RJO FuturesCast

September 6, 2019 | Volume 13, Issue 36

The Markets

Metals - Gold Up After Disappointing Jobs Report

After a brief hiccup and slide overnight, gold is up once again Friday morning as investors flock like seagulls to the precious metal. RJO Futures Senior Market Strategist, Bob Haberkorn says “There is so much flight to safety right now and metals is where a lot of that money is going…traders that had been out of the metals market are coming back…and there’s been a lot of buying from new accounts”.

The latest spike in gold is most likely due to the August jobs report which came out Friday morning. According to the report, hiring in August was lackluster adding a measly 130,000 jobs throughout the month. However, the unemployment rate remained the same at 3.7% which is still just above the 50-year low. Nonetheless, all the uncertainty in the jobs market and the possibility of another rate cut has driven investors to the safety of gold.

Support and resistance levels for December gold are as follows:

Dec gold: Support level 1: $1500

Dec gold: Support level 2: $1460

Dec gold: Resistance level 1: $1546

Dec gold: Resistance level 2: $1566

Gold Dec '19 Daily Chart
Metals - Silver Sees Correction

Multiple bullish themes were wiped off the table this week with the U.S. and China planning to continue trade talks with a meeting in October and Hong Kong withdrawing the extradition bill that sparked protests. Global equity markets have been stronger the second half of the week as well. The silver market was on track for its fifth week higher in a row and still might is Thursday’s selloff finds support. Initial jobless claims remained steady and US non-farm payrolls look to come in slightly below previous readings. While the silver market has had quite the run recently, outside market forces are favoring the bear cam to end the week. The bulls are holding onto hopes that U.S. and European economic data rekindles recession fears and with Thursday’s pullback, any extended gains in the equity markets will continue to pressure. With December silver breaking the reversal point on 19.28 support comes in at 18.30 and 18.15. Resistance comes in at Wednesday’s high of 19.75

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 - Crude Recovery Passing EIA Test

As of Thursday morning, the October 2019 Crude Oil contract is trading up about $1.24 per barrel at $57.50 as the market weighs a number of factors, including a 4.8-million barrel draw from the holiday delayed EIA this morning. Also bullish for the market are some outside forces such as a weaker dollar, announcements of trade talks between U.S. and China, and a good ADP number this morning.

Of definite interest are the 200-day moving average and upper trendline pictured below. As many have noted the range of this market, I have also noted $57.50 frequently in these posts and the market seems to be respecting that level as of this writing. Further strength above these levels could bode well, whereas a failure could be a good opportunity to short back to the range.

Energy - Natural Gas Trending Up

Natural gas for October has been in an uptrend since August 23 and all moving averages are pointing up.  Higher highs and higher lows are prevalent in the charting. Today’s pivot is $2.411. Support comes in at $2.353 and $2.331 near yesterday’s low. Resistance is penciled in at $2.468, today’s high. A close above $2.500 could take natural gas to the next higher trading range, but beware the divergence in RSI, it still has not broken too far from the overbought condition, but is beginning a move downward. This may signal a down turn in prices should this continue.

The run up the last few sessions may be due to short covering. Stops have been violated and this may have lead the price to jump. The weather across 2/3 of the continental U.S. is forecast for above average temps, this should support the market a bit. The recent turn North of the hurricane has tempered the upside because most of the storm’s energy is out to sea. We are expecting a fairly large injection into storage with today’s numbers. 77-79 bcf is the amount estimated. Production remains high and the passing of hurricane Dorian to the North won’t affect the supply chain.

Softs - Cocoa Futures - Rally Stalled but Upside Potential Intact

After four strong trading sessions in the December cocoa futures, the contract took a pause and pulled back to the 2230 support level. Although most signs point to the potential of more upside, 2280 provided resistance technically. Demand seems strong after the European and Asian markets moved higher this week. With China trade talks seemingly back on, the U.S. equities also rallied. Brexit talks have added volatility to the currencies. The British Pound and Euro have strengthened, providing a push for cocoa prices. Production levels in the new calendar year will be monitored – will current weather conditions affect the longer-term output? West African weather fronts are supposed to produce substantial rain in the near term. Ghana and Nigeria are already dealing with disease in their crops, these patterns could add to the damage. As we approach the weekend, COT data could provide some insight on how traders are positioning themselves as we head into the final quarter of the year.

