RJO FuturesCast

September 24, 2021 | Volume 15, Issue 38

The Markets

Metals - Path of Least Resistance Remains Down in Gold

The gold chart is short term negative especially after this week’s recovery bounce and then sharp reversal down to $1,7375. A close under yesterday’s low of $1,7375 would open the potential for a washout back towards $1,700. However, while the Evergrande default has moved to the “back burner” for now, they did miss their interest payment due this week. The gold market is going to need something negative or risk off type event to rebound back above the $1,785 level. Until that time I remain bearish.Platinum had a huge rally this week from $900.00 to $1,0107 kissing that 200 DMA and then quickly retreating towards the $960.00 range.

Silver also experienced a bear market bounce this week and is again testing support at $22.00.

While precious metals temporally remain out of favor, metal traders cannot continue to write off prospects of longer-term inflation. Metals will find support. Remember that it is usually as simple as just finding a level on the chart that brings the buyers back!

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 Down on The Day

December silver is trading 22.455. down 25 cents for the day. It is a surprise as to why silver is so weak in light of weakness in the US dollar contract. It's important to note that we are getting close to seasonal lows. I would be cautious about initiating a new short position from this price point. However, the weekly chart below does show that the bear trend is in full force.

From a technical perspective, although silver is oversold, the market remains, and a breach below 22.00 would further erode the price. A close over 23.50 is needed to negate downside pressure. Give me a call or email me to discuss trading or hedging strategies from these levels.

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 Poised for Third Straight Week of Gains

Oil prices ramped up to 2-month highs as of Thursday afternoon and are poised for a third straight week of gains amid the prospect of an improvement in fuel demand as well as a larger than expected draw in inventories, which comes in the face of China’s first selling of public crude oil reserves. Stocks drew -3.481 million barrels for the seventh consecutive week with the deficit increasing to -80.422 million barrels and are now -36.637 million barrels below the five-year average, according the to the EIA. India recorded a 14.2% increase in refinery processing last month, suggesting perhaps a turn in domestic demand. This was strengthened by reports that Indian oil imports came in at a 4-month high with a year over year gain of 3.1%. Oil volatility (OVX) continues to fall to cycle lows (low 30s) with the market remaining bullish trend with today’s range seen between 69.89 – 73.78.

Crude Nov '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 - Evergrande Debt Situation, Commodities, and Cocoa

Commodities have been controlled by the Evergrande debt situation the past week or so - adding to an already volatile market. Each commodity has been affected by this situation in its own way. Cocoa has pulled back due macro uncertainty from China. Asian demand has a big affect on cocoa this time of year. As we head into the final quarter, cocoa demand has slowed in recent years. The slowdown during Q4 has mainly been due to the pandemic, there has been less chocolate consumption due to shutdowns and slowdowns.

A few key things to watch - N. American and European demand and weather in West Africa. If production and supplies continue to look like an issue, cocoa prices could end the year around 2800. The next few weeks should be telling, we’ll get more information about the current state of the global economy and see how Covid numbers look as vaccine rollouts continue and people try to continue to the new normal.

Cocoa Dec '21 Daily Chart
Agricultural - Bullish Canola Count Intact Above Minimum 851.5

Posted on Oct 14, 2022, 07:42 by Dave Toth

On the heels of mid-Sep-to-early-Oct's steeper, accelerated, 3rd-wave-looking recovery, the past week-and-a-half's boringly lateral chop is first considered a corrective/consolidative event that warns of a continuation of the uptrend that preceded it to new highs above 04-Oct's 891.0 high.  This count remains consistent with our broader base/correction/recovery count introduced in 13-Sep's Technical Blog following that day's bullish divergence in short-term momentum above 07-Sep's 809.5 minor corrective high detailed in the hourly chart below.

