RJO FuturesCast

March 26, 2021 | Volume 15, Issue 12

The Markets

Metals - Despite Dollar Strength, Gold Remains Steady

We cannot ignore what is happening in the US Dollar Index when talking about gold. Gold is holding steady and continues to consolidate as the Dollar breaks out to highs not seen since mid-November. Even if we see gold prices drift a little closer to $1,700, I’m confident that gold has bottomed already. Let’s not forget that 10-year note yields are influencing all other markets also. Yields have backed off a few BPs and outside markets have embraced higher rates because thus far they are only back to pre-pandemic levels. Keep an eye on rates when trading gold. Gold bulls need to see a close above $1,750 in June gold.

Platinum is searching for a bottom over the past week and a half. Platinum also went thru a sharp downside correction as rates spiked higher. The subsequent bounce has since faded, and it looks like a retest of the early March swing low is in order. Look for some consolidation in the $1,140 range in July platinum.

Gold Jun '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or fcholly@rjofutures.com.
Metals - Silver Needs Bullish News

Silver is trading above $25.00 in late hours. The sharp sell-off sparked by rising rates has silver on the defensive. Some good news is that the sharp sell-off was met by a "bargain hunting buy" leaving chart pattern suggesting sideways to higher price action. The dollar index's strength hasn't deterred silver from holding this morning's gain above its psychological level of $25.00. I think there is a strong sentiment among traders that excess liquidity could be a catalyst for inflation. The reality is that rates have been rising to mitigate potential inflation risk. Silver is in desperate need of some bullish news to sustain more upside potential.

From the technical perspective, attached is a continuation weekly Silver chart. As I said a couple of weeks ago, "Silver will trade above $30.00 again before it trades below $20.00. Near term, Silver could pop above $26.50, and traded below $25.00 could trigger a wave near $24.00 ", which was met.

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 Poised for Third Consecutive Week of Losses

Oil prices appear to be poised for a third consecutive week of losses despite an early lift as concerns that the shipping container that had run aground in the Suez Canal may last for longer than expected, squeezing supply. Renewed restrictions in Europe have added concerns that the global recovery in fuel demand may slow. Oil inventories added to the bearish sentiment as US crude oil stocks ran up to a 30-week high. However, the refinery rate jumped 5.5%, indicating the potential for increased demand for domestic crude. It should be noted that OPEC+ compliance to reduce output came in at 114% last month. Again, most importantly, the push above trend in oil volatility (OVX), which comes in around 48 appears to be more ‘episodic’ and non-trending in nature as the market remains bullish trend with today’s range seen between 56.53 -66.97.

Crude Oil May '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Reversal in Cocoa Coming, Due to Increase in Demand

Cocoa has been on a steady decline since the start of the month. As more vaccines are administered, the globe will get a better idea of when we can get back to “normal.” For now, Covid cases are on the rise in certain areas, shutdowns continue, and employment concerns are very relevant. Fundamentally, cocoa has been one of the hardest hit commodities of late. Adding and removing shutdowns have created volatility in cocoa. The recent pullback in the May cocoa can create opportunities for traders. Clear support in on the chart and a reversal may be forming. Looking to buy further out calls in the September contract – an increase in demand in the summer months could help this idea. Also, a strengthening Pound will help traders find a direction of the market. Of late, the NY cocoa versus the London cocoa has also been something to watch.

As we move into the 2nd Quarter, monitor cocoa’s key growing regions and what production numbers come in at. Weather will play a big factor in the coming months, hot, dry heat can hurt the crop and also boost the futures prices.

Cocoa May '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or pmooses@rjofutures.com.
Agricultural - Grain Futures Update w/Stephen Davis - 03/26/2021
Stephen Davis discusses the latest news impacting the grain futures market, including what he expects from next week's planting intentions report.
Agricultural - Live Cattle Trending Higher

