RJO FuturesCast

June 4, 2021 | Volume 15, Issue 22

The Markets

Metals - Gold's Uptrend Still Intact

A sharp sell off in gold and other precious metals yesterday seemingly a result of an uptick in rates along with a bounce in the Dollar. We continue to hear so much chatter about inflation and that is the biggest factor driving gold recently and will continue to be the driving force behind future rallies. Of course inflation will lead to higher rates and higher rates will eventually lead to Dollar strength but don’t think for a minute that the Biden Administration is going to take their foot off the pedal. Not gonna happen! The Dollar is going to have a bounce here and there, and gold will have a dip here and there. Buy those dips is my recommendation. Gold came down and kissed the 200 DMA this morning at $1,855.90. Now we need to see gold prices north of $1,900 again. The 50 DMA is still way down at $1,805 but is quickly climbing towards the 200 DMA. When that 50 DMA crosses above the 200 DMA, you better be long. The “Golden Cross” is one of the best technical signals for gold. I think gold is still on the right track to see a continuation of the rally. Gold is in a bull market and inflation is heating up in things that every day people need…food, energy and housing. Once those wages start to move higher, and they must, to compete with unemployment benefits. You will see inflation really begin to heat up. Gold still is a good value longer term.

Gold Aug '21 Daily Chart
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Metals - Upside in Silver

Front-month December Silver is trading at $27.95, up about 44-cents. Today has been full of favorable data to support the metals in general, and silver is no exception. Below I have attached a long-term chart to give you an idea of price points that the silver contract may visit. The trend is your friend. With commodities heating up, inflation talks are circulating in the markets. In my view, any weakness in silver would be bought rather than sold. Silver could find firm support as the US dollar index continues to retest below 90.00 levels and talks of central banks possibly devaluing the dollar. I wouldn’t consider silver in bearish territory unless it traded below $22.00 and perhaps an upside target of $35.00. If you are looking to participate in the upside, we could consider using options with defined risk.

Silver Monthly Chart
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Energy - Oil at Two-Year High

Oil prices are closing in on two-year highs as OPEC+ has agreed to continue to restrain oil output coupled with ongoing optimism regarding the recovery of global demand. Despite the current supply restraints, OPEC+ is expected to increase output in August following their July 1st meeting. Discussions between the US and Iran have slowed this week with tempered expectations of an increase in Iranian output. Weekly inventory report appeared mixed with a larger than expected draw in supply coupled with a rise in inventories for gasoline and a downtick in in the implied demand readings for gasoline (albeit third week above 9 million bpd), according to the EIA.  The market remains bullish trend as oil volatility (OVX) continues to settle around the 30 handle with today’s range seen between 65.13 – 69.89.

Jul '21 Daily Chart
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Softs - Confused Cocoa Futures

Looking at a July cocoa chart, you can see the lack of direction. After a recovery in May, most of the rally has been given back. Recent consolidation has traders confused on cocoa’s next move. Certain areas of the world are anticipating an increase in demand as covid restrictions lift, others are left with the possibility of restrictions being tightened again. Most of this depends on the availability of vaccines in parts of the world.

Cocoa supply doesn’t appear to be a problem. Exports are ahead of last season. Weather could become an issue – with little rain expected and high temperatures, mid-crop could be negatively affected. The currencies may also help cocoa find support at these levels.

As we reach oversold levels, we’ll see what the COT data shoes us as well this week. Look for support to hold at 2385, if this occurs a bottom may have been reached.

Cocoa Jul '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 - June Cattle Looking to Make a Run

June cattle had a very tight range yesterday and the lower slaughter numbers helped support the market. JBS packing numbers are back to full strength, but there were thoughts that beef may have spoiled during the waiting process. Looking at the market going forward, June cattle looks to make a surge higher if it can make a breakthrough the 118 price level. If we see a breakout, then the next upside target would be to 120. The USDA boxed beef cutout was up $1.36 at mid-session yesterday and closed 39 cents higher at $340.55. This was up from $329.49 the previous week and was the highest since June 1, 2020. Cash live cattle continue to trade steady against last week. In Kansas on Thursday, 2,818 head traded at 119-120 with an average price of 119.58 versus an average of 119.56 last week. In Nebraska 3,012 head traded at 120 versus and average of 119.99 last week. With surging beef prices in the past month, packers have been able to buy live inventory at steady prices and this leaves packers with massive profit margins and may encourage steady or higher cash cattle again next week. June cattle is still trading discount to the cash market which has traded near the 119.50-120.00 level this week. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 321,000 head, down from 478,000 last week and down from 453,000 a year ago.

Live Cattle Jun '21 Daily Chart
Equity - Jobs Data Enough to Lift Stocks

Nonfarm Payrolls data was released this morning.  The number came in at 559k vs. an expected 650k.  While that is a bit underwhelming, it is much improved from last month’s reading of 266k.  It should be noted that we also saw a revision higher in last month’s number of a whopping 12k jobs.  The unemployment rate did tick down a bit to 5.8%.  Markets seem to be taking the reading well as it likely buys Powell some time in regards to having more serious conversations about the tapering timeline.  He has stressed in the past that he’ll begin to consider trimming the $120B in asset purchases the Fed is currently making each month when and if we reach full employment and we reach the Fed’s goal of 2% inflation. 

Labor participation was reported at 61.6%, which was also below expectations.  Powell will likely continue to monitor this figure as the 5.8% unemployment figure released today fails to account for the millions of eligible workers that have given up their job searches.  He has commented on this situation in the past, and it seems that the U5 and U6 figures are what he’s more concerned with.  Labor participation is likely to improve as benefits expire for many recipients, but he’d obviously prefer tapering too late to too early.    

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 - 06/04/2021

Good Morning,

Yesterday’s action was interesting to say the least – following the ADP, Initial Claims, and the record ISM Non-MFG PMI data (64.0 vs 62.7 prior) markets fell into a mini-taper/inflation tantrum. Better employment data from here on out only feeds the idea that the worst of the inflation is yet to come, and with the Fed still running its QE at $120B/mo., you’ve got to believe a taper is being discussed inside the walls of the Federal Reserve. We’ve recently thought as early as July, but could they surprise with a June taper? Unlikely in my opinion. But, could a Fed taper spark a Scenario 4 market reaction coupled with slowing y/y Growth/Inflation data (as we expect) – it certainly could, and we’ve had July pegged as a pretty high probability period of risk in markets. 

Oil- remains steadfast at 69.00 and looks to be on its way into the 70s. Bullish trend, positive momentum, closing in on the top of the range warrants a “sell some” but we remain bullish of oil prices from here.   

Gold- a big wipe out yesterday on higher yields and a Fed taper possibly on deck - offered us an opportunity to look to reposition here. Gold could struggle as Scenario 4 looms in July, but ultimately we think gold will begin to perform much better out into the Fall and into year-end. We still like SILVER better quantitatively speaking, as silver is Bullish trend. 

Yields- Bond yields traded up 3bps and have immediate upside to 1.69% in the 10yr. Yields like the idea of stronger employment and the possibility of a Fed taper on deck. 

Non-Farm Payrolls are due up in about 15 minutes and so I’m going get going here. 650K expected, 5.9% rate, and keep an eye on wages and revisions from the May number. 

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.
Economy - Futures Market Outlook w/John Caruso - 06/03/2021
John Caruso discusses the latest news in the futures markets including some bullish momentum in the stock indices.
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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