RJO FuturesCast

July 10, 2020 | Volume 14, Issue 28

The Markets

Metals - Gold is About to Explode Higher

August gold futures have crossed an important milestone in the contract and crossed it with strength. $1800 was a very important level to get a close above and do it with volume behind it. I think that given the economic pain likely ahead (safe haven play?) you could see gold continue to find its footing and see a push toward that all to familiar level of $2000. While this will likely take months to accomplish if gold moves up in a stable pattern, the idea of $1600 gold before $2000 gold I’m not believing anymore. I was skeptical about long gold as we couldn’t ever seem to get above $1790 for more than a day or two. The blast through $1800 all the way to $1830 says quite a bit.

The record push into gold ETF holdings, the unlimited Fed stimulus, and a general safe haven investment push have all led the precious metal higher and the rally is likely to continue. I think traders and investors should be eyeing gold very closely as at 8-year highs, any pullback of significance should be bought into even if it means buying in on a big down day (often hard to do among new traders). Traders can take advantage of the new likely range bound trade as we grind sideways to higher using different types of strategies, including options, which we sometimes incorporate in our strategy development. I am recommending a general long position in gold, and the purest way of doing so is going directly to the precious metal itself in the futures market and not an ETF. If you would like more information on various strategies we are trading please contact me directly.

Gold Aug '20 Daily Chart
Metals - Silver Has a Potential Run to the Upside

September silver is trading at $19.09 and up about 10-cents on the day. The surge in equity prices globally lead by China is definitely seeing as a supportive factor for strong silver performance. As you can clearly see here, front month silver is looking to take out $20.00. On the last issue, I wrote about the silver chart work setting up a potential flag on the chart and it has worked through that and is now heading to 20-dollars plus. As I have stated before,  the Fed and world monitory authorities flooded the streets with cash as they are working hard to pull the world economy from the brink of total disaster. As we all know, this zero interest environment is here to stay for the foreseeable future. I continue to think that silver has a big run to the upside left to do. For the most part, everything on the negative side is already known, what is not clear yet is the pace of economic recovery. For now, silver will grind sideways to higher. ANY price break will be seen as an opportunity to buy rather than sell. Global markets continue to price-in new infection concerns. I think it is too early to talk "depression" but that remains to be seen. Markets will remain choppy as we navigate through this

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 Assess Coronavirus and Supply Fears

Oil prices have traded within a narrow range within the last couple weeks but appear susceptible to corrective action as record breaking new corona cases have renewed concerns about the pace of the economic recovery as well as the subsequent impact on fuel demand. Despite the International Energy Agency (IEA) increasing its 2020 forecast for oil demand, it was noted that the uncertainty surrounding COVID-19 still poses a heightened risk to outlook. U.S. crude oil inventories rose by nearly 6 million barrels with the annual surplus around 80 million barrels. Prices have been pressured by reports that Libyan oil production will be coming back online after six-month blockade by eastern forces. In addition, tensions between the U.S. and China have heightened as China said that will be responding to U.S. sanctions on Chinese officials over allegations of abuses against the Uigher Muslim minority. The market remains bullish trend amidst this reflation ramp up with today’s range seen between 38.02 – 41.57.

Crude Oil Aug '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 - 07/10/2020
Stephen Davis discusses the latest happenings in the grain markets. With a crop report due out later today we expect to see some movement in the market
Agricultural - Live Cattle Production Above Expectations

Yesterday, August cattle gave back all of its early gains to finish just slightly higher on the day. As of right now, there is a weak beef market and it is showing in the cash market with prices in the mid to high 90s, but traders seem to feel that he cash market is in a short-term bottom regardless of the weak demand. Cash live cattle traded moderately higher in Kansas on Thursday and mostly steady to weaker elsewhere. In Kansas 1158 head traded at $94-$98 and an average price of $95.94, up from $94.60 the previous day. In Nebraska 961 head traded at an average price of $96.40 vs $96.26 the previous day, and in Texas/Oklahoma 170 head traded $94 vs an average price of $94.91 the previous day. As I have been saying the past couple months, we should be keeping an eye on the slaughter numbers during this reopening period, slaughter numbers have been well above expectation during the duration and therefore production has been well above expectations. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 474,000 head, down from 484,000 last week and down from 476,000 a year ago. 97.5 looks to be a good target on the downside where support would come into play but with the current conditions and possible reclosing of restaurants over the next month, we could see the prices trend lower.

Live Cattle Aug '20 Daily Chart
Equity - Stocks Down This Morning

Stock futures were pointed lower this morning as several states in the U.S. posted new highs in Covid-19 related outbreaks and deaths. Worldwide, Hong Kong will be reclosing schools and Mexico has also seen new record of recorded cases. Keeping the market from dropping further was some positive news from the pharmaceutical sector regarding positive data on their coronavirus treatments. Gilead Sciences said its coronavirus treatment candidate, remdesivir, “was associated with an improvement in clinical recovery and a 62 percent reduction in the risk of mortality compared with standard of care.” This news sent Gilead share up 2%.

Support today is checking in at 301000 and 296500 while resistance is showing 307500 and again at 309500.

E-mini 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 - Economy: Look For Opportunities on the Edges

Asian equities chilled overnight with the Shanghai -1.90% but +14% m/m – Chinese Banks reportedly eased back on asset purchases.

U.S. Equites followed China lower overnight, the SP500 -0.62% , Dow J -0.78%, Russell 2000 -0.90%, and the NASDAQ -0.49%.  The NASDAQ begs the question whether or not it’s even an index anymore, when really only 5 stocks out of 3300 in the Composite drive the index? It’s an honest question. Either way we remain bullish of tech in Q3 2020 and bearish of US Small Caps.

Europe- Stronger industrial production out of France and Italy leant a hand to Euro stocks overnight. Europe “green” across the board.  Ger, UK, France, Italy, Swiss indices leading the way ranging from  +0.50 – 0.70% for the lot.

Oil/Energy- finally broke lower overnight, -1.54% following a negative session yesterday as well. +7M bbl build in weekly inventories but most notably the acceleration in US Covid-19 cases continue to spike and cast shadows over demand and economic recovery. As a matter of fact, the Int’l Energy Agency issued a warning pertaining to demand outlook due to Covid-19. However, we’re still buyers of Crude Oil at the low end of the range through Q3 2020 OR until further notice. We’re also going to be taking a hard look at Nat Gas on the current pull-back following the more than 40% rise off of its contract lows. Nat Gas looking as if its attempting to bottom, but remains bearish trend.

Metals- Continue to do their thing…Copper is immediate overbought but remains bullish trend. 

***UPDATE- as I type this, Gilead touts results of Remdesivir vaccine trial.  Stocks and crude oil are bouncing….

Not much else we’re seeing – still looking for our opportunities on the edges – we’ll be in touch hopefully soon.

Econ Calendar for today….June producer inflation data expected to decline, but hold flat y/y.

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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