RJO FuturesCast

September 9, 2021 | Volume 15, Issue 36

The Markets

Metals - Gold Market Without a Direction

Gold traders are struggling to find direction. It seems likely to see tapering sooner rather than later, so last weeks rally has quickly lost steam. Sideways is a trend and easily traded while it lasts, but a market cannot trade sideways forever either. Gold has recently gone through a very sharp selloff and an equally sharp recovery bounce. But golds inability to breakout above $1,830 warns for trade to revisit August swing low of $1,677 range. If gold closes below $1,780 then $1,750 to $1,720 is in the cards. Of course, anything out of the Fed indicating a “delay” in tapering would be supportive to gold prices moving back towards $1,830 range. However, the strength in the dollar and the believe that the Fed will do the right thing has pressured gold below $1,800. Other precious metals like silver and platinum have also struggled to hold rallies and find direction.

It's my opinion that the Fed has created a dependency on easy monetary policy. We cannot depend on the Fed to always be there! It used to be easy to be bullish gold. You could always make an excuse…safe haven trade, trade it as a currency, or inflation hedge. The Fed needs to get out of the way and let traders detox cold turkey. Just my opinion. It won’t be easy, and it won’t be pretty, but it is necessary.

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 - Oil Steady as US Output Offset by Clouded Demand

Oil prices are holding steady as of Thursday morning as demand concerns regarding the delta variant have been largely offset by production declines in the Gulf of Mexico. Reports are that only about 20% of oil production have returned, which equates to about 1.4 million barrels per day lost with the Gulf’s offshore wells making up 17% of US output. The EIA revised its 2021 oil production forecast by 200k bpd down to 11.08 million barrels per day. Weekly API data showed a smaller crude drawdown than expected with a greater than expected drawdown in gasoline and distillates. Oil still possess a strong inverse correlation on a 15-day duration with the US Dollar of -0.82 with the market remaining bullish trend as oil volatility (ovx) has fallen to the low 30s with today’s range seen between 67.21 – 71.36.

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 - Comeback in Cocoa Futures

September has been a good trading month thus far for the bulls in cocoa. December cocoa moved to a multiyear high, but technically stalled around 2720 making that new resistance. Recent findings out of Ivory Coast’s production data shows that there will be a continued decline in supply. This is also being found in other key growing areas in West Africa. Lower production expectations mixed with stronger short-term demand has led to the recent rally in prices.

If restrictions begin to ease and Q4 data is stronger than the first ¾ of the year look for prices to continue to move in this direction. For now, weather appears to be a nonfactor in the soft and this market is mainly being driven by global supply and demand. Traders should continue to follow the technicals on pullback for entry and exit points but keep an ear on any changes to demand.

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 Still Searching For Support

After some consolidation on the daily December corn chart last week the market broke a bit lower this week but appears it may be finding support around the 200 day moving average (see chart below) couple the 200 MA around $5.04 ½ with the monthly May low $5.00 ¼ I mentioned in several articles and the market appears ready for a major move. Tomorrow's USDA numbers could be the catalyst to break this market lower or could cause this market to take off like a rocket. As I see it most of the negative news has been “baked in” to the current prices so in order to break it lower we will need to see some rather bearish numbers otherwise look out, we could see a nice pop. USDA Supply/Demand and Crop Production will be released at 11am cst tomorrow. If you would like to receive RJO Insights right after the Reports are released please email me your contact info and I will add it to my distribution list. 

The key numbers I think that are relevant 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.
Agricultural - Hogs Appear Overbought

The hog trade was down yesterday close to $2 for the October contract. Right now, the market is in overbought conditions and is expected for some long liquidation unless we see some better export numbers. China, being a major market mover, has imported 8.9% less in August as compared to a year ago. The USDA pork cutout, released after the close Friday, came in at $106.99, down from $108.19 on Thursday and $115.45 the previous week. In the last two years, the cutout has traded near $70.00 in early September. There is a lot of outside forces pressuring this market to the downside and if things continue on the international stage as they are with respect to the import and export numbers, then the market has some severe downside risk. I still like taking the short side of this in the Oct futures to $85 level, I would look to reverse above $92.50. The USDA estimated hog slaughter came in at 463,000 head Friday and 28,000 head for Saturday. This brought the total for last week to 2.398 million head, down from 2.438 million the previous week and 2.466 million a year ago. Friday's Commitments of Traders report showed managed money traders were net buyers of 4,182 contracts of lean hogs for the week ending August 31, increasing their net long to 83,389. Non-commercial & non-reportable traders were net buyers of 2,629, increasing their net long to 77,151.

Live Hogs Oct '21 Daily Chart
Equity - Stocks Up on Jobless Claims

Stock futures were up this morning trying to hold off a 4th consecutive day of losses as traders are torn between a hot job market and the worries of soaring Covid-19 infections. Wednesday showed the DJIA and S&P 500 posting their 3rd consecutive days of losses as the tech-based Nasdaq fell for the first time this week. The market has taken bad news in stride, but August’s poor jobs data put a damper on 4th quarter strength. Another release by the Labor Department showed that open jobs hit a new record with nearly 11 positions remaining unfilled. New jobless claims came in today at 310,000, a pandemic era low. It yet remains to be seen how investors will try to sort the hot job market that is losing steam based on all the new cases of the Delta variant Covid-19 strain.

Support today is 449300 and 447500 with resistance showing 453000 and 454500.

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 Outlook w/John Caruso - 09/08/2021
John Caruso talks about the latest news moving the futures markets including some material reversals in metals.
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.

Coming Up Next Week...

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