The important takeaway from this month's lateral, sleepy price action is the definition of Wed's 851.5 low as the end or lower boundary of a suspected 4th-Wave correction.  A failure below 851.5 will confirm a bearish divergence in daily momentum and defer or threaten a bullish count enough to warrant non-bullish decisions like long-covers.  A failure below 851.5 will not necessarily negate a broader bullish count, but it will threaten it enough to warrant defensive measures as the next pertinent technical levels below 851.5 are 13-Sep's prospective minor 1st-Wave high at 813.8 and obviously 08-Sep's 766.0 low.  And making non-bullish decisions "down there" is sub-optimal to say the least.  Per such, both short- and longer-term commercial traders are advised to pare or neutralize bullish exposure on a failure below 851.5, acknowledging and accepting whipsaw risk- back above 04-Oct's 891.0 high- in exchange for much deeper and sub-optimal nominal risk below 766.0.

On a broader scale, the daily log scale chart above shows the developing potential for a bearish divergence in daily momentum that will be considered confirmed below 851.5.  This chart also shows the past month's recovery thus far stalling in the immediate neighborhood of the (888.0) Fibonacci minimum 38.2% retrace of Apr-Sep's entire 1128 - 766 decline).  COMBINED with a failure below 851.5, traders would then need to be concerned with at least a larger-degree correction pf the past month's rally and possibly a resumption of Apr-Sep's major downtrend.

Until and unless the market fails below 851.5 however, we would remind longer-term players of the key elements on which our bullish count is predicated:

  • a confirmed bullish divergence in WEEKLY momentum (below) amidst
  • an historically low 11% reading in out RJO Bullish Sentiment Index and
  • a textbook complete and major 5-wave Elliott sequence down from 29-Apr's 1128 high to 08-Sep's 766.0 low.

Thus far, the market is only a month into correcting a 4-MONTH, 32% drawdown, so further and possibly protracted gains remain well within the bounds of a major (suspected 2nd-Wave) correction of Apr-Sep's decline within an even more massive PEAK/reversal process from 17-May's 1219 high on an active continuation basis below.

These issues considered, a bullish policy and exposure remain advised with a failure below 851.5 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, we anticipate a continuation of the past month's rally to new highs and potentially significant gains above 891.0.

Agricultural - Grains - Corn, Inside Week Forming

With a major Chinese property development firm on the possibly verge of collapse, December corn had a rough start to the week like most commodity and equity markets but has since rebounded very nicely. Yesterday we set the weekly high at $5.31 and at the time of this writing we are “knocking” on that door trading just a few cents under. Below is a weekly December corn chart, as one can see, this week December corn is trading inside last week's price range. If it closes out the week this way (and I think it will) next week’s key short-term numbers to watch will be $5.38 ½ on the upside and $5.06 ½ on the downside. I would recommend traders take their cue from the breakout. According to the Crop Condition and Progress Report that came out Monday, not much has changed. Good to excellent levels remain around 59% with about 10% harvested. With the wild, mixed weather patterns we saw this year in the corn belt I think yields will be the wild card going forward and traders should watch intently as numbers start to come in. Based on what I have heard to date I think we may see the USDA revise yields lower which should be supportive for corn as we head into fall.

 Watch December corn at $4.96 on the downside vs $4.99 and $6.39 ½ on the upside – basically a breakout on the May monthly chart. There are several minor areas of support and resistance inside that range that can help with short term market direction if violated as I mentioned above. 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 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 msabo@rjofutures.com.
Equity - Stocks Slide After Evergrande Misses Payment

U.S. stock futures are slipping this morning after two strong days from the Federal Reserve’s statements on Wednesday. The rally stemmed from traders welcoming the Feds delay of tapering of the central bank’s bond purchase despite the anticipated rise of interest rates in 2022. However, as of Thursday evening bondholders have not received payments from China’s Evergrande. Evergrande, a private-sector Chinese property developer, will now enter a 30-day grace period to meet the payments. If payments aren’t received during that period, they could trigger a default which many are comparing to the Lehman Brothers collapse. There is a general feeling out of Beijing that the government will step in at some point to intervene despite the massive $300 billion in debt that is owed. The ruling party does not want to see a lack in stability it needs to maintain the power they have achieved. Support today is 440500 and 436000 with resistance checking in at 447500 and 450000.

