RJO FuturesCast

March 20, 2020 | Volume 14, Issue 12

The Markets

Metals - Gold Bulls Are Very Disappointed, Should They Be?

June Gold futures have been anything but a “safe haven” over the past month since the widespread outbreak of corona virus. I’ve heard every theory out there for why it’s not going up when there is an apocalypse going on in the equities. The most “rational” reason that I’ve heard and would to some extent agree with is the issue of clearing commodity and equity asset class exposure and meeting margin calls. Fleeing to cash in other words.  I would expect that after the extreme volatility that equities and gold have had over the past few weeks is here to stay.

This presents the question to anyone reading this article of how to profit off these uncertain times in gold. Investors should consider the everyday swings that gold has had with some days being as much as $150 from top tick to bottom tick. On a 100oz futures contract this is quite a lot to say the least. Investors interested in the precious metal should also look at the smaller, 10, 33, and 50 oz futures contracts to manage the swings with smaller accounts. Gold to me has more of a perception of a haven rather than being one and this move proves it in my opinion. The DOW has had several 2000 point plus selloffs in a single day recently and gold dropped severely with it each time, and trended lower as we continued lower in the equities.

Gold June '20 Daily Chart
Metals - Silver Ends a Historic Week

The gold/silver ratio hit all-time near-term high on March 18th at 124.18, but has since backed off a bit and is trading around 118.76. In otherwords, silver is getting a relief so to speak, relative to gold.

Silver made a historic 11-year contract low this week. So, in a nutshell, it has been a very strange week for silver. We haven’t see this type of price action since the week of Oct 2008 when it hit a low of $840. In my view, the price action suggesst that near term lows might not be in yet! Equities are being supported by the stimulus packages for coronavirus that the senate passed this week. A cure or some sort of vaccine could probably give markets additional boost. The chart damage on silver could take a little bit longer to improve.

From technical prosective, May silver broke out of the “inside day” chart. Support comes around 11.98 and the market is trying to break above 13.00. In my view, sideways to higher price action will proably be in order since silver is tracking the equity market. There is a general demand for commmodities acccross the board at this time.

Silver Weekly Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or etesfaye@rjofutures.com.
Energy - Oil Rebounds From 18-Year Low

Oil prices are starting to come off their steep surge on Thursday following a 24.4% collapse on Wednesday as prices have been weighing supply and demand prospects. With demand forecasts slumping and tensions between Saudi Arabia and Russia escalating following the failed OPEC meeting in early March, prices have now slid nearly 60% this year. President Trump noted that the US could intervene in this ongoing price war, which contributed to yesterday’s gains. Meanwhile, OPEC production cuts are set to expire at the end of the month. Saudi’s Aramco has output at a record 12.3 million barrels over the coming months, however, both Saudi Arabia and Iraq cut rebates on freight costs, effectively lifting prices. Look to short bounces at/near top end of the range as the market remains bearish trend with today’s range seen between 21.29 – 30.34.

Crude Oil May '20 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.
Agricultural - Grain Futures Update w/Stephen Davis - 03/20/2020
Stephen Davis makes his weekly commentary on the grain markets. There was a lot of volatility this week, and the direction of the grain markets is rather uncertain
Agricultural - Live Cattle Market Hard to Nail Down

Along with the rest of the market, meat markets have been exceptionally volatile this week. April cattle closed 300 points up off the limit yesterday as the market is responding to a surge higher in beef prices over the past couple days. An interesting aspect of this is that there is a surge in packer margins which is trying to fill the retail pipeline which, for at least the short-term, is a bullish force. Beef supply is high right now and add that to the fact that cattle weights are up in a time when usually they are smaller, suggesting that this could be a sign that cattle is already backing up in the country. We may see some temporary pops here in the short-term, but I do not see any reason to stay long this market.

Average dressed steer weights for the week ending March 7th came in at 903 pounds, up from 897 the previous week and 871 a year ago. The 5-year average weekly weight for that week is 879.4. This is a bearish development. The USDA boxed beef cutout was up $3.27 at mid-session yesterday and closed $2.63 higher at $249.87. This was up from $206.01 the previous week and $228.67 a year ago. This is the highest the cutout has been since June 2017. U.S. beef export sales for the week ending March 12 came in at 21,188 tonnes, up from 17,668 the previous week and the highest since January 23. Cumulative sales for 2020 have reached 337,282 tonnes, up 17% from last year's pace and the highest on record going back to at least 2002. The largest buyers this week were South Korea at 7,343 tonnes, followed by Japan at 4,007, Canada at 2,675 and Taiwan at 2,348. China bought 8 tonnes after buying 694 tonnes the previous week. The countries with the largest commitments for 2020 are Japan at 100,146 tonnes (roughly 30% of all U.S. sales), South Korea at 81,159, and Hong Kong at 47,901.

The USDA estimated cattle slaughter came in at 115,000 head yesterday. This brings the total for the week so far to 474,000 head, down from 485,000 last week and down from 480,000 a year ago. For the cattle on feed report, traders see placements for the month of February at just 92.4% of last year with a range of 89.0-97.1. Marketings for February are expected at 105.6% of last year. This would leave On Feed supply for March 1 at 100.3% of last year (range 99.7-101).

Live Cattle Jun '20 Daily Chart
Economy - Jobless Claims Skyrocket to 4-Year High

Shots fired yesterday in the jobless market. U.S. jobless claims rose 70K to a 4yr high of 281K.  This data could grow 10/20 fold in oncoming weeks and that’s not an exaggeration. Be engaged with our ranges, because bounces in stocks/commodities that are listed as “bearish trend” are likely to fail and be shorting opportunities.  However, we do think energy is buyable in this environment from the low end of the range (yes we know its bearish trend), BUT we definitely see swing trading opportunities in crude from the these multi DECADE levels. 

Stocks- Look for possible sell opportunities off bounces, preferably at the top of the range. VIX has come off the highs to 68.00 and yields are backing off again this morning.  This could give stocks a few days of “bounce” , but they will likely be opportunities to catch the next leg lower.

Oil- we said it up top, good swing trade opportunities from multi-decade lows.  Manage the range and keep an ear the ground for rumblings out of OPEC

Metals- I do think there could potentially be another wave of selling that hits the metals – but we think it’ll likely be the LAST.  Tremendous upside in metals, but may shake out one more time.  Dollar devaluation is likely at some point as markets quell the fear and attempt to recover – this is your gold/silver catalyst to watch for.  1400-1558 Gold and 11.53-14.07 in Silver

E-mini S&P 500 Jun '20 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 jcaruso@rjofutures.com.

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