RJO FuturesCast

October 8, 2021 | Volume 15, Issue 40

The Markets

Metals - Bad News is Good for Gold

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.

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 Looking to Rebound

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.

Silver 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 etesfaye@rjofutures.com.
Energy - Oil Taps $80 a Barrel for the First Time Since 2014

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. 

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.
Softs - Cocoa Supply, The Weaker Euro, and The U.S. Debt Ceiling

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.

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 - Corn - Another Inside Week

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 12th 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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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.
Equity - Stocks Mixed This Morning

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.

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 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 Update w/John Caruso - 10/07/2021
John Caruso comments on the strong rally we are seeing the equity markets today and how it could shake out the rest of the day and into next week.
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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