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.
Softs - Coffee Sideways Consolidation

Although December coffee prices have met firm resistance at the 9750 level, support levels are holding strong. In my last article, I had outlined the key reversal up that may be taking place in December coffee prices. The reversal up looks to be from the August 20th price action, where the high was 9565 and the low was 9340. This technical daily candle looks to have precipitated some good follow-through support. Key producers in Columbia may have added some support to December coffee prices, but offsetting any potential bull run is the currently bearish news from record high supply numbers from Brazil last season. So much of that supply needs to be met with strong demand, and with the U.S. stock market continuing to endure massive volatile swings, lack of resolution with ongoing U.S.-China trade talks, I would suspect it will be quite a bit of time until December coffee makes a bull run back to the 100 level.

There should be solid support at the 9500 while the consolidation in price action takes place. Yesterday’s low of 9420 falls short of the 9340 reversal-up day. Upside resistance comes in around 9750, and a break above this well-defined range could signal a visit back to the 100 level.

Agricultural - Grain Futures Update w/Stephen Davis - 09/06/2019
RJO Futures Senior Market Strategist Stephen Davis discusses the grain futures markets.  If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7181 or sdavis@rjofutures.com.
Agricultural - Same Old Song and Dance in Corn

December corn briefly traded up to 362 early yesterday, before a negative ethanol production number reminded traders there is no demand right now.  Ethanol production for the week ending Aug 30th, was down 2.4% vs. last week and down 6.8% vs last year. Corn use has already met this year’s USDA estimate of 5.425 billion bushels. Stocks were 23.801 million bushels. This is up 3.5% vs last week and 4.8% vs last year. The global grains production for the 2019-2020 season is seen at 2.7 million tonnes, up .9% from prior forecast and 2.1% higher than last year according to UN’s food and ag organization. Some firms see the 2019-2020 Brazilian summer corn crop at 26.3 million tonnes, roughly the same as last year.  Planted area is also seen as basically unchanged at 4.9 million hactares. Corn support comes in at 352 and resistance at 365.  A close over 376 is needed to wake up the bulls.

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.
Currency - Resumption of Trade Talks Causes Safe-Haven Liquidation

U.S. dollar futures moved lower on Thursday morning for a third day in a row, down about 100 points off the weekly high. Tuesday’s “evening star” pattern is a reversal signal that indicates the top in the dollar may be in place. Remember, the USD is currently the reserve currency of the world, so when market tensions are high, money typically flows in to the dollar. With news of a resumption of U.S./China trade talks, we are seeing money flow out of the cash market and back into equities. Safe-haven currencies, like the yen and the Swiss franc, are selling off today as renewed optimism takes hold of economic sentiment. The British pound, and to a lesser degree, the euro, have caught a bid this week and moved to the upside from oversold levels.

Fundamentally speaking, pound bulls are optimistic about a “just get it done” attitude regarding the Brexit situation. The falling dollar and risk-off sentiment is aiding commodity currencies as well. It appears a bottom may be set in the pound. However, there is political uncertainty, and therefore trade risk, with the possibility of Boris Johnson being ousted as prime minister in the case of mid-October elections. But, the big topic in the global economy is clearly the trade war. President Xi is in no hurry to make a deal. He is hoping Trump will not win next year’s vote, allowing Xi to most likely close a better trade deal with a more docile US president. Furthermore, Xi has been rolling out punches of his own, as his patience with Trump’s stubbornness is dwindling. In short, I would not hold my breath on a deal coming out of this supposed meeting next month. In the case of another negotiation failure, safe-haven markets are likely to rally once more after selling off and finding support at current levels.

Interest Rates - U.S. Bonds On Fire

The bonds have been on a tear for the for the last few months with the December contract hitting contract highs yesterday at 166.23 on continued unrest in Hong Kong, ongoing tariffs and a weak PMI reading yesterday that came in at 49 and change.  Any number that comes in below 50 is considered a contraction in the economy. Overnight, we saw some decent economic news out of Europe which has pushed yields up and spilled over to the U.S. bond market. In general, the world economy is no doubt slowing, with many countries near or at recession levels, and at the same time, the U.S. is acting far better, in fact, some would argue that data has been on the strong side as of late. A key number to watch this week is the monthly employment number. Most have predicting in the last few months that the non-farm payrolls would be slowing down, but we have actually seen very good numbers. So, Friday’s number will be watched closely as many doves are hoping for a bad number, so the fed will continue to cut rates. One reason the bonds have been so strong the last few months is that the European yield curve is negative. If one were to put money in a European bank for let’s say three months, they would lose money as you are basically paying the bank to hold your money because rates are negative. So, many investors overseas are putting their money in U.S. treasuries, despite the low rate in the 10-year note, which is around 1.46%.   The yield is very low but at least it’s not negative.

30-Yr T-Bond Dec '19 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.

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