RJO FuturesCast

While gold does continue to trade a big choppy range of $1,775 to $1,850, the rally of the past two weeks is impressive. Gold has based a bottom and it looks like gold traders are finally coming to terms with all the inflation data out there. Rates are moving higher, and gold has been climbing higher also. The next breakout above $1,850 is likely, in my opinion, to move prices back to challenge $1,900. I also believe that once gold moves above $1,850 that it will begin basing a higher low. In the range of $1,850 to $1,900.

Platinum is coming back to life also. A move above $1,100 is in the cards. It seems to be a good value between $1,010 to $1,020 April basis. Platinum will have an easier path forward than silver, but once silver starts to move it will be very fast, probably a $1.00 at a time.

Energy prices are very strong. Interest rates are moving higher and there’s still too much cash out there. It’s about the money supply and gold and other precious metals have to move higher too!

Oil prices are moving higher as of Friday morning but are poised for their first weekly loss after seven consecutive weekly gains as the IEA noted that global supplies continue to remain tight, while simultaneously noting that OPEC+ production came in 900k barrels below their target for January. Moreover, the IEA noted that Saudi Arabia and the UAE could help combat higher prices by providing more supply as they have excess productive capacity. OPEC+, in turn, had an upward revision to demand for the coming year. Nuclear talks between the US and Iran were revived this week with a deal potentially lifting sanctions on Iranian oil, which would ease supply tightness. Crude stocks fell -4.75 million barrels with the deficit narrowing -58.627 million barrels below last year with the five-year average widening to -50.12 million barrels, according to the EIA. This now puts US crude stocks at the lowest since October 2018. Oil volatility (ovx) continues to remain elevated in the mid 40s with the market remaining bullish trend with today’s range seen between 85. 32 – 92.19.

Cocoa futures’ prices have recently rallied more than 10%. Recent global data is indicating that this trend higher may continue. As an individual commodity, the demand for cocoa is increasing. Key areas of the world for cocoa purchases - Europe and North America, have begun removing Covid restrictions which appears to be boosting the demand in chocolate. The equity markets in Europe and the U.S. have also been strengthening, although still very volatile.

Weather patterns in West Africa have been very dry due to high temperatures, causing some concern in production numbers which could help support prices to stay above 2800. Weather will be a key factor in prices for the short-term. If production is affected later this season, prices could touch new contract highs in the coming months.

Grinding data in the future will also be telling for the outlook of cocoa this year. For now, supply and demand are working together to move cocoa prices higher. Traders should monitor the 2850 level and consider buying calls in further out months if the bullish trend continues.

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.

On February 4^th I advised traders on the following: “As one can see by looking at the chart below on Jan 24^th March corn broke out above $6.18 ½, a level I mentioned several times in my articles.  By January 31^st 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 today’s high.  I remain bullish for now, but traders should be prepared for additional volatility at these prices especially with the recent breakout.”  Last Friday which was February 4^th, the market did form an inside trading day as I thought it could (see chart below) on Monday the market broke out to the upside indicating a buy signal. I still remain bullish but would advise traders to be cautious as we could see short term selloffs to push the weak longs out of the market.

For months I have been advising traders on the following in my articles: “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." FINALLY, after months of corn consolidating in a rather large trading range, March corn broke out above $6.39 ½, made a small pullback to a low of $6.10 ¼ and then quickly made a move to $6.62 ¾ on February 10^th printing a new contract high!  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 the risk on a futures position or a 3-legged option strategy for producers looking to forward market their grain. A strategy like this gives producers an opportunity to take advantage of further upside while protecting a sizable price area of downside risk. Implied option volatility is currently up, when compared to the historic volatility levels, so now may be an excellent time to implement strategies like this. Call for specific entry levels and strike prices. I have 26 years of grain trading experience, feel free to call or email with any questions you may have and be sure to check out my archived weekly grain market insight articles posted on our website.

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U.S. stock futures were relatively flat Friday morning after Thursday’s sharp sell-off initiated by the high inflation number and an announcement of a 100-basis point increase to the Fed Rate by July.  The Labor department released data on Thursday that showed a 7.5% increase in the consumer price index, a composite of the cost on everyday good, as opposed to the expected 7.2%.  This was the highest reading since the first quarter of 1982.  James Bullard, the St, Louis Federal Reserve Charmain, called for a 100 pt increase during the three regularly scheduled meetings before July with the first being in March.  Most economist are predicting an aggressive 50-pt hike during that first meeting in March with a total of 150-pts for the year to curtail the rising inflation.

Support today is checking in at 443150 and 441000 with resistance showing 454000 and 461400.

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.