RJO FuturesCast

August 27, 2021 | Volume 15, Issue 34

The Markets

Metals - Gold Futures Marking Time

To taper or not to taper? When and how much? Does the rate of inflation warrant higher rates? When are we going to stop paying people more to stay home than to go out and work? When will the Delta variant peak? Are we going back to lock downs? Trading gold is not like buying every dip in the S&P. Everybody always says that “the market doesn’t like uncertainty”. Well it seems certain that the Fed is afraid to take away the punch bowl, but at some point, we will have to normalize rates. It would be better for the markets if it were done slowly and incrementally as opposed to sudden and sharp hikes. We have to keep inflation under control. If the Fed lets inflation run away, we will have bigger problems than payer slightly higher rates. We will see how Chairman Powell handles his speech today at the Jackson Hole Symposium. A “virtual” Jackson Hole.

Meanwhile gold trades between $1,810 to $1,780 waiting for some clear direction.

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.
Metals - Silver Should See Support

The silver market is looking to set its seasonal lows sometime in the next few sessions. Currently, the silver market is trading around near $24.00 in the December contract.

The recent washout has caused the silver bulls to pull back and reassess where strong solid technical support is. The US Fed meeting at the Jackson Hole symposium underway. Sad to say, but the recent rise in the rate of new infection in the US is a genuine concern and could force the Fed hand from tightening the money supply.

From technical analysis, silver should find support here. Any absolute washout to the downside in Silver should be limited.  Sideways to higher price action will prevail in the coming sessions. Reach out to me to discuss possible options strategies.

Silver 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 etesfaye@rjofutures.com.
Energy - Oil Reflates 10% Week Over Week

Oil prices are bouncing back after falling for the first time in four sessions amid renewed concerns of the impact of the delta variant on global recovery demand. Oi has reflated over 10% week over week as the USD has come off trend resistance with a strong inverse correlation developing with the USD of -0.71 on a 15-day duration. OPEC producers increased their exports during the first part of August, which was led by both Saudi Arabia and the UAE. Weekly EIA data showed inventories falling -2.98 million barrels, falling to lowest level since January 2020. Exports fell from last week to 2.812m bpd with refinery utilization up for the fourth consecutive week. Oil volitivity (OVX) has collapsed relative to last week down to the mid-30s with the market remaining bullish trend with today’s range seen between 62.11 – 70.92.

Crude Oil Oct '21 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 Futures Above 2600, but For How Long?

December cocoa futures continue to move higher as we head into the weekend. The market is trading above 2600 and appears to be building on this recent rally, but for how long? The techincals are at a key point right now, if they can break and hold above 2635, last week’s highs are back in site. The market is feeling overbought though. COT data will show where trader’s minds are after the close.

The fundamentals are telling a much different story. Production numbers are high, demand is still low. If cocoa sees record production data, prices will move lower – possibly retesting 2450 again. If demand stays weak, those levels are very realistic in the short-term. With Covid-19 restrictions coming back into play, numbers surging in all parts of the world and no sign of slowing down, prices in cocoa will most likely turn lower again. Traders should look at puts in the December or March contracts.

Cocoa 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 - Grains - More Consolidation

Today is September grain option expiration, last week we watched September corn close near the lower end of the weekly range. Since Monday, corn reversed course and headed back higher although still trading in the major range that I mentioned last week. Monday’s Crop Progress Report revealed further declines in the good to excellent category which now stand at 60% and this should help support the market. The market looks poised to close near the highs for the week. In last week’s article I wrote the following “The market may be getting ready for a possible bullish set up. Why do I say that?  Look at the volume, open interest, and price (see Sept corn daily chart below). The price has fallen over the last week (although still trading in the “big picture” bullish range) volume has fallen and so has open interest. This generally signifies that the market is ready to strengthen and turn bullish as weak longs are pushed out of the market.”  This came to fruition so far this week with corn gaining about 15-cents from last week’s close and I believe there is more to come next week.

In previous articles I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside. I still believe a close above or below those prices are crucial to establishing a new direction.  There are several, what I consider, minor areas of support and resistance inside that range that can help with short term market direction if violated. Call me at 1-800-367-7290 for more in-depth discussion on these numbers.

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.
Agricultural - Lean Hogs Dragging Lower

Cash hogs continue to trend lower week after week. October hog futures closed lower yesterday, but were substantially off the lows showing a little support around $87. The cold storage report that came out was seen as a bearish factor so it should lend to a continued down trend in the cash market and follow through in the futures. Seasonally, we are coming into a period of increased production, further implicating that prices should continue their downward trend. The USDA pork cutout, released after the close yesterday, came in at $109.73, down from $112.22 on Monday and $116.46 the previous week. This was the lowest the cutout had been since June 25. A year ago, the cutout was 75.49, and two years ago it was 79.08. The CME Lean Hog Index as of August 20th was 107.90 up from 107.56 the previous session but down from 109.67 the previous week. This leaves October hogs at a $20.98 discount to the cash market as compared with the 5-year average discount of $5.56. Internationally, China pork production is back over pre-Covid levels and implicated that less imports are expected. I would look to short the Oct hog futures with a price target at $83.50 and a risk level up to $92.50, keeping within the current range of the market activity. December futures would look to have more of a stronger sell-off with the actual current increase in production coming to market The USDA estimated hog slaughter came in at 474,000 head yesterday. This brings the total for the week so far to 911,000 head, down from 949,000 last week and 953,000 a year ago.

Lean Hogs Oct '21 Daily Chart
Equity - Stock Market Higher as it Awaits Powell's Speech

The U.S. stock market had some gains early Friday erasing loses seen Thursday as traders are waiting to hear remarks from the Federal Reserve Chair Jerome Powell. There were some hawkish comments from Fed policy makers earlier in the week that derailed the market, this adding to the crisis in Afghanistan which saw mass casualties including U.S. service members. Ester George, President of the Federal Reserve in Kansas City, stated she would prefer to see asset purchases and monetary policy accommodations reduced “sooner rather than later”. Today's remarks from Powell should reveal a fuller picture of the central bank leader’s ideas on the pace of the U.S. economic recovery in the wake of a surge in covid-19 cases due to the delta variant. A definitive plan is not expected today but it will be interesting what road Powell takes as his comments have been more dovish than the others suggesting a more let’s wait and see attitude on the economy before making any adjustments.

Support today is 445500 and 444500 with resistance showing 448500 and 451000.

E-mini S&P 500 Sep '21 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 - 08/26/2021
John Caruso talks about today's moves in the futures markets and what to expect tomorrow ahead for Fed Chairman Jerome Powell's speech.
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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