RJO FuturesCast

August 7, 2020 | Volume 14, Issue 32

The Markets

Metals - Gold Continues to Shine, is $2500 Next?

December gold futures have been on the biggest run in over a decade as the market continues to seek alternative asset classes while the US dollar continues its slide. Gold should continue to see buying interest heavily on any dip (such as this morning’s $40 selloff) and is widely seen as a store of value. The government isn’t “even thinking about thinking about” raising rates as Jerome Powell put it, which leads investors to flee the greenback in search of better performers and yield. Gold is getting plenty of tailwind with the dollar in a tailspin and just recently touching a 2-year low. The biggest and most obvious driver of this rally is the unpreceded surge of “free” money from the treasury. Another stimulus is seen in the near future and this should once again continue to smack down the dollar and boost the shiny metal into new high territory once again. Traders should position themselves for heavy volatility as the average true range (or ATR) indicator is now at $45 from $25 just one month ago. This means that gold’s average move top to bottom on any given day is $45, or $4500 per futures contract. It should come to no surprise as traders gain confidence in a bull run and FOMO kicks into overdrive that volatility is here to stay. Fear and greed are the only thing that move markets and a 10 year high in the shiny metal, an endless printing press from the Fed, slumping US dollar index, and general search of performance should all keep gold well above $2000 for the foreseeable future.

Gold Dec '20 Daily Chart
Metals - Silver Headed to $30?

It looks like front month silver is heading to $30.00. Not sure what to expect after that but the trend is your friend. Attached is a chart of gold/silver ration you don’t see every day. I want to bring to your attention that gold really outperformed silver from 2011 until march of this year. Then you see a sharp drop of the ratio high of over 112 on monthly bases to what is today, a little over 72. As you see on the monthly chart of the spread, the trend line comes a tad above 40. Obviously this will take some time to happen as the trend extends all the way to 1970’s. .  

As I said before, the path of least resistance remains up. Silver will continue to benefit over gold on this rally. The only thing that could slow down silver is increase in exchange margin, and significant reduction in new Covid cases. A trader once said, “ trade what you see, not what you think”. Any  pull back, like today with silver down 27 cents at 28.00, will likely be seen as an opportunity for late comers to jump on the bulls wagon. We can also approach this market using options as well the 1000oz contract.

Gold/Silver Ratio 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 Under Pressure, Set for Weekly Gain

Oil prices are slipping this morning as non-farm payrolls reported an increase of 1.763 million in July with the unemployment rate falling to 10.2%. This comes amidst a resurgence in corona cases threatening demand recovery as well as an expected increase in production from Saudi Arabia and Russia weighing on prices. Notwithstanding, support has been garnered by strong Chinese oil imports and lower weekly floating storage numbers. The market is looking ahead to a potential new stimulus deal, which in turn, would be supportive of fuel demand.  The US Dollar has continued to lend support as it continues to be devalued. The market is appearing to hold on to a weekly gain of over 3% with back to back weekly declines in stockpiles. Oil remains bullish trend with today’s range seen between 39.75 – 42.65.

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 - Cocoa, Covid, and Candy Sales

As the summer starts to come to an end, we look ahead to fall activities and holidays. Will the demand for cocoa be down due to Covid and classroom closures? What will Halloween look like in the U.S.? All these unknowns have investors guessing on what earning will be for the major chocolate/food companies. If data comes in better than expected look for the cocoa recovery to continue.

Demand has been the weak link for cocoa prices, but now it may be turning around slowly. Production news has been coming in bullish, technically cocoa continues to close above the 200-day moving average and the currencies are supporting this recent move as well.

Weather premium may also come into play supporting these new prices in the futures as key growing regions have reported lower rainfall totals. Traders should monitor the charts and resistance at 2585 in the short-term.

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 - Grain Futures Update w/Stephen Davis - 08/07/2020
Stephen Davis discusses the latest news in the grain markets, including a possible trade war part 2 with China.
Agricultural - Expect Live Cattle to Sell Off

Overall October live cattle still remains in an uptrend but with yesterday’s price action that is triggering some bearish technical signals. I suspect that cash and futures beef prices begin to firm around these levels unless we see the slaughter numbers start to increase and come in above last years numbers. The USDA slaughter estimates came in at 118k head yesterday, bringing the total for the week to 464k which was down about 10k from last week. Boxed beef cutout values were up about $1.09 after the close finishing at $204.66. This was up from $201.80 from last week, the highest levels we have seen since the first week of July.

On the cash end of the market, there has been some heavy trading in terms of volume for KS, NE, and OK with prices 2.5-3 cents higher. People in the market have a strong belief that the cash market is going to rally with the Oct futures above 107 and cash at 100. US beef exports sales for the week ending July 30th totaled 13,366 tonnes. Feeder cattle contracts are trading one shaky ground, higher one minute, lower next and are sitting dangerously close to the resistance levels that were broke through last Friday. As trade continues to panic, the understanding that the feeder cattle charts are topping out is becoming more prominent. August feeders were down $0.92 at $143.87, September feeders were down $0.05 at $146.42 and October feeders were up $0.07 at $147.37. In all, I believe live cattle futures will start to sell off a little bit until we see the slaughter numbers start to increase. A target to step in and buy would be 105.

Live Cattle Oct '20 Daily Chart
Equity - Stronger Than Expected Jobs Report

U.S. stock futures rallied off their lows Friday morning after the release of a stronger than expecting job report. The U.S. added 1.763 million jobs in July while economists were predicting a number in the 1.4 million area.  The unemployment rate was also better than expected coming in at 10.2%.  Revisions for the months of May and June were also higher on todays release. This positive news came when investors were eagerly waiting for lawmakers to come to an agreement on a new U.S. relief package. The negotiations were near a collapse Thursday as White House officials and Democratic leaders were no where close to making a deal and these positive numbers could ease pressures of a quick deal. “If this had been a bad number, it would have forced the negotiators to get a deal done.” Said Matt Maley, chief market strategist at Miller Tabak & Co. “So in a perverse way, the better-than-expected data raises the odds that nothing will get done soon on the fiscal front.”

Support today is checking in at 332000 and 330000 while support is showing 336600 and 337500.

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 - 08/07/2020

NF Payrolls data:

1.8M jobs created vs 1.6M exp – Beat
10.25% rate vs 10.5% - Beat


May and June Payroll were revised up a net 9K

All of this was better than expected and what’s most concerning is the massive gap between the ADP data on Wed (showing 160K jobs created) vs today’s data showing 1.6M, and the potential for large revisions LOWER next month. Hmm. 

Markets are chopping following the number, no real direction for the day thus far.  Now the attention gets turned back to Washington DC and whether they can piece together a deal ahead of their Aug recess. I’d expect some near-term “fireworks” here as the deadline looms. 


Global Equities: Europe was choppy to lower, Shanghai lost 1.00% overnight (remains bullish trend), but threatening a correction as Tencent becomes Trump's new target. The U.S. is looking at modestly lower open. Stay bullish Tech, but bearish on Small Caps. 

Bonds/Yields:  despite the “better than expected” data, they can’t crack the bond market/lower yields.  We’ve been in about 6-8 bps range in the 10yr for the past 2 weeks. 

Gold/Silver: Following Silver’s overnight ramp to $30.00, it’s now $1.50 off the highs.  We’ll wait patiently to signal here.  Gold same thing, bounce overnight now backing off $27.00 off the highs. 

I’m going to keep it relatively brief as we’re fairly swamped on this end.  Back soon.

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.

Coming Up Next Week...

View Futures Calendar