RJO FuturesCast

July 24, 2020 | Volume 14, Issue 30

The Markets

Metals - Look to Buy Gold on a Pullback

Gold’s allure has once again attracted thousands of investors who don’t want to miss out on a 10 year high run in the gold market. This has mainly been driven by interest rates at zero, federal stimulus money injections, and positive industrial demand growth prospects in the future. The fundamental story of why gold should continue to run is clearly there and I don’t think anyone is seriously doubting that. There are some concerns that I see with the speed of the rally and if you need proof of that check out silver this week up 15%. Commodity markets like gold are notorious for doing this, and investors should be weighing the risks of being long gold up here, with the chances of a pullback to buy into.

I believe gold should be bought into on a pullback somewhere in the 1800’s. On the August contract that would be around 1850 to 1860 to me and on December gold around 1875. The technical aspect here is important because although we have run up so fast, the volume behind it has been stellar as well which is a positive for gold bulls. I think it’s a bit overbought in this territory, but that doesn’t change the fact it will likely do one of two things. The first is a continued surge toward 2000 with minor dips here and there, or a more significant correction that gets bought into heavily on the way down eventually coming back toward today’s price of around 1900 on August. Proceed with caution on the long side and for traders who are new to the precious metal, options might be the better route to take or a smaller size gold futures contract.

Gold Aug '20 Daily Chart
Metals - Silver Up Today

Front month silver is trading $23.05 up about 7-cents on the day. As you see the monthly chart below, silver is likely heading to Aug 2013 high of 25.12.  In my view, the range of resistance is between 25.00 to 27.00. This month, silver took out 7-years high and likely poised for more gain. The path of least resistance remains high. Silver continues to benefit over gold on this rally. The gold/silver ratio is now near 82.00 as it was in 2018. I mentioned this last week, a break below 95 in the dollar index as seen this morning would only give silver push to head into the $25 to $27 range. The only thing that could slow down silver trajectory would be a dramatic breakthrough in Covid-19 vaccine or significant reduction in new cases.

There are other factors that are working it the background but the trend is your friend. A trader once said, “ trade what you see, not what you think”. What you see is a breakout and un uptrend. Any break to the downside, will likely be seen as an opportunity for late comers to jump on the bulls wagon. If you need additional help, please let me know. We can also approach this market using options as well the 1000oz contract.

Silver Monthly 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 Edges Higher on Weaker Dollar, Softer Demand Weighs

Oil prices are edging higher this morning following a two percent dip yesterday amidst yet another increase in corona cases as well heightened US- China tensions, despite more sustained weakness in the US Dollar as the Dollar Index moves to its lowest level since 2018. A rise US inventories have also weighed on prices as US production has increased to a new six week high amid lower fuel demand, according to the EIA. Oil demand outlook appears to be faltering in the short term as geopolitical tensions have increased trade risks and new cases have outweighed any reopening momentum. The market remains bullish trend with today’s range seen between 39.61 – 42.28.

Crude Oil sep '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.
Softs - Grinding Data and Supply News Lead to Volatile Week in Cocoa

The chart is showing traders that we may have seen the bottom in the September cocoa contract. The past few sessions have canceled each other out, one day up, one day down and so on. Grindings data has caused some of this volatility. Lack of demand and some bullish supply info has also created this recent pattern. As we have leaned on demand news for guidance, West Africa may have enough of a threat to production that prices may be able to find some support. Also, if the global equity markets continue to stay somewhat positive, we may be headed back above 2250. For now, traders should keep an eye on the euro and pound for some additional directional help. The technicals also seem to be back in the picture for cocoa now since the demand concerns seem to be taking the sideline, so monitor the 2250 target and see where the market goes from there.

Cocoa Sep '20 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 - Friday Ag Roundup w/Tony Cholly - 07/24/2020

Corn: Like last week, corn began the week moving lower on Monday and Tuesday, running into support @ $3.30 (lows on the week) along the upward trend line. Along with hitting support, the demand out of China has remained steady this week, causing corn to bounce back on Wed/Thurs and began pushing back towards the highs of the week $3.40 that was put in on Monday before it sold off. Watch for continued choppy trade if weather stays good and we don’t see any extended dry/hot stretches in the forecast. COT has a large net short position for funds, so that is one thing to keep an eye on. Bullish news can spark a decent short covering rally if the gap is filled and continues higher through resistance.

