RJO FuturesCast

August 14, 2020 | Volume 14, Issue 33

The Markets

Metals - Gold Correction is a Buying Opportunity

No market can just go straight up without any interruption. Yet, that is what gold did for three straight weeks, moving from $1,820 an ounce to $2,076 an ounce. So, one can easily make the case that gold was “overbought”. The market added 14% premium to a $1,800 commodity in three short weeks. He gold rally reversed on August 7th. That’s a classic “key reversal” on the daily chart. New all-time high got rejected early in the session and closed lower than the previous day’s low. That was our sell signal, or at least a warning to tighten stops and purchase Put protection.

Healthy markets go through corrections. This pullback is just a correction and the market is likely to consolidate around the $2,000 taking a little breather before continuing to march forward taking out $2,100. The reasons why I feel so confident about the continuation of the gold rally is that fiscal stimulus isn’t going away any time soon. Debt is ever mounting. The Dollar is weakening, and we’ve never lived in a time of greater “uncertainty”!

Volatility is high. Risk management is critical. Working with a professional is advised. Puts work!

Gold Dec '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 fcholly@rjofutures.com.
Metals - Silver Seeing Pullback

September silver saw a big drop during Tuesday’s session, falling $4.58 off of better than expected U.S. PPI numbers and reports of a Russian COVID vaccine. The overnight session Tuesday/Wednesday posted a low for the week of 23.58, a level not seen since July 31st, before closing positive for the day and continuing to rebound on Thursday. This morning we have seen an initial pull back and the September silver market is currently trading at $26.77. Although the market started today lower it has managed to stay inside Thursday’s range and I feel we will need to hold Thursday’s low today in order to see a continued rally next week. I don’t think a pullback with the U.S. PPI, jobless claims, and vaccine news we saw this week is a bad thing. Especially with the recent run higher and momentum studies showing over bought levels in silver. The Fed is still not looking to raise rates until 2021, stimulus policies will continue, and the recovery from the virus is still going to be a longer term, slower process. Look for silver to continue its run higher in the coming weeks as volatility is here to stay in the near term as it retests recent highs and looks to break through resistance of $30.

Silver Sep '20 Daily Chart

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - Oil's Demand Recovery in Focus

Oil prices are edging lower this morning as doubts regarding the demand recovery continue to persist well as concerns of increasing supply. OPEC+ are set to increase output this month of nearly an additional 2 million barrels a day, which comes as they lower their global oil demand forecast for the remainder of the year. A monitoring committee of OPEC+ are set to meet next week with Russian Energy Minister noting that he does not expect any decision regarding any further output cuts to be made. In addition, the International Energy Agency (EIA) cut their forecast as well down 140k barrels a day due to expectations of reduced air travel. Prices had been supported this week by data from EIA showing crude, gasoline and inventories all fell. The market remains bullish trend with today’s range seen between 40.08 – 42.91.

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 - Coffee Due For Bounce Back

A recent with “risk-off” mentality across the markets forced some long liquidation of various commodities, including the price of September coffee. While coffee has experienced a volatile and significant pullback to lows not seen since mid-May of this year, many traders believe that with a continued weakening US Dollar and strength in the US equities market, we should soon see September coffee prices hold support around the 110 area.

While several States are still struggling with increased COVID-19 cases (due to increased testing capabilities), traders should remain extremely cautious that until our world is fully operational and back to normal, coffee prices will continue to suffer volatile swings and major moves. I’ll say it again, until that day when restaurants are permitted to increase their level of capacity (or even remain open), home coffee sales will not be nearly enough to offset the gaping void of demand left unfilled by restaurants and coffee shops. In addition, many of these restaurants and coffee shops may never return.   From a technical perspective, we await a retest of the 120 level should take place over the next week and a close above 127 will be required in order to negate this most recent downturn.

Coffee Sep '20 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis - 08/14/2020
Stephen Davis discusses the grain futures markets. There is a high demand for grain in China amid a food shortage. The U.S.s and China are scheduled to meet Saturday. Hopefully some good comes out of it.
Currency - USD Needs Positive Data to Regain Momentum Higher

The USD has kept in a somewhat tight trading range, but has been unable to hold onto any early strength into this mornings action. The lack of progress being made on Capitol Hill coming up with a new stimulus package is providing support, as well as average Chinese economic data resulting in a negative shift in global risk sentiment. The dollar will need to avoid negative readings in industrial production and retail sales in order to regain some strength heading into the weekend. Near term resistance comes in at 9350 and support at 9303.

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.
Interest Rates - Interest Rates and the Almighty Dollar

Looking at the September 10-year note, yesterday’s move was significant in terms of breaking the recent uptrend. We had a high yesterday of 139-30 and a low of 139-07 and settled at 139-075. Today’s action is negative with the contract making a lower high, 13916, and a lower low at 139-00, and is currently trading at 139-045. A number traders should be focused on is 139-04 which happens to be the 50-day moving average. A close below the 50-day moving average would be deemed negative.  As I have written in the past, of the money being printed by the Federal Reserve has really hurt the dollar and at some point, will create inflation. The big problem that the Fed has created by printing all this money is the fact that they want rates near zero, which will in turn encourage individuals to borrow and increase spending. They are doing this for the purpose of propping up the economy. However, one has to worry if rates start to go up and the economy is still underperforming because of the virus, the Fed might in turn panic because inflation in this type of environment will kill any hopes of a V-shaped recovery.

10-Year note Sep '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.
Equity - Stocks Struggling to Build on Gains

The four major U.S. indices are all struggling to print new highs and have seemed to establish solid levels of resistance this week.  Following Monday’s and early Tuesday’s trades, I thought we were likely to see a new all-time high in the mini S&P. However, the trade has been rangebound ever since with the market having issues around the 3380 level. We’re seeing overbought readings from several technical indicators, and while we’ve struggled to continue the push higher this week, the selloffs haven’t been all that impressive either. This morning’s retail sales number was a bit mixed. We revised the prior reading higher but missed on the month over month change (1.2% vs. an expected 2.0%). The number less autos was a bit higher than estimated 1.5%, coming in at 1.9%. The data has sent the markets on a downward trend from where they were trading prior to the reading, but we’ll see how the rest of the day shapes up. Consumer sentiment is on deck at 9 CT, and consensus is expecting a reading of 71.9. 

E-mini S&P 500 Sep '20 60-Min 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.

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