RJO FuturesCast

October 2, 2020 | Volume 14, Issue 40

The Markets

Metals - Gold Continues to Follow Equities×

December gold future have been bouncing around in remarkable fashion over the past few weeks. The average range on gold from top to bottom on any given day is $35. That would be $3500 profit or loss on a single futures contract. We have been close to $2000 just a few weeks ago only to come crashing down to $1850 and now are back above $1910. The market fundamentally has lost a bit of steam as the new bullish themes for gold seam to have faded away. The US dollar index is also pressuring the precious metal and has also finally broke out above 94.00 which was what the market was looking for after several months of consolidation sideways. In my view the gold market has been broken down and done too much technical damage to return back above $2000. US equities are down currently and so is gold. Traders should remember the covid crash and the market reaction in gold, aggressively selling off. Should another crash in equities have any different reaction for gold? I wouldn’t bank on it. Technically gold should be coming down to around 1800 for a psychological retest of a level that some traders will see as value while others who have fought the bears throw in the towel and puke the long position. In the short term, the more aggressive the selloff is in equities the more down gold will likely be. Gold needs a close above 1955 to break a down trend with 3 points of touch going back to August 18th. Until this happens, look for gold to continue its choppy ride lower along with equities.

Gold Dec '20 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 jgraves@rjofutures.com.
Metals - Silver Trading Relatively Flat×

Dec silver is trading 24.270 this morning down about 2 cents. Silver is relatively weak with all the news it has been getting. Silver, even discounting the positive COVID test of President Trump, is relatively flat. Even sellers don’t have real control of the market. Then this leads me to believe that silver is really concerned with deflation. With the house passing, 2.2 trillion stimulus bill and GOP is looking to get 3.7 trillion, we are at crossroads. It remains to be seen when this will get signed by the president. It is an election year on top of that and silver is not getting even the flight to safety type of buy action. In my view, silver should be hovering at around $30.00. the fact that silver is trading this way and looking at “inside week” price action. Sellers can get really active if we go below 22.50. A break above $25 needed to give the bulls some confidence. 

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 Down as President Trump Tests Positive for Covid-19×

Oil prices fell nearly 4% yesterday on a dampening global demand outlook as well as a rise in output from OPEC adding to the already negative supply side fundamentals. The selloff has only continued this morning with the market down nearly 5% on reports that POTUS has been diagnosed with the coronavirus. The increase in supply came largely from Libya and Iran, who are both except from production cuts set by OPEC+, with September output increasing 160k barrels per day from August. Some support may have been garnered earlier in the week from reports of progress in US stimulus talks as well as weekly inventories showing a decline of 2 million barrels. Oil volatility (OVX) has entered a bad bucket regime with the market remaining bearish trend with today’s range seen between 36.51 – 40.14.

Crude Oil Nov '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or aturro@rjofutures.com.
Softs - Cocoa Futures - Tricks and No Treats×

Cocoa continues to show weakness, both fundamentally and technically. Demand for cocoa has been a concern for trader’s all year but as we enter “chocolate season” we see that even chocolate/candy purchases have been affected by Covid-19. With the majority of the U.S. putting restrictions and guidelines on Halloween festivities, chocolate companies are reporting a decline in purchases. If children aren’t going door-to-door to collect candy in most areas, what will earnings look like for Q4 for chocolate companies?

For a market that was already hurting for demand, this could push futures prices below 2400. The chart appears to be in correction territory, if 2480 is met and taken out, 2400 could be here before Halloween. 

Key growing regions are also on pace to have higher production numbers in the near-term, long-term however, Ivory Coast could have a decline in production for the 2021 season. Trader’s should monitor company earnings and ICCO estimates as we trade through the final quarter of the calendar year.

Cocoa Dec '20 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 - Grain Futures Update w/Stephen Davis - 10/02/2020×
Stephen Davis discusses the latest news driving the grain markets. Stocks are currently tighter which may drive corn prices higher.
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.
Equity - Stocks Fall After President Trump Tests Positive for Coronavirus×

U.S. stock futures were trading sharply lower this morning on President Trump’s announcement that he tested positive for Covid-19, this coming on a day when the last job report before the election was to be the big news.  The Dow was down nearly 400 pts and the S&P 500 and Nasdaq were headed for even bigger losses on the open as traders reel on what this means for the upcoming election and the new economic stimulus plan.  “Markets (being impersonal) will focus on whether this affects the election outcome or public health policy,” UBS economist Paul Donovan said in a note Friday.  ‘The future presidential debates may not happen; these were not seen as especially significant. Those opposed to mask-wearing may revise their views, and the president’s experience may impact US public health policy.”

The Labor Department released this morning that nonfarm payrolls rose by a lower than expected 661,000 and the unemployment rate was listed at 7.9 %, the last number before the election.  Projections were a gain of 800,000 and rate of 8.2%.  This payroll miss was largely due to a drop in government hiring as home schooling continues.

E-mini S&P 500 Dec '20 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 Forecast w/John Caruso - 10/02/202×

Well, welcome to Q4 2020 I suppose….

Yesterday our Implied Vol signals were flashing -6% in the Nasdaq which put it in the 95% percentile of “complacency” on a 10yr look back. Volume also declined on yesterday’s punch higher in stocks, another signal that the “big” money had little conviction at those price points. The President contracting Covid-19 or not, we still think there was a high likely hood of waking up to a morning such as this. Copper prices fell -5.5% yesterday, along with Oil’s -3.5% plunge – two economic bellwether commodities collapsing like that intraday is usually a sign of trouble. We bought bonds yesterday, rather than shorting stocks – which was the correct call. The 10yr yield has backed off approximately 6 bps from yesterday’s open, giving us a nice bounce in the 10yr Notes.  Albeit, not a good thing having the leader of the free World Covid-positive, we still think the stimulus bill is likely a more important factor for markets in the near-term. Yesterday we took our first steps in positioning for “Risk-off” in Q4 2020.

Sept Non-Farm Payrolls aka Employment Report: 661K jobs created vs 868K expected; 7.9% UE rate vs 8.2% expected

Global Equities:
USA: Sp500 -1.47%; NQ -2.08%; RTY -1.68%

EUR: GER -1.10%, UK -0.88%, FRA -0.88%

Asia: Shanghai -0.20%, KOSPI +0.86%

VIX: Signaling immediate overbought overnight to the top of the range.  >10% bounce in the VIX last night. 

Commodities Overnight:

Metals: Gold/Silver flat following a volatile overnight session. Gold may have some more “gas” in the tank, however we still are of the strong opinion that the US Dollar may attempt to reverse higher in the near-term providing us better entry points in Gold. 

Copper: The “Dr” got trashed yesterday -5.5% signaling impending doom – and it was correct. Copper is a top long in Scenario 3, but that’s in the past now. We expect Copper to underperform going forward. 

Oil- down -4.29% overnight to 37.00, now signaling immediate oversold, but flipped back to BEARISH TREND yesterday

Agriculture:
Soybeans down -0.88%

Corn down -1.18%

Coffee down -0.93%

Sugar down -1.60%

Looks like a risk off equity/commodity basket to me.  Good Luck today, plenty to do.  We’ll be in touch.

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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