RJO FuturesCast

June 26, 2020 | Volume 14, Issue 26

The Markets

Metals - Does the Gold Bull Camp Still Have Control?

In the early morning trade, August gold trading slightly in the red and looking a little toppy after it failed to break above yesterday’s high of $1,779 a troy ounce. Yesterday, the bull camp was in control trading nearly at 8 years highs and a rise in open interest, but that could be slightly dampened with the announcement that a 2nd round of Coronavirus stimulus checks will be delayed. Furthermore, gold ETF’s have reported that this was the 6th largest week ever in buying them, so that could add support and minimal downside risk.

Gold is still in a very strong uptrend with support down to $1,750 an ounce, but if it gets below that level look for a larger pull back in this market. If it breaks yesterday’s high which I mentioned above, then look for a rally above $1,800 an ounce.

Gold Aug '20 Daily Chart
Metals - Potential Upswing in Silver?

September silver is trading at $17.80. Silver is range-bound and potentially setting up a flag type of chart structure as seen below. The Fed and world monitory authorities flooded the streets with cash. Coronavirus wreaked havoc on the world economy so each country is trying to do its best. Zero interest environments are here to stay. what will that kind of environment will do to silver in the long run. I still think that silver has a big run to the upside in its future. Everything on the negative side is known, what is not clear yet is the pace of economic recovery. For now, silver will grind sideways as the equities trying to price new infection concerns. I think it is too early to talk "deflation" but that remains to be seen. You can do a sideways strategy using options.

Silver Jul '20 Daily 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 - Crude Oil Back on the Rise

U.S. crude rose 1.4 million barrels to a record high according to EIA data. Demand will eventually play a key role in balancing the markets, the increasing COVID case count in areas that opened early suggest the added pressure in WTI. It should be noted that although  global markets teeter on the brink of risk aversion connected with the outbreak of the new Covid-19 disease in the United States, oil fundamentals overall are still moving in the right direction, towards recovery and increased refining in global oil refineries. Global supply decreased by nearly 12.2mn barrels per day in the month of June, on an annual basis, due to nearly 9.1mn barrels per day of OPEC+ cuts. Traders will be watching whether China will continue to import at the same pace as we saw in May, as well as waiting to see if OPEC will hold discipline and extend their cut past July.

Momentum studies have started to turn negative, and are trending lower from previous overbought levels. August crude has support at $37.00 and a break of this should see a move to the next level of support at $36.50. If we see these levels hold the technicals point to resistance at $38.00 and should we see this level break we should see a test of resistance at $38.70.

Crude Oil Aug '20 Hourly Chart
Softs - Sugar Stalls and Stumbles

October ’20 Sugar futures spiked up yesterday morning (6/24/2020) before ultimately reversing into a downside break-out. The rally in sugar from the panic sell-off lows has been impressive considering the demand destruction and potential for a sizeable crop from India. It was most likely driven by bargain buyers and the return of strength in energies. However, it seems that rally may be coming to an end. This can be a very trend friendly market as when it picks a direction it tends to follow through continuously…until it doesn’t. Sugar prices have been trading mostly side-ways since the last new high on June 10th. This suggests bulls have been running out of steam.

From a fundamental perspective, there is the possibility of a production surplus with India likely having a sizeable upcoming crop, which is bearish. From a technical perspective, today’s reversal/downside break-out is a strong bearish indicator. Should sugar prices close below support it is likely the trend will change in favor of bears.

Sugar Oct '20 Daily Chart
Agricultural - Bullish Canola Count Intact Above Minimum 851.5

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.

Agricultural - Grain Futures Update w/Stephen Davis - 06/26/2020

Stephen Davis discusses this week's movements in the grain markets. China is currently buying tons of soy, but unfortuantely it is not U.S. soy. Looking ahead, the acreage report comes out June 30th and should give us great insight on what to expect moving forward.

