacting as if that is the case.  Trader’s will now set their sites on next Thursday’s CPI reading to see if there is a chance they veer off course. 

Nasdaq 60-min 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 - S-T Mo Failure Insufficient to End RBOB Correction, But Beware

Posted on Nov 08, 2022, 07:51 by Dave Toth

In Fri's Technical Webcast we identified a minor corrective low at 2.6328 from Thur as a mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  The 240-min chart below shows the market's failure overnight below this level, confirming a bearish divergence in very short-term momentum.  This mo failure defines Fri's 2.8172 high as one of developing importance and a parameter from which very short-term traders can objectively base non-bullish decisions like long-covers.

Given the magnitude of the past three weeks' broader recovery however, this short-term momentum failure is of an insufficient scale to conclude anything more than another correction within this broader recovery from 26-Sep's 2.1877 low.  Indeed, overnights failure below 2.6328 only allows us to conclude the end of the portion of the month-and-a-half rally from 31-Oct's 2.4822 next larger-degree corrective low.  2.4822 is the risk parameter this market still needs to fail below to break the uptrend from 18-Oct's 2.3526 low while this 2.3526 low remains intact as the risk parameter this market needs to fail below to break the month-and-a-half uptrend.  From an intermediate-to-longer-term perspective, this week's setback falls well within the bounds of another correction ahead of further gains.  This is another excellent example of the importance of technical and trading SCALE and understanding and matching directional risk exposure to one's personal risk profile.

The reason overnight's admittedly minor mo failure might have longer-term importance is the 2.8172-area from which it stemmed.  In Fri's Technical Blog we also noted the market's engagement of the 2.8076-to-2.8159-area marked by the 61.8% retrace of Jun0-Sewp's 3.2758 -2.1877 decline and the 1.000 progression of Sep-Oct's initial 2.1877 - 2.6185 (suspected a-Wave) rally from 18-Oct's 2.3526 (suspected b-Wave) low.  We remind longer-term players that because of the unique and compelling confluence of:

  • early-Aug's bearish divergence in WEEKLY momentum amidst
  • historically extreme bullish sentiment/contrary opinion levels in our RJO Bullish Sentiment Index
  • an arguably complete and massive 5-wave Elliott sequence from Mar'20's 0.4605 low to Jun's 4.3260 high (as labeled in the weekly log active-continuation chart below) and
  • the 5-wave impulsive sub-division of Jun-Sep's (suspected initial 1st-Wave) decline

The recovery attempt from 26-Sep's 2.1877 low is arguably only a 3-wave (Wave-2) corrective rebuttal to Jun-Sep's decline within a massive, multi-quarter PEAK/reversal process.  Now granted, due to the magnitude of 2020 -2022's secular bull market, we discussed the prospect for this (2nd-Wave corrective) recovery to be "extensive" in terms of both price and time.  A "more extensive" correction is typified by a retracement of 61.8% or more and spanning weeks or even months following a 3-month decline.  Per such, the (suspected corrective) recovery from 26-Sep's 2.1877 low could easily have further to go, with commensurately larger-degree weakness than that exhibited this week (i.e., a failure below at least 2.4822) required to consider the correction complete.  Indeed, the daily log chart above shows the market thus far respecting former 2.6185-area resistance from 10-Oct as a new support candidate.

These issues considered, very shorter-term traders have been advised to move to a neutral/sideline position following overnight's momentum failure below 2.6328, with a recovery above 2.8172 required to negate this call, reaffirm the recovery and re-expose potentially significant gains thereafter.  For intermediate- and longer-term players, a bullish policy and exposure remain advised with a failure below 2.4822 required to threaten this call enough to warrant neutralizing exposure.  We will be watchful for another bearish divergence in momentum following a recovery attempt that falls short of Fri's 2.8172 high that would be considered the next reinforcing factor to a count calling that 2.8172 high the prospective end to the month-and-a-half 2nd-Wave correction.  In lieu of such, a resumption of the current rally to eventual new highs above 2.8172 should not surprise.

Coming Up Next Week...

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