RJO FuturesCast

August 6, 2021 | Volume 15, Issue 31

The Markets

Metals - Silver Erases Gain

September silver starts the day lower today completely erasing the gain it made last Wednesday and Thursday. The silver market had been trading sideways, holding on to that $25 support level but once that was pushed through the market fell sharply to a low of 24.37. This morning the focus was on US economic data with nonfarm payrolls coming in well over the expected 870,000 at 943,000. This pushed stocks to new intraday highs and is weighing on the silver market. The US dollar also saw a move higher this week, reversing from last week’s lower trade which is pressuring the silver market lower as well. At the current time, the September silver market is hanging around 24.39, just off its recent lows. The next level of support is 24 but the bulls will be looking for a recovery to setup a push back above resistance at 25 next week. With the current talks of possible stagflation, fresh new all-time highs in stocks, and the flight to quality going to the US dollar the bears are in the drivers seat for the metals markets.

Silver Sep '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - Oil Set for Weekly Loss Amid Renewed Demand Concerns

Oil prices are softer as of Friday morning and are poised for their largest weekly decline since March as demand concerns come back to the forefront amid the spread of the delta variant. This is coupled with reports that global floating storage came in at four-month highs as well weaker Asian oil imports despite an uptick in Indian demand. Crude stocks registered inventory builds in two of the last three readings with a build of 3.627 million barrels with gasoline stocks posting a larger than expected draw of -5.291 million barrels along with a strong implied gasoline reading of 9.77 million barrels per day. Most importantly, oil volatility (OVX) has broken down below 40 with yet another episodic spike in volatility into options expiration as the market remains bullish trend with today’s range seen between 67.56 – 75.24.

Crude Oil Sep '21 Weekly 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 - Grains - Consolidation Continues 3.0

I’m going to sound like a broken record today as this update is very similar to last week. More consolidation in the corn market and a lack of strong bullish or bearish news to justify a breakout.   September corn is showing a strong consolidation pattern on the weekly chart (see below) as it currently trades inside last week’s price range. In the last market update, I advised traders to watch for changes in Monday’s Crop Condition Report. Well that report showed a drop in the good to excellent category from 64 to 62, most traders expected to see a drop to only 63, so this report was considered favorable to the bulls. As I mentioned last week, historically we usually see corn sell off around this time of year but so far that hasn’t been the case, instead the market searches for clear direction. The longer the consolidation lasts, the larger the move we expect to see, only time will tell.  Watch for Monday’s Crop Condition Report to see if the Good/Excellent rating for corn slips again. I think the “real” move will come from the August 12th USDA Supply/Demand Report and Crop Production. Watch for the USDA to possibly lower yields from the 179.5 number, the big question remains, by how much?

Key numbers to watch in my opinion are: $5.81 ½ on the upside and $5.19 ½ on the downside.

I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility is still relatively high compared to historical vol levels. You may want to incorporate some short options into your strategy in a calculated risk manner such as bull or bear option spreads. I have 25 years of grain market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth trading strategies. Also be sure to check out my past weekly grain market updates posted on our website.

Corn Sep '21 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 msabo@rjofutures.com.
Interest Rates - 10-Year Note Hits Contract High

Looking at the September 10-year note, we hit a contract high early this morning at 135-14 and touched a yearly low in yield at 1.127. We are currently trading at 124-25 and yield is 1.195. The reason for this morning’s rally was the weaker than expected ADP payroll number and worries that Friday’s employment number may also come in weaker than what the street is forecasting. Things have since reversed due to the very hawkish speech that Fed Vice-Chair Clarida gave late this morning. He believes the Fed should begin to taper as early as July, meaning the Fed should stop buying bonds and keeping interest rates artificially low. The Fed has hinted that they will give the market a heads up when that thought process is to occur so we will have to see when that does happen. My best hypothesis is that if we see a big employment number on Friday morning, upwards of a million new jobs, the treasury market will dictate exactly when the Fed will make the taper announcement. Looking at technicals for the Sep note, we see resistance at today’s high of 135-14 and support around 134-04. I will say, if the note does close lower in the day after making a new high, that indicates an island reversal and we may not see another high for quite some time. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.
Equity - Jobs Data Beats Estimates

The economy added 943k jobs last month, which is the largest gain since last August.  The unemployment rate ticked down to 5.4% vs. an expected 5.7%.  Readings like these will ignite the tapering conversations once again as it indicates a step closer to Powell’s full employment wishes. We’re obviously not quite where he’d like yet, but it is hard to suggest that things aren’t progressing. 

As the delta variant continues to make news, it will be interesting to see how things take shape. Mask mandates (even for vaccinated individuals) seem to be coming back, many corporations, businesses, etc. are mandating vaccinations, and lockdowns could be back on the table.  The workforce is much better prepared for work from home than we were back in early 2020, so I doubt such actions will have as dramatic an effect on the markets as they did then. However, they could certainly call into question whether the “reopening” remains “open.” 

Stocks are mixed following the report. The S&P and Dow managed to print new all-time highs and are up on the day, while the Nasdaq fell a bit shy and is down about 1/3 of a percent.  The Russell is trading in positive territory, but has a ways to go before printing new highs. 

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 - 08/04/2021
John Caruso talks about latest news in the futures markets today including some hinting at tapering from Fed Vice-Chair Clarida's comments this morning.
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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