RJO FuturesCast

October 1, 2021 | Volume 15, Issue 39

The Markets

Metals - Gold Seeing a Slight Dip Friday

Despite a dip in the U.S. dollar and bonds, we saw gold futures trend a little bit lower this morning giving us a rather sluggish start to Q3. At the time of this writing, December gold is trading down .01% after we saw a 2% rise on Thursday, so not all is lost, but it is something worth following closely as gold is trading at $1757/oz.

It is interesting that we are seeing a loss today as most investors seem to be rather bullish on gold. When you take into consideration the weakness of the U.S. dollar and the probable tapering on bond buying by the Fed, it should create some opportunities in gold. The fundamentals are all there for gold to go on a bullish run.

Gold Dec '21 Daily Chart
Energy - Oil Set for Sixth Consecutive Week of Gains

Oil prices are holding steady as of Friday morning and are poised for their sixth consecutive week of gains as the market assess the impact of OPEC+ potentially raising their output production by 400k barrels per day in November and December. This comes as OPEC+ noted an increase in output in the month of September, in large part due to a surprise output increase from Nigeria. Crude stocks rose for the first time in seven weeks, up +4.578 million barrels bringing stocks down to -73.884 million barrels below last year’s levels and -32.079 million barrels below the five-year average. The market continues to remain bullish trend with today’s range seen observed amid yet another higher low between 71.47 – 77.52.

Crude Oil 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.
Agricultural - Grains - Corn Breakout on Weekly Chart

In last week’s Grain Insight article, I advised traders on the following “Below is a weekly December corn chart, as one can see, this week December corn is trading inside last weeks 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.”  We got exactly that, a breakout on the weekly chart to the upside (see below) which suggests to me further upside. Yesterday’s Grain Stocks Report was inside expectations, leaning slightly bearish but not enough to damage the bullish chart pattern. For now, I think traders should remain cautiously bullish.

These numbers still remain the same for now - 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 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.
Interest Rates - Volatility in Interest Rates

Volatility is starting to pick up the treasury complex, overnight, we saw a high in the December 10-year note of 131-235 and a low of 131-11 and currently we are trading at 131-135. The theme of the last week has seen the note breakout to the downside and yields, which move inversely to price, follow suit making new highs for move. What we have been seeing here is the ongoing talk of the Fed possibly begin to taper. What that means is that the Fed has been buying bonds monthly since the beginning of the pandemic to keep rates artificially low to make borrowing cheaper. Unfortunately, while doing this, even as the economy has performed, the market has been sniffing out inflation. All one has to do is go to their local grocery store and gas station to see increases in both. Grain and meat products have gone up substantially and it is starting to hurt the medium and lower the class. As prices continue to skyrocket, some can’t afford to buy their wants and needs. All along, Fed Chair Powell has said he believes the rapid move in inflation is “transitory”, meaning it should subside soon.  Unfortunately for most people the market has lost faith in this believe as higher prices for consumers does not look to slow down anytime soon and the Fed might be forced to hike rates much earlier than expected.

10-Yr 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 Mixed to Kick Off Q4

Global equities were lower overnight, and domestic markets seem to be struggling to hold onto some signs of strength early in the day.  All four indices have made new lows for the week.  Rising yields have been hammering tech stocks, and the Nasdaq is now off it’s all-time high by a bit over seven percent.  In addition to yields, supply chain issues are piling up, and the forecasted timelines for them to get straightened out are not encouraging.  A more hawkish Fed has the dollar rallying, Chinese crackdowns, debt ceiling issues (likely just political theater for now) persist, and what’s looking to be a rough road to passage on the next infrastructure bill have also managed to pump the brakes on what’s been a tremendous rally.     

While there’s a fair share of doom and gloom out there, the Nasdaq is still up thirteen percent on the year following this drop.  Many medical professionals are suggesting Delta has peaked, and there was tremendous news from Merck and Ridgeback Biotherapeutics.  Evidently they’ve developed a pill that has greatly reduced symptoms and death amongst the high risk population when administered shortly after showing symptoms.

E-mini S&P 500 Daily 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.
Economy - Futures Market Outlook w/John Caruso - 09/30/2021
John Caruso takes a look into what's happening in the markets today as we have somewhat of a hectic close to Q3.
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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