E-mini S&P 500 Dec '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 - S-T Mo Failure Insufficient to End RBOB Correction, But Beware

Posted on Nov 08, 2022, 07:51 by Dave Toth

In Fri's Technical Webcast we identified a minor corrective low at 2.6328 from Thur as a mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  The 240-min chart below shows the market's failure overnight below this level, confirming a bearish divergence in very short-term momentum.  This mo failure defines Fri's 2.8172 high as one of developing importance and a parameter from which very short-term traders can objectively base non-bullish decisions like long-covers.

Given the magnitude of the past three weeks' broader recovery however, this short-term momentum failure is of an insufficient scale to conclude anything more than another correction within this broader recovery from 26-Sep's 2.1877 low.  Indeed, overnights failure below 2.6328 only allows us to conclude the end of the portion of the month-and-a-half rally from 31-Oct's 2.4822 next larger-degree corrective low.  2.4822 is the risk parameter this market still needs to fail below to break the uptrend from 18-Oct's 2.3526 low while this 2.3526 low remains intact as the risk parameter this market needs to fail below to break the month-and-a-half uptrend.  From an intermediate-to-longer-term perspective, this week's setback falls well within the bounds of another correction ahead of further gains.  This is another excellent example of the importance of technical and trading SCALE and understanding and matching directional risk exposure to one's personal risk profile.

The reason overnight's admittedly minor mo failure might have longer-term importance is the 2.8172-area from which it stemmed.  In Fri's Technical Blog we also noted the market's engagement of the 2.8076-to-2.8159-area marked by the 61.8% retrace of Jun0-Sewp's 3.2758 -2.1877 decline and the 1.000 progression of Sep-Oct's initial 2.1877 - 2.6185 (suspected a-Wave) rally from 18-Oct's 2.3526 (suspected b-Wave) low.  We remind longer-term players that because of the unique and compelling confluence of:

  • early-Aug's bearish divergence in WEEKLY momentum amidst
  • historically extreme bullish sentiment/contrary opinion levels in our RJO Bullish Sentiment Index
  • an arguably complete and massive 5-wave Elliott sequence from Mar'20's 0.4605 low to Jun's 4.3260 high (as labeled in the weekly log active-continuation chart below) and
  • the 5-wave impulsive sub-division of Jun-Sep's (suspected initial 1st-Wave) decline

The recovery attempt from 26-Sep's 2.1877 low is arguably only a 3-wave (Wave-2) corrective rebuttal to Jun-Sep's decline within a massive, multi-quarter PEAK/reversal process.  Now granted, due to the magnitude of 2020 -2022's secular bull market, we discussed the prospect for this (2nd-Wave corrective) recovery to be "extensive" in terms of both price and time.  A "more extensive" correction is typified by a retracement of 61.8% or more and spanning weeks or even months following a 3-month decline.  Per such, the (suspected corrective) recovery from 26-Sep's 2.1877 low could easily have further to go, with commensurately larger-degree weakness than that exhibited this week (i.e., a failure below at least 2.4822) required to consider the correction complete.  Indeed, the daily log chart above shows the market thus far respecting former 2.6185-area resistance from 10-Oct as a new support candidate.

These issues considered, very shorter-term traders have been advised to move to a neutral/sideline position following overnight's momentum failure below 2.6328, with a recovery above 2.8172 required to negate this call, reaffirm the recovery and re-expose potentially significant gains thereafter.  For intermediate- and longer-term players, a bullish policy and exposure remain advised with a failure below 2.4822 required to threaten this call enough to warrant neutralizing exposure.  We will be watchful for another bearish divergence in momentum following a recovery attempt that falls short of Fri's 2.8172 high that would be considered the next reinforcing factor to a count calling that 2.8172 high the prospective end to the month-and-a-half 2nd-Wave correction.  In lieu of such, a resumption of the current rally to eventual new highs above 2.8172 should not surprise.

Economy - Futures Market Insight w/John Caruso - 09/22/2021
John Caruso discusses the latest news moving the economy today, including this afternoon's Fed announcement and what a tapering signal could mean for the economy.
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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