Cash cattle seems to be helping push futures higher, along with the consumer demand starting to pick up as well with the June contract trading at prices we haven’t seen since the march 18th high. The USDA boxed beef cutout was up $1.32 at mid-session yesterday and closed $1.61 higher at $236.45. This was up from $228.61 the previous week and was the highest the cutout had been since March 1. Cash live cattle prices continue to firm. The 5-area weighted average on Thursday was 115.84 up from 114.21 last week. In Kansas, 1,290 head traded at 115-116 with an average of 115.87 up from 113.96 last week. In Nebraska 8,770 head traded at 115-1156 with an average price of 115.96, up from 114.17 last week. Export sales came in yesterday for the week ending March 18 at 18,872 tonnes, down from 25,936 the previous week and the lowest since February 18. The average of the previous four weeks is 19,474. Cumulative sales for 2021 have reached 422,485 tonnes, up from 337,281 last year and the highest on record. The five-year average is 275,823. The largest buyer this week was Japan at 5,828 tonnes, followed by South Korea at 4,440 and China at 3,569. South Korea has the most commitments so far for 2021 at 118,517 tonnes, followed by Japan at 93,983, China at 58,720, and Hong Kong at 47,879. Cattle futures still look to trade higher in the coming days with a near term target for the April contract at $120. June futures I would look tot continue to have more upside potential, but the major pivot point would be around that 122. 75 in the June futures.

Live Cattle Jun '21 Daily Chart
Equity - Stock Rebound Continues in Early Going

Strength in international markets helped the indices build upon yesterday’s midday rally in the overnight session. After the bell, all four indices are still higher by a decent margin. On the data front, Personal Income and Outlays came out about as expected (-7.1% vs. expected -7.2%), while we saw a small beat in Consumer Sentiment (84.9 vs. expected 83.3). Yesterday’s GDP reading also came in a bit better than expected (4.3% vs. expected 4.1%). We’ve got a decent amount of data next week, highlighted by the jobs numbers Thursday and Friday. 

Coronavirus cases continue to build, but the market seems to have little concern. The fact that vaccines are becoming available to nearly everyone seems to have calmed the market’s nerves on that front. That said, we continue to hear about new stains, which may or may not lead to additional shut down measures globally. Some areas are much further along than others in rolling back restrictions like mask mandates, and we’ll be paying close attention to how things go for those areas.   Stay safe and have a great weekend. 

S&P 500 120 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 - Futures Market Outlook w/John Caruso - 03/26/2021

Massive Scenario 2 relief rally in equities yesterday – the SPY bounced right off of our immediate-term trade line of 3851 and low end of our range. The Russell and Nasdaq also went along for the ride higher. But, the undercurrents of the market are swirling. The Russell Index (small cap value stocks), now look the weakest of the major indexes. Value tends to lead on the way up, AND on the way down. So, if markets are in transition phase, the Russell Index may begin to underperform for a brief period of time (especially if we’re going to take a peek at Scenario 4 headed into Q3). I’m well aware of these macro changes, and usually need a little time and space to assess the environment AND we will get this right. But, I’m not going there yet, we remain in Scenario 2 – and these last few day’s may have been the last good opportunity to position for it. 

This is how we think 2021 plays out in terms of the Growth and Inflation cycle are concerned:

Q1/Q2 – Scenario 2 (G accelerating, I accelerating) – this has been correct – Bullish just about ALL RISK ASSETS

Q3- Scenario 4 (G slowing, I slowing) – Risk Off/Underweight for equity markets and commodities, Overweight US Dollars and Treasuries

Q4- Scenario 3 (G slowing, I accelerating – STAGFLATION) – Overweight commodity assets, specifically Energy.  Underweight equities. Overweight Treasuries

That’s our playbook in it’s simplest form. 

Bond Yields- catch a bid overnight as stocks move back to “risk on”. 

Copper- Bid right off of the low end of our range overnight.  Immediate upside to 414, which yes IS A LOWER HIGH.  Copper remains in a consolidation period, trade the range. 

Precious Metals- they look very weak still. Gold and now silver as well. Silver traded below 24.85 early yesterday, before recovering. We can bounce from here, but risk remains tilted on the downside. Silver is the “Moby Dick” aka “the White Whale” trade. Everybody knows the potential in this market and wants to catch it…BUT I’ve seen many men go broke over the years not managing risk appropriately in this space. You don’t want to be like them, nor do I. Gold is a SHORT from the top of our range, and it’s a good possibility I hit the sell button if we get there. 

US Dollar- Goes bullish trend IF we climb above 93.30. I remain bearish of the dollar until this happens. 

NO MARKET INSIGHTS ON MONDAY AND TUESDAY.  I’ll be in transition from the city to the suburbs this weekend and early next week.  I should have my office up and running by mid-day Tuesday and fully plan on trading the afternoon session. Bear with me for a few days. 

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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