RJO FuturesCast

There you have it! Proof that gold needs the Fed’s easy money policy to rally. At least for the short term. Bad economic data leads traders to believe that the Fed cannot take away the punch bowl just yet. However, I still believe that the next big bull market in gold will be driven by long term inflation. How long will they try to tell themselves that this is “transitory”? How long exactly is transitory? How much more evidence does the Fed need to see in terms of inflated costs?

But let’s focus on today. The monthly jobs report was a big miss from what the market was looking for. The market was expecting added jobs in September to be in the neighborhood of 475,000 to 500,00. What we got was 194,000 jobs added. A big miss. The lowest number this year! So, a big miss like that ahead of next months Fed Announcement leads traders to believe that the Fed will not need to get aggressive with tapering or move projected rate hike dates up. Gold is up $22.00 after this bad jobs number. If gold today can close above $1,781, the 5- day moving average, that would be considered friendly to the gold bulls. Next technical level to the upside would then be $1,800.

The Silver market is looking to set up for a rebound. Currently, the market is trading 10 cents positive. The big news is that Senate extended the debit limit by two more months. I think President Biden will get his bill passed down the road, and there may be an inflation pressure around the corner. Current price action will probably invite some bargain hunters to get involved on the long side at these price levels.  

The technical landscape slightly tilted in favor of the bull camp. A close over 23.00 will signal near-term lows are in but do not rule out a "break to the downside below 20.00" and a subsequent reversal. Markets tend to do this when they are confirming lows. Reach out to me if you want to approach this market using options. Also, there is a mini contract for silver if you're going to test the waters.

Oil prices continued to ramp higher on Friday morning as the market assess the possibility of additional consumption of global petroleum through the substitution of higher priced gas to oil as well as the uncertainty of the US releasing their strategic reserves. Lending support was the return of Chinese demand from holiday as well as reports from OPEC+ on Monday that that they will not be increasing monthly production by more than initial expectation of 400k barrels per day. Crude stocks increased for the second week in a row, building 2.345 million barrels with stocks now 72.040 million barrels below last year and 32.037 million barrels below the five-year average, according the EIA. This comes on the back of exports falling to the lowest since early August to 2.114m bpd as well as imports increasing to 7.035m bpd, the highest since mid-July. The market remains bullish trend with today’s range seen between 73.46 – 79.81. 

As it appears the U.S. will extend their debt limit in the coming days markets are finding support. We’ve seen volatility in the global markets over the past week stemming from debt concerns, weakness in the Euro and split news about the progress in the battle against Covid. As more individuals get vaccinated against Covid, it appears numbers in cases, hospitalizations and deaths are headed in the right direction – but this depends where you are looking. There are still many parts of the world struggling to recover physically and economically after the past year and half. As we enter the fall and winter seasons and holiday season, we’ll see what the trajectory is of the virus.

The equity markets, both European and U.S. have provided strain on commodities. Cocoa has managed to stage a rally earlier this week, trying to hit a new high of 2800 – but we have seen a big pullback the past few sessions. The key for the bulls is if production will really be lower than anticipated. This key will guide the cocoa market to start Q4.

Three weeks ago, 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.”  The was the week of September 20. Last week December corn broke above the $5.38 ½ level and moved to a high of $5.48 ½ before backing off and closing the week at $5.41 ½ - while we didn’t see corn make huge moves to the upside it was still a very solid showing for the week and more importantly confirmed the chart model I am following. This week is showing us another inside week setup. Traders should watch for a break above $5.49 or a break below $5.23, basically last week’s range. I am still cautiously bullish and believe Dec corn has additional upside if the fundamentals continue to remain in the range of estimates or come in bullish. On Tuesday October 12^th USDA Supply Demand and Crop Production Reports will be released at 11am cst, make sure you have adequate risk management strategies in place to protect your positions as this market seems to be “coiling up”!

The “big picture” numbers remain the same and probably will for some time. I firmly believe a break below $4.96 could give the bears control of the market and a break above $6.39 ½ on the upside may have enough bulls behind it to propel corn to all-time highs. There are several minor areas of support and resistance inside this range that can help with short term market direction if violated. Call me directly at 1-800-367-7290 for more in-depth discussion on these numbers and to discuss trading strategies specific to your situation.

I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility has come down quite a bit from its most recent highs mainly due to the consolidation and tighter trading ranges. I have 25 years of grain market experience, feel free to call or email with any questions you may have.  Be sure to check out my archived weekly grain market insight articles posted on our website.

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U.S. stock futures are mixed this morning as traders took in a key report on the labor market’s recovery. The S&P was down slightly a reversal from a third straight day of gains. The rally was part due to the Senate leaders reaching an agreement on raising the government borrowing limit into December, avoiding a default as early as this month.  They voted to increase by $480 billion and it will head to the House of Representatives today.  With the budget temporarily out of the way the focus was switched to the latest job report which showed another miss on payroll gains following a disappointing August number.  Non-farm payrolls only rose by 194,000, missing the expected 500,000 number.  The unemployment number fell more than expected to 4.8% but it was followed by a poor labor force participation rate of 61.6% versus 61.7% in August. Even with the payroll miss in September the report may still be strong enough to trigger a tapering from the Federal Reserve.  Jerome Powell said it would only take a “reasonably good report” in September to meet the Fed’s threshold.

Support today is 435500 and 432500 with resistance at 442500 and 446000.