RJO FuturesCast

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.

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.

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.

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 12^th 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.

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. 

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. 

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.