RJO FuturesCast

August 13, 2021 | Volume 15, Issue 32

The Markets

Metals - Gold to Retest Swing Low

With the sharpness and degree of Monday’s follow through selloff from last week’s seventy-five-dollar correction we can say the market was extremely over sold and that this bounce was in order. However, one could also say that a retest of Monday’s low is a likely scenario and that this recovery bounce is another opportunity to sell gold. Keep an eye on the US Dollar. The Dollar has been capped by good resistance at .9320 recently. If the Dollar breaks out above .9320, gold will slide back to $1,700 pretty easily. Also, keep in mind that the gold market was spooked by talk of tapering and we continue to see inflationary data that should prompt gold traders to pressure the market down again.

As I like to point out, “it’s usually just a level on the chart, that turns the market around.” Having said that, I see $1,765 as “old support, becomes new resistance.” Just look at the daily chart below. If gold can manage a close above $1,775 that would be friendly to the gold bulls. A drop below $1,742 would indicate a continuation of the short term down trend. Below $1,720 is bearish.

Gold Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or fcholly@rjofutures.com.
Energy - Will Recent Covid-19 Outbreaks Slow Crude Oil Demand?

On Monday crude oil continued last weeks slide lower down to $65.15 before closing up off its lows at $66.85 on the day. Mid-week we saw a recovery with a weekly high of $69.62 but at this time it looks like it will end the week on a weaker note. Pressure is being brought on by talks that OPEC will once again increase production and also that a ramp up in Covid outbreaks will slow the demand side of things. Despite these pressures we saw Sept crude bounce off support at $65 and trade back to the middle of the $65-$75 range. There are some global demand discrepancies between OPEC and the International Energy Agency which is causing the market to have some uncertainty. US production also remains lower than normal. Resistance comes in right above the $70 level and a breakthrough of that is needed to see crude oil push back to recent highs of $75. If wider global shut downs due to Covid or increased production from OPEC nations come to fruition, expect to see lower trade back down with $65 and $61 as the next downside targets.

Crude Oil 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.
Softs - S-T Coffee Divergence Could Re-Expose Secular Bull

On the tiniest of scales, yesterday's recovery above 04-Aug's 178.65 initial counter-trend high detailed in the 240-min chart below confirms a bullish divergence in momentum.  On the heels of late-Jul's relative plunge, early-Aug's piddly recovery attempt falls well within the bounds of a mere corrective hiccup ahead of a resumption of this relative plunge.  Nonetheless, until or unless mitigated by a relapse below 02-Aug's 171.60 low, further corrective rebound OR the resumption of the secular bull trend are expected.  Per such, this 171.60 level serves as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed by shorter-term traders with tighter risk profiles.

The compelling thing about last week's 171.60 low and admittedly short-term risk parameter is that it comes against the backdrop of a massive, arguably accelerating secular bull trend where the relapse from 26-Jul's 215.20 high can, at this point, only be considered another correction within the secular bull.  Against the backdrop of this secular bull trend, the daily log scale chart above shows the area marked by the (170.50) 61.8% retrace of Jul's 147.65 - 215.20 rally and 168.65 former resistance-turned-support as a logical support candidate.  As yesterday's bullish divergence in short-term momentum  rejected/defined a level (171.60) just above this pivotal area, an acute risk/reward opportunity from the bull side is presented.  For IF late-Jul's exaggerated relapse/correction ended at 171.60, a resumption of the secular bull trend to new highs above 215.20 would be expected.  That's quite the reward for a risk to levels just below 171.60.

From an even longer-term perspective, the monthly log chart below shows the magnitude of this secular bull trend.  MINIMALLY, commensurately larger-degree weakness below 06-Jul's 147.65 larger-degree corrective low remains required to break even the portion of the bull from Nov'20's 102.15 low, let alone threaten the 27-month secular bull trend.

These issues considered, shorter-term traders whipsawed out of bullish exposure following 30-Jul's bearish divergence in short-term momentum are advised to return to a bullish policy and exposure from the 178.65-area OB with a failure below 171.60 required to negate this specific all and warrant its cover.  Longer-term commercial players remain advised to maintain a bullish policy with a failure below 168.65 required to defer or threaten this call enough to warrant its cover.  In lieu of weakness below at least 171.60 and preferably below 168.65, a resumption of the secular bull trend is anticipated.

Agricultural - Grains - BREAKOUT!

After weeks of consolidation the corn market finally broke out yesterday when the USDA released its Supply/Demand Report and Crop Production Report. Last week I advised that the “real” would probably come from Thursday Reports, that proved to be the case. USDA lowered its yield from 179.5 to 174.6 which was below the range of estimates hence the strong move higher. Today’s price action has September corn trading inside yesterday’s daily range. I would expect the market to continue to push higher over the next week as the market carves out a new range now that we have better insight to the yield reduction. Short-term technical indicators have turned up suggesting it could be time to be long, couple this with the bullish fundamental news we received yesterday, and the bulls have a lot to be happy about. With that said, be cautious as the large trading ranges could come back into play and easily push “weak” longs out of the market.

In last week’s article I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside. Well, yesterday the market surged through $5.81 ½. This signifies a strong upside technical breakout in my opinion and should start the market on a new

I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility recently came down but 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 Daily 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.
Economy - Post-Market Futures Outlook w/John Caruso - 08/09/2021
John Caruso discusses the day that was in the futures market including the big news from this weekend regarding a large selloff in the gold and silver markets.
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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