Agricultural - May See Cattle Prices Trend Higher

Yesterday we saw August cattle have a good surge in the market on average volume which may give the market a bullish turn and have found a short-term low in the market. With restaurants re-opening and beef prices being relatively cheap, we may see some demand perk up and prices trend higher. Anything to dampen this bullish upturn would be China putting up trade barriers for beef and pork but that doesn’t seem to be the case as China is in need for increasing their pork and beef imports. Technically, the MACD is starting to cross to the upside, pairing that with yesterday’s trade on decent volume we could see this market start to retest the early June/ late May highs of $100. 

The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 239,000 head, up from 238,000 last week at this time but down from 244,000 a year ago. The USDA boxed beef cutout was down $1.75 at mid-session yesterday and closed $2.25 lower at $211.81. This was down from $227.89 the previous week and $219.74 a year ago. This is the lowest the cutout has been since March 13. Cash live cattle traded in light volume (437 head) at $97 on Tuesday, down from $100 last week and in line with the trends on Friday and Monday.

Live Cattle Aug '20 Daily Chart
Currency - Euro Headed Lower

As currencies continue to be devalued through worldwide aggressive stimulus packages and coronavirus cases continue to shutter world economies, the Euro is no exception. Jobless claims throughout Europe continue to look dismal pertaining to Europe’s economic outlook as well, leaving the Euro dropping from near-annual highs. Some may argue that the currency was due for a pullback due to its aggressive spike in recent weeks from optimism rising, however underlying economic outlooks of Europe continue to remain the same, which is overall negative. Technical analysis further shows weakness in the Euro, as prices seem to be declining at an increasing rate across monthly levels. For these reasons, the Euro seems prone to a sharp selloff in the coming days.

Euro FX Sep '20 Daily Chart
Equity - Stocks Down Early Friday

U.S. stock futures were slightly down this morning after a positive Thursday trading session. Yesterday’s markets were higher after the Federal Reserve stated that they will ease some rules that limited banks abilities to invest in hedge funds and similar investments.  This will increase their profits since interest rates were cut to almost zero from the coronavirus outbreak. Traders had a boost of confidence by some moves made by officials allowing business to reopen, but some states have seen new restrictions after a surge in infections. States such as California, Florida and Texas all have seen a huge spike in hospitalizations after aggressive reopening’s. The Commerce Department released data this morning which showed consumer spending increasing by 8.2% for the month of May. This was the largest increase recorded since 1959. April's number showed a historical low of a 12.6 decline. On the flip side, personal income dropped 4.2% after a record increase of 10.8% in April. April is when the Fed gave stimulus checks to millions of Americans and in greatly increased unemployment benefits to fight the COVID-19 hardship.

Support today is showing 302500 and 297800 with resistance at 309800 and 312500.

E-min S&P 500 Sep 20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-1656 or jyasak@rjofutures.com.
Economy - S-T Mo Failure Insufficient to End RBOB Correction, But Beware

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.

Economy - The Odds are Rising

Stocks- Since the beginning half of June the Russell 2000 (small caps) has pared back 10% of its more than 40% gains from the March 2020 lows. What’s most disconcerting to me (and should be for you as well) is that Russell never regained its 6-month bullish trend in the time of that historic rally. Yes we were bullish “trade” – meaning 3 weeks+, but all the while remained bearish “trend” – 6 months +. In its simplest form, what I’m trying to convey is the dominant trend remained and is still bearish. With the recent breakdown in the trade, and dominant trend remaining bearish in the Russell 2000 - we think the odds are rising that the market crashes for the 2nd time in 2020. Side note: Covid – 19 cases are at record highs here in the U.S.

Volatility- True bull markets in U.S. Stocks don’t exist with the VIX trading > 30.00. 

Gold- High conviction long when we see pull-backs to the low end of our range (1735 – 1745). We’re embarking on the next rising phase in Gold very soon. 1835 upside target.

Currencies: Dollar bouncing today, we’ll be ready for the next position on the sell side, but not yet. It may stay range bound before a big break down later in the summer – we’re estimating a breakdown to at least 88.00 and perhaps worse as the Federal Reserve devalues the purchasing power of America. 

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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