Soybeans: Soybeans, unlike Corn, began the week initially moving higher and running into resistance at the top end of the trend channel. ($9.02) Resistance held and we saw soybeans sell off on Tuesday on news of better weather mixed with a better crop progress report.  China demand remained extremely strong with China purchasing beans for 8 straight trading sessions. Soybeans are hanging around the top end of the channel still and seem to have backed off this morning after touching resistance.  Watch for beans to break this trend if China demand continues, but if we see bearish weather and less demand, I fully expect a move back to the lower end of the trend, which is circled on the chart below.

Corn Sep '20 Daily Chart
Soybeans Sep '20 Daily Chart

If you’d like to learn more about the agriculture markets, please request our exclusive 2020 Grain Futures Outlook. If you have any further questions or needs, please contact Tony Cholly at 1-800-826-2270 or email him at tcholly@rjofutures.com

Our 2020 Grain Outlook Includes:

- World Corn Outlook – Stock Change vs. Usage Ratio
- U.S. Soybean Export Sales and USDA Forecast
- U.S. Planted Wheat & World Wheat Production
 - And Much More!

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or tcholly@rjofutures.com.
Agricultural - Grain Futures Update w/Stephen Davis - 07/24/2020
Stephen Davis discusses this weeks changes in the grain markets and what he foresees in the future.
Equity - Stock Futures Down With Increase in Tension Between U.S. and China

The U.S. stock market is down this morning on increased tensions between China and the U.S.  The two countries traded blows this week with the closing of the Chinese Consulate in Houston which led to the retaliatory closure of the U.S. consulate in Chengdu. These closures led to a major sell off in China based stocks that has had a ripple effect world-wide.  Jobless claims have also helped the slide as there was an increase in the weekly number for the first time since March.  1.42 million claims were reported compared to 1.3 million the week prior.  This has created increased fears into a sliding virus-stricken economy.  “Like we have seen in several other economic indicators, the initial claims data signal that the economy has lost some momentum lately following the solid improvement that occurred throughout much of April and May when restrictions on activity were being relaxed across much of the nation” JP Morgan economist Daniel Silver.

Support today is 319000 and 317000 while resistance is showing 326000 and 330500.

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 - Futures Market Insight w/John Caruso - 07/22/2020
Global Equities: A relatively mixed bag around the world this morning, US trading slightly lower (off the overnight lows), Europe down all across the region with Spain leading -1.30%, and Asian equities higher across the region. Key earnings are due out in the US today, including the much lauded TSLA – which in our opinion has moved more on hope and FOMO rather than economic sanity, but who can even tell the difference anymore. Microsoft also reports after the bell. Metals: Gold and Silver continued their climb overnight, Silver +6.50% last night at one point and once again outpacing Gold.  Metals, specifically Gold are telling you that rates are going to be low, the Dollar is going to be weak, and expectations for inflation will be high well out into the future. Got that? Down rates, Down Dollar, up Gold. Metals are immediate-term overbought, as they were yesterday and the day before, look at booking some gains so you can replant your positions from the low end of our range, which is now north of 1800oz for Gold. Oil- Trading down this morning on the larger than expected build in API inventories yesterday (+7M bbls w/w), which begs the question of the strength of demand. EIA report is due out today at 9:30 CST. There’s a topic on the table in the next stimulus bill presented by Mitch McConnel that would protect companies from employee lawsuits after returning to work. I happen to think this issue is very important for energy demand, as it would encourage companies to bring employee’s back therefore bolstering demand for fuel and travel back to work. I’ll tell you, from what I’ve seen the Chicago Loop is a ghost town during what used to be peak rush hour. Air travel fuel demand remains down 30% from last year. US/China relations seem to be going “splendidly” this morning. The US has accused Chinese hackers of attempting to steal C19 vaccine intellectual property, and subsequently ordered the Chinese to close down their consulate in Houston Tx. Reports of a fire at the consulate this morning stem from rumors of the Chinese burning documents inside. Stimulus- hearing that congress currently at an impasse on the next round of stimulus. Many of the benefits from the previous rounds of stimulus are set to expire at month end. Developing…. Long on patience, process, and Stagflation, short on FOMO.  Good luck. Actionable Levels Feel free to reach out to John Caruso at jcaruso@rjofutures.com or 1-800-669-5354 if you’d like to get a 2 month free trial of our proprietary trade recommendations by email.  Also, be sure you sign up for our exclusive RJO Futures PRO simulated demo account here.

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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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