RJO FuturesCast

March 5, 2021 | Volume 15, Issue 9

The Markets

Metals - Gold is Near a Bottom×

Gold has been sliding lower since January 6th. It’s not a coincidence that Treasuries Futures have also been sliding lower since January 6th. The next date on the daily chart that you should pay attention to is February 11th. That is the day that the selling accelerated. So why is gold being liquidated while treasuries move lower? Because interest rates are moving higher. Yields are returning to the “savers”! There is very suddenly a new way to get real returns on your money. Rates have moved very fast and now even Fed Chairman Powell cannot ignore inflation any longer. He had to acknowledge publicly now that as the economy reopens, inflation will rise. Well no kidding! Commodity traders see inflation all over the place. Lumber is at all time highs. Copper is at 11-year highs. Crude oil is over $65.00. RBOB gasoline is over $2.05 today. Grain markets are at 7-8-year highs. This is inflation. It’s not yet runaway inflation, but Washington wants yet more stimulus and then they’re going to finally look to spend more taxpayer dollars on “infrastructure”. There are too many dollars out there already. The economy is growing. The economy is NOT going to slow down as we reopen.

So why do I think that gold is near a bottom? The short answer is that I see longer term support around $1,675 to $1,650 and gold has reached oversold levels now. But more importantly because I still believe that gold is and will continue to be a good inflationary hedge. The rotation out of risky assets and into the safe returns in treasuries will slow. The bond market is telling us all that inflation is here. Once we embrace this inflation, gold prices will begin to march higher.

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 - Silver is Struggling Early×

Pretty dismal start of the moth for the silver market with the end of last week’s slide lower continuing this week. Tuesday was the only green day as the market fought off the lows to close higher on the day. The rest of the week we say trade down to support at $25. The outlook for silver remains bearish in the short term with a rally this week in the US dollar and a rise in interest rates. The Fed is sticking to their story of not stepping in front of inflation for the time being. A positive jobs number this morning at 379K vs an estimate of 182k will also add pressure to the silver market. The stock market also saw a pullback after starting the week trading higher which shows an overall risk off environment in the market. A stimulus package is still in talks, but it may be too little too late to make a significant impact. May silver needs to hold this $25 support level or risks seeing trade push down to $24 and then $22.50. The bulls are going too have to see a bounce to $27.50 and then $28.50 in order to rally back to the most recent high of $30. There is still a case for a rally in the metals but its not going to be an easy route and you should expect some back and forth along the way.

Silver May '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.
Softs - Coffee Pulls Back×

May coffee has retreated from the 1.40 highs aggressively over the past four trading sessions, due largely in part to a weak Brazilian currency and wet weather in key growing areas of the largest producing country, Brazil. Although the promise of much stronger demand is in play, this near-term weakness has May coffee prices potentially revisiting the well-defined range that had been in place from November 2020 through early this month. This recent selloff is also likely to be some long liquidation taking place as prices have not reached the 1.40 resistance level since December of 2019.

The recent breakout rally from February 22nd has been answered by an over 62% retracement correction. The high from the last major consolidation range is 1.30, so it is likely that this area should have some good support. With May coffee last trading 1.32, a continued selloff to 1.30 is still likely in the near-term.

For more frequent commentary, please check out and subscribe to my daily futures market videos on coffee and other commodities.

Coffee May '21 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis - 03/05/2021×
Stephen Davis discusses the latest news driving the grain markets. Grains are up this morning and we'll see if we can carry that momentum into next week.
Currency - Expect Volatility from USD×

The USD continues to rise with fresh upside breakout this morning and the highest trade since November 25th.  Obviously, indications from the federal reserve chairman that recent sharp gains in interest rates are not a concern, would seem to clear the path for even higher US interest rates ahead. In fact, many times markets threatened with intervention or simply anticipating intervention will push to pull out intervention. Money looks to continue to flow toward the USD with a wide range of payroll outcomes this morning, favoring the bull camp. The crossover of the moving averages suggests a developing short-term uptrend. Daily RSI has risen into overbought levels. Resistance comes in around 9195 and 9220, with support coming in at 9125 and 9080.

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 Waiting on Chairman Powell's Speech×

Taking a look at the June 10-year note this morning, we somewhat of a narrow range with an overnight high of 133-06 and a low of 132-275. Currently, the price sits at 133.05. Today’s market is clearly waiting on Chairman Powell’s speech at 11:05a.m. central where most traders believe that he will stay consistent and will reiterate that inflation is still subdued, and bond buying will continue. That has been the pattern of the last month every time he speaks. How the market has reacted after his speeches has been consistent as well. Yields will come down and prices will go up and then after the dust settles, the market doesn’t believe him and reverses after. So, traders should be aware and trade accordingly. Looking at technical’ s for 10-year June contract, I see resistance at 133-12-15 and support at 132-20. Since we are still in a downtrend, traders are advised to sell strength because the market is still in downtrend. Again, Powell speaks at 11:05 today so be aware.

10-Year Note Jun '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 - Stocks Mixed Following Good Jobs Number×

Rising interest rates and inflation fears have rocked the equity markets this week.  The tick up in interest rates led to rumors of another “Operation Twist” policy being in the works. The process involves the Fed selling shorter term treasuries and buying longer dated ones. The goal is to encourage growth by lowering longer term rates. When Jerome Powell expressed that he had little concern over inflation fears during his speech yesterday, the market collapsed. 

Yesterday’s dip eventually got bought in to the close, but markets struggled to build on the late momentum, resulting in choppy trade overnight. When the jobs data was released showing a gain of 379k jobs (175k expected) and an unemployment rate of 6.2%, a quick selloff was followed by a sharp rally. Since then, we’ve seen a bit of a mixed bag with higher dollar and higher yields continuing to weigh on the Nasdaq in particular. The dollar hit our initial target of 92.00 overnight (92.225 high) and has since backed off a bit. We still think that 92.70 might be in the cards, but we should find some real issues overcoming 94.00. With that in mind, I think we may see some even lower prices in equities (targeting 3685 and 12000-12200 in the S&P and Nasdaq, respectively) before we are likely to see another rally. 

E-mini S&P 500 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.
Economy - Futures Market Outlook w/John Caruso - 03/04/2021×

Volatility – while vol tends to sneak up on most, I can’t say that we weren’t ready for it. Recognizing some key players in the FAANG stocks breaking down over the last week, AND the drastic w/w change in our IVOL signal, I actually rented a modest short position over the past few days in “growth” aka NASDAQ. As I mentioned yesterday’s letter, we remain bullish on the cycle, but with the VIX and VXN (NQ volatility) breaking to bullish trend in the last 24hrs, I need to stop and respect that signal. Whether we hold bullish trend for more than a day remains to be seen (I don’t think it will). Keep an eye out…the Russell 2000 has me interested, but wait for me on this. 

Commodities-  Buying/trading opportunities lay ahead.  

*We’re housing some Silver on our books that’s moved against us for a couple of days, but honestly, I see no imminent signs of trouble here. Silver remains bullish in the model, and more importantly, bullish trend. If we see a trend breakdown here, we’ll respect that bull to bear phase transition and exit with no questions asked. 

*Copper and Platinum are both correcting, very intriguing dips to look at buying here.     

*Oil/Energy – no dip here. Despite the massive build in inventories of CL yesterday, we’re +5.00% over the past 2 days. 

China Stagflation? Something to consider in regards to commodities, is China looks to be moving into a Scenario 3 set-up. They are likely to begin to see some ‘stagnation’ in growth. Of course China is the worlds largest consumer of commodities globally. This is something we’re monitoring closely, Shanghai -2.05% breaking trend last night. 

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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