RJO FuturesCast

February 5, 2021 | Volume 15, Issue 5

The Markets

Metals - Is $1750 in the Cards for Gold?

It looks likely at this point. Saying so isn’t such a bold statement. The US Dollar has been able to hold levels above .9100 all week. So far $1,785 has held and I discussed this range of $1,800 to $1,785 in my last report. We are currently at a level where the gold bulls will really need to step up and quickly retrace levels back to $1,850. I’m thinking that if there’s too much hesitation to recover quickly from here that the path of least resistance remains down. If somehow the Dollar reverses and moves back below .9100 then that would support gold prices recovering. However, I’m thinking you’ll be able to enter on the long side at lower levels in the range of $1,750 to $1,740 for the April contract.

US Treasury Futures remain weak and Equities remain strong. Energy markets are very strong. These are “risk on” trades and regardless of the reason behind these trades, they’re not good for gold. There’s ne reason for the safe-haven trade. The currency trade isn’t working, and we’re just not yet ready to embrace the inflation trade for gold. There is inflation out there. You can see it in other markets. Don’t give up on the gold trade, but a patient approach is recommended.

Gold Weekly 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 - Bears in Control of Silver

Monday we saw a continuation of last week’s momentum in silver with the March silver contract pushing as high as 30.350, but that move was quickly given back as the market traded down to a low this week of 25.935 on Thursday. The bears are in control after this week’s action but the trend higher remains intact. Monday’s push higher looked to be caused at least somewhat by a massive increase in demand for physical coins with many retailers online getting completely wiped out on their inventory. The rally was short lived with a strengthening US dollar, higher stock market, and positive US economic data providing pressure to the metals markets. Also, no fresh talks of a stimulus package getting passed this week probably helped push silver down as well. There currently is a disconnect in the futures price and physical silver coin price with demand remaining high for physical coins. March silver looks to be trying to build some support off of the 26.350 level which is good news for the bulls. Another washout lower would push down to find support at 25.000. The bulls need to see a close above 27.750 to restart a rally and go test the 30.000 level again. Silver still could see another move lower as its in the middle of a sideways range. Watch the dollar and US equities to determine which direction the market will be pushed next.

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 Price High but Signaling Overbought

Oil prices are continuing their advance towards $60 a barrel as the vaccine rollout efforts continue to encourage the prospect of enhanced fuel demand, despite the expectation that consumption will not reach pre-pandemic levels. Support has been garnered by ongoing supply cuts by major producers as OPEC+ reiterated their commitment at their policy meeting on Wednesday. In addition, weekly inventories showed oil stockpiles fell to 475.7 million barrels, the lowest level since March with refinery utilization rates edging higher. The market remains bullish trend but is signaling immediate term overbought with today’s range seen between 52.02 – 57.22.

Crude 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 - Coffee Continues Rangebound

Slowly but surely businesses and schools are re-opening which has presented the bulls with opportunities to step in and find support in March coffee futures. Although the vaccine distribution efforts have been a bit slow-going, the fact that there is a vaccine continues to build confidence in the mind of the worker and consumer. However, “a new study from the National Restaurant Association claims nearly 17% of U.S. restaurants have closed either permanently or long-term amid the coronavirus pandemic.” These closures may likely affect the mindset of the entrepreneur, and ultimately the demand for coffee.  For the next couple of years, or at the very least, until the pandemic is completely in the rear-view mirror, we should expect demand to remain stable but in check.

Sideways consolidation has been the technical news for March coffee prices, with price action tied to a well-defined range of 120-129. Currently March coffee futures are hugging the 50-day moving average, resting at 122. Traders should monitor for a break above the 130 level for upside continuation, and break below the 120 area (and ultimate violation of the 50-day MA) should spell a reversal down to the 200-day MA (resting at 115).

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Coffee Mar '21 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis - 02/05/2021
Stephen Davis discusses the latest news in the grain markets including the fact that he thinks China will continue buying U.S. grains.
Currency - Potential Major Trend Decision in USD Today

Today will be a very important day for the bull camp in the USD, as the trade is likely to get some type of confirmation on the real focus of the bull camp. Basically, seeing further USD gains in the wake of slightly better US nonfarm payrolls will likely enforce the idea that capital is flowing to the USD off prospects of improved US differential yield potentials. On the other hand, it is also possible that the USD will continue to rally in the face of a disappointing jobs number, which in turn would suggest the bull camp is capable of shifting a number of fundamental outcomes in its favor. USD reaching overbought levels warrant some caution for bulls. A positive sign for trend short term, was given on a close over the 9 day MA. The next upside objective is 9193. Resistance comes in at 9175 and 9190 with support hitting at 9125 and 9095.

USD 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 tcholly@rjofutures.com.
Interest Rates - Interest Rates Still Moving on Stimulus

Looking at the march 10-year we had a high overnight of 136-26.5 and a low of 136-19 and currently trading at 136-255. The over trend is now firmly lower with the market currently below the 50-day moving average which currently sits at 137-155.  In addition, if you look at the daily chart, today is the fourth day in a row where we see lower highs which also confirms the downtrend. The market is looking ahead of the new stimulus bill that hopes to be passed in the not to distant future. Another bearish factor that the market is absorbing is the decline in unemployment claims. Additionally, as more people are getting vaccinated for the virus, the daily infection fate has dropped to the lowest levels since November. With all the bearishness that we see, traders should be aware that we see speculators and funds are short this market so a bit of a short squeeze could occur especially tomorrow as we have the monthly employment number that comes out at 7:30 central. The street is looking for a gain of 50K vs last month’s decline of 140K. Looking at support and resistance levels, I see 136-10 on the downside and 137-155-137-20 on the upside.

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 - Economy Adds 49k Jobs

Expectations of 50k jobs added were just about dead on this morning.  Consensus for the unemployment rate was 6.7%, but that came in much better at 6.3%.  In the wake of the open, stocks seemed to be enjoying the reading.  New all-time highs were seen in the S&P, Nasdaq, and Russell. The Dow fell 40 ticks short of doing the same. In addition to the positive jobs data, the Senate voted to push through a $1.9 trillion covid relief package without any GOP support. The bill will now head to the House, where it is unlikely to face a whole lot of headwinds from the Dem majority. 

Despite the good news, it looks like a lot of traders took advantage of the higher prices by taking some profits. The indices all showed short-term overbought readings when on their highs and are now heading back towards unchanged/negative. We’ll see whether or not we see another correction of note, but the fact that we’re already printing new all-time highs after what we witnessed last week shows you that the buyers are still out there. 

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.

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