RJO FuturesCast

September 2, 2021 | Volume 15, Issue 35

The Markets

Metals - Gold Struggles to Rally

Unfortunately for the gold bulls we are going to have to see some weak economic data or “bad” news for gold prices to break out above the $1,825 to $1,830 range. The gold market has lost its luster after the initial euphoria of a “dovish” fed at the virtual Davos symposium. The gold traders are now starting to realize that we are probably closer to tapering than what they would like. Tapering does not equal rate hikes though, and the Fed is still at emergency levels of liquidity. The supply chain is still faltering, and people are still being paid more to stay home than to go to work. Surging Covid cases and mask mandates are keeping a lid on the economy and that’s the only reason that gold is still above $1,800 in my opinion.
I remain long term bullish on gold, however, I still believe that the market may still need to move lower again first. Perhaps to $1,750 or even $1,720

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 Waiting on Nonfarm Payrolls

The December silver contract saw a recovery last week off the $23 support level but was unable to continue that this week. Although the market has held at resistance here, it has been unable to push through 24.30 and continue the trend higher. Weakness in the US dollar should be providing support as it did last week but the market seemed to care less about the dollar’s continued slide lower. The silver market is awaiting Friday’s nonfarm payrolls where a favorable number would bring tapering talks back in center focus for the Fed. The bears still look to be in control, and it looks like choppy trade will continue in the near term with last week’s rally not being significant enough to reverse the trend and push the market through the key $24 level. A break of Tuesday’s low of $23.83 would push the market back down to support around $23. However, if trade can push the market above $24.30 the market could see a move higher to $24.80 and then $25.00 as the next areas of resistance. Back and forth trad looks to continue until some fundamental news can give silver the push it needs to extend a move in one direction.

Silver Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - WTI Back Over $70 a Barrel

Oil prices are ramping higher as of Thursday morning powered by ongoing concerns regarding restricted oil production in the Gulf with reports of 80% of output still down coupled with a sharp decline in oil inventories. US inventories reported a draw of 7.169 million barrels and are now -73.006 million barrels below last year and -27.795 million barrels below the five-year average. OPEC+ agreed on Wednesday to continue phasing out production restraints by adding 400k barrels per day in October while simultaneously raising their demand forecast for 2022. Further lending support are reports that Russian oil output declined last month as well as continuation in weakness in the US Dollar. The US dollar is now carrying a strong inverse correlation of -0.90 on a 15-day duration. Oil volatility (OVX) has continued to fall into the low to mid 30s with the market remaining bullish trend with today’s range seen between 63.15 – 71.67.

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 - Slow Grind Higher in Coffee, With Focus on a Tighter 2022

Bullish developments in several areas should continue to provide underlying support, so coffee is unlikely to fall sharply from its current price levels in front of the holiday weekend. A weaker Brazilian currency played a key role in coffee finishing the day in negative territory as that may encourage brazils farmers to market their remaining near-term supply to foreign customers.

The international coffee organization said that this seasons global Arabica exports through the end of July came in at 82.63 million bags which compares with 78.89 million at the same point last year. Brazil’s green coffee exports last month came in at 172,242 tonnes which compares with 191,124 tonnes during August of 2020.

Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short term was given on a close over the 9 -ay moving average. Near term upside objective is 20120. The next level of resistance is around 19810 and 20120, while the first support comes in at 19310 and 19110.

Coffee 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 tcholly@rjofutures.com.
Agricultural - Grains - Have we Found Support?

After a solid finish last week December corn has pulled back slightly this week to a support area. Dec corn continues to trade inside the bigger range. It’s important to note that we are finally seeing a carry come back into the market as the September-December corn spread is trading around -8 cents, the best we have seen it since all year! The Crop progress Report that was released on Monday showed no change in the good to excellent category and stood at 60%. In last week’s article I mentioned “This came to fruition so far this week with corn gaining about 15 cents from last weeks close and I believe there is more to come next week.” So far, we have not seen any additional upside but we also have not seen a major failure.

In previous articles I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside but that was based on September corn. The key numbers, I believe to watch, for December corn are $4.99 on the downside and $6.39 ½ on the upside – basically a breakout on the monthly chart. Those numbers are based off December corn month of May high and low. Every month since then has been inside May’s trading range. 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 Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or msabo@rjofutures.com.
Interest Rates - Interest Rates Trading in a Range

Looking at the December note, we have a very narrow range today with a high of 133-20 and a low of 123-07 and are currently trading at 133-13. The market is setting to digest some key economic numbers that began today. We had ADP employment and ISM manufacturing early this morning with the reading at 374K which was a big miss as the street was looking for 613K, on the upside, the ISM came out a tad better than expected at 59.9 vs 58.6. There is no doubt the numbers we have seen in the past few weeks are due to the presence of the Delta variant. It’s too early to know for sure if this is the start of a weakening economy or just a pause of the powerful and strong numbers that we have seen since early summer. Last week, many fed governors were on tape stating they would like to see the fed start to taper, which is the fed buying bonds to keep rates artificially low. As the economy has shown overall to be very resilient many wish the fed would stop. The problem with their view is that the Fed stated that they still see risks in the economy and indicated that a taper was not imminent. So, we have dissent from many fed governors and Chairman Powell which is not allowing traders to get a firm handle on the next move in treasuries. Friday is the monthly employment report and if it comes in stronger than expected, one should anticipate a sharp rise in yields and lower prices.

10-Year Note Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.
Equity - Stocks Higher Ahead of Jobs Data

Chances are you’ve already heard that we’ll see the non-farm payroll data for August tomorrow.  Market participants are anxiously awaiting the data as it is the most important release between now and the FOMC meeting that takes place 9/21 & 9/22.  Fed Chair Powell continues to insist upon seeing better employment figures before he’d consider tapering.  Tomorrow’s figures will help traders determine whether or not the Fed is likely to announce tapering later this month or if they’ll hold off until the November meeting.  Today’s jobless claims data was encouraging, coming in at the low end of expecations (340K).  That figure is the lowest since the pandemic began about a year and a half ago. 

Estimates are calling for about 740k jobs added tomorrow and an unemployment rate of 5.2%. While the headline figure would be down from July (943k), that would be another solid reading.  Many market participants seem to be hoping for a more tepid reading in hopes it will force Powell to hold off until the November meeting. With uncertainties still abound concerning the delta variant and unemployment benefits ending in a matter of days, I think that crowd may get their way regardless. A blowout number (amongst other factors) may force his hand, but I wouldn’t be surprised to hear him cite these issues as reasons to hold off until November either. 

E-mini S&P 500 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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