RJO FuturesCast

July 2, 2021 | Volume 15, Issue 26

The Markets

Metals - Gold Poised to Move Higher

Gold has been range bound between $1,750 to just under $1,800 for the past two weeks since the Fed induced sell off. A breakout with a close over $1,800 will quickly take the trade to $1,850. The $1,750 swing low should hold. I don’t expect that $1,750 is even likely to be retested. In fact, I think the next trading range that I will be discussing is $1,850 to $1,900. Gold likes these fifty-dollar ranges and they are very tradable while they last. I also expect that the next run back to $1,900 will be another breakout run towards $2,000! The 50 DMA and the 200 DMA are about to cross. If I’m right and the 50 DMA crosses above the 200 DMA that will be a “Golden Cross”, a very bullish signal. Plus inflation with wage inflation will be the next reason why you might want to own gold.

Platinum in the $1,050 range is a good long-term value. A breakout above $1,100 is needed to confirm a bottom is in, but if gold rallies then platinum will follow.

Gold Aug '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 Could Hit $30

Silver is currently trading at $26.49. The US and global markets continue to recover stead pace. However, with the rise in commodity prices and signs of inflation, silver bears would likely be put on the defensive. The weekly chart below shows range-bound price action. In my view, you will see silver above $30 before you see it below $20. Another interesting fact is that the dollar has been relatively strong, yet silver has not given much ground to the downside. In my view, any pullback will be bought rather than sold. I’m not sure if the market is convinced of the dollar strength, I'll add more notes about that later.

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 Over $75 a Barrel

Oil prices have continued their inflation higher climbing above 75$ a barrel for the first time since October 2018 amid reports that OPEC+ will increase production by approximately 400k barrels between August and December as the trajectory of global demand prospects continue to accelerate. Notwithstanding, the UAE is expected to make a different proposal amid concerns of an Iranian oil production ramp concurrent with other OPEC+ members with the meeting scheduled to continue today. US stockpiles fell for the sixth consecutive week, to their lowest level since March 20 with an 81-million-barrel deficit from year ago levels, according to the EIA. The market continues to remain bullish trend with today’s range seen between 71.65 – 75.66.

Crude Oil Aug '21 Daily Chart
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Softs - Have Cocoa Futures Found a Bottom?

As technical selling continues, cocoa futures continue to move lower. It appears traders are beginning to lose patience with waiting on the demand for cocoa to increase. The year is halfway through, covid restrictions are still in place in many key areas of the world for cocoa demand and the Pound continues to add to the market weakness. At this point, the fundamentals - weather, supply, etc have taken a backseat to the macro story.

If the weather patterns in West Africa continue, which are positive for supply numbers, we could see cocoa prices test 2300. The trend on chart is bearish, a change in COT, and a positive change in supply and demand is needed to reverse this. If 2300 is tested with no change in global demand, the remainder of cocoa trading year could end much lower than many expected.

At this point, traders are anticipating a recovery in cocoa prices although the short-term is not promising. Still consider buying further out calls in the December contract for upside exposure in hopes that the world continues to recover.

Cocoa 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 - Grains - Up, Up, and Away

In last week’s update I advised there could be a buying opportunity in corn down near the trend (see chart below). The technical picture held up nicely until we saw the much-awaited Crop Report on Wednesday. The strong technical setup coupled with an unexpected decrease in corn acres forced the shorts to cover and new buyers appeared to come into the market in droves. Corn locked limit up 40 cents and Nov 21 Soybeans closed 86 cents higher. This week, Sept corn went from a low of $5.28 to a high of $6.26 basically a $1 move. Looking at the chart pattern, the market appears to be in a consolidation pattern “coiling up” and getting ready for its next move. If the weather continues to stay dry and HOT all I can say is look out, this is not a market I would want to be short. With a weaker US dollar, tight stocks, lower planted acres, strong demand (look at year over year Chinese corn imports, up over 425%, unconfirmed sources suggest China’s corn production is way off), drought like conditions in most parts of the Midwest, freeze/frost problems in parts of South America – I see the perfect “ingredient’s” for corn and soybeans to continue higher. 

With these market conditions, you may want to look at an options strategy as a possibility. I have 25 years of market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth strategies. Also be sure to check out my past weekly grain market updates posted on our website.

Corn Sep '21 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 msabo@rjofutures.com.
Equity - Stock Futures Hit New High on Jobs Report

Stocks rallied on the open this morning after the June job data showed an accelerating recovery for the U.S. labor market.  According to the Bureau of Labor Statistics, the economy added 850,000 jobs last month. Economist estimated and addition of 706,000.  This topped the 559,000 that were created in May.  However, the unemployment number came in a little higher than expected at 5.9%.  According to James McCann, an economist ant Aberdeen Standard Investments.  “This is a strong report and should be taken as a sign of things to come for an accelerating labor market. Today’s data won’t change the Fed’s view. An acceleration in the labor market like the one signaled in this report is exactly what they were anticipating,” McCann added. “The pick-up in hiring should tell the central bank that firms are having more success finding workers, which will ease concerns about a more protracted period of increasing wages. What will happen now is that investors will really focus in on when the Fed is likely to announce a tapering of its asset purchases.”

Support today is showing 429000 and 427800 with resistance being 432100 and 433000.

E-mini S&P 500 Sep '21 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 - Futures Market Insight w/John Caruso - 07/02/2021

We were expecting to here from OPEC yesterday, with regards to their decision on increasing Oil production. From what I’m hearing that decision has been delayed until today, and I’m not quite sure when exactly we’re expected to hear back.  Expectations for a 500K bbl increase in production by members is the benchmark, and I’ve read they may come in just under at 400K bbl. Typically the July 4th weekend is considered “peak demand” season, but this year is certainly the exception for that we think. Oil, for the first time in a while, signaled immediate OB in our model coming into the session, and Oil bears (if there’s any left) got some respite with an approx. 1.50 pullback from the highs that reached above 76.00 early yesterday. Oil, no longer signaling OB today. We remain cautiously bullish here within our range model, and expect to see some back and fill in coming weeks. 

On to the June Non-Farm Labor Report:  An increase of 700K increase in jobs in June is the benchmark forecast vs 559K prior.  5.7% unemployment rate which is expected down from 5.8%. We ran through 3 possible scenarios yesterday, and now it’s game day.  We’ll know when we know. 

Yields are ticking down ahead of the number and Stocks remain firm. Our IVOL signals for stocks still suggest the market is NOWHERE near complacent, which means the upside can continue. We’ve seen in recent weeks a net SHORT position in the US Small Cap Index (Russell 2000), and more squeeze could be on deck for the bears. The USD continues to sense a taper is coming from the Fed, and the ECB went dovish on monetary policy back in mid-June which is also contributing to the squeeze for the USD bears. I’m watching this very closely for possible entry points on the short side for the USD, but also acknowledging that Scenario 4 (a bullish scenario for the dollar) is a probable outcome for this oncoming quarter. 

T-minus 10 minutes to the number, I’m going to keep it right here for now.

If we don’t speak again today, I hope you all enjoy your long holiday weekend, and stay safe out there.  God bless the USA!

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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