RJO FuturesCast

October 15, 2021 | Volume 15, Issue 41

The Markets

Metals - Gold on Pace for Best Week Since August

Gold futures have fallen early this morning as we saw treasury yields rise and it’s threatening to halt a 3 consecutive session rise. However, gold is still on pace to have its best week in nearly 5-months. December gold is currently trading at $1772.30 at the time of this writing, about $28 off the recent highwater mark of about $1800. All-in-all December gold is still on pace to make a 1% gain on the week, so gold bulls can’t be too upset. Analysts attest that the recent run in gold has been partially fueled by the diminished value of the dollar as the market is flooded with money coupled with the Fed holding interest rates artificially low. This could change soon though as the Fed has signaled they will taper their bond buying in the coming months. Keep an eye on gold today and the coming weeks and check back for more updates.

Gold Dec '21 Daily Chart
Energy - Crude Oil Still Surging

Oil prices continued to inflate higher as of Friday morning and are set to for a weekly gain of more than 2% on increasing signs of tightening supply. This comes as OPEC+ dismissed the notion of additional supply coming online coupled with the IEA noting that increasingly higher gas prices could boost oil demand with their expectation that oil demand is set to jump half million barrels per day (bpd), which would result in a supply crunch of around 700k bpd through the end of the year. The IEA noted in its monthly report that oil demand is forecasted to increase by 210,00 bpd in 2022 and oil demand to reach 99.6 million bpd. This comes as weekly US crude stocks rose by 6.088mb, much greater than the expected 702k barrels. Contributing to the build was a slowdown in refinery utilization (-2.9%) and refinery input (-684bpd). Oil volatility (OVX) continues to breakdown to cycle lows with the market remaining bullish trend with today’s range seen between 76.29 – 83.24.

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 - Coffee Continues to Grind Higher, In A Position to Test Old Highs

Coffee prices have jumped more than 10% over the span of one week, as supply-side developments both near and longer term have fueled this rally. Although the coffee market is beginning to reach overbought levels, it looks to have much more upside left to go before this rally runs out of steam. Brazil could see crops negatively impacted by extensive drought conditions and frosts during July. Reports that farmers may default on over one million bags in deliveries have also ramped up near term supply anxiety. These supply issues are exacerbated by the global shipping container shortage that continues to fuel coffee’s longer-term uptrend. Rising overbought levels warrant some caution for bullish traders. A positive signal for trend short-term was given on a close over the 9-bar moving average. There could be more upside follow through. Resistance comes in at 21940 and 22355. Support comes in at 20685 and 19845.

Coffee 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 tcholly@rjofutures.com.
Agricultural - Grains - Corn Breakout This Week

Last week I advised traders on the 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.” Sure enough, the market broke through $5.23 and made a weekly low of $5.06 ¾ before reversing. At the time of this writing, December corn is trading around $5.26 ¼ with a weekly high of $5.34. It appears the market still has strong support around the $5.00 area. If we see corn close in the upper 1/3 of the daily trading range we may see some follow through to the upside early next week. The USDA Supply Demand and Crop Production Reports that were released on Tuesday were inside the range of estimates but leaned slightly bearish. I still remain cautiously bullish even with the same pullback we saw this week. In my opinion to really get the bulls excited we would need to see December corn trade up above $5.49.

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.
Interest Rates - Treasuries Trending Down

Looking at the December 10-year note, overnight we had a high of 131-160 and a low of 131-06 and currently trading 131-12. This morning we had PPI, which came out a tad weaker than expected which has given the note a mild boost in early trading. The trend is down in treasuries with a “sell the rally” mentality firmly in place as inflation continues to creep higher with crude reaching 81.68 overnight and natural gas currently up 21-cents as we speak. This week we have seen many fed speakers come on tape and suggest that the Fed should start to taper as early as November which should keep a lid on prices for the remainder of the week. The continued talking of tapering is the Fed slowing down the purchases of bonds which has been going on since the pandemic in early 2020. The Feds continued the buying of bonds which is keeping rates artificially low, creating a bubble that is ready to burst. Being able to pick the exact time is impossible but the fed has created a monster and I believe has cornered itself while inflation related commodities have skyrocketed. It’s not a good position as investors have seen the yield on treasuries jump om the last two weeks, so I would encourage traders to be on guard as more fed officials express their desire to begin to taper.

10-Year Note 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 Continue to Rally

The markets are higher for the third day in a row as we get ready to call it a week.  Inflation is back in the news, and it appears that it is trending more so than it is transitory.  Retail sales clocked in at the higher end of the expectations (0.7%) M/M despite labor shortages, material shortages, and supply chain disruptions driving prices higher (.04% M/M and 5.4% Y/Y).  While there is hope for the labor side of things given the expiration of benefits for many, it seems as though it will be a while before things are anywhere near back to normal.  

Earnings season is back in full swing.  Thus far, results have been positive with most of those reporting beating analysts’ estimates.  Despite some of the obvious headwinds that persisted through the last quarter, the consumer remained quite active.  I would expect strong earnings to continue to be released as a result.  However, consumer sentiment came in this morning at a mere 71.4.  That is the worst reading since 2011 as consumers are starting to show signs of concern over inflation.

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 - 10/14/2021
After seeing a rather soft PPI number and a jobless claims number that has fallen below 300k we are seeing a pretty strong rally in the equities. It will be interesting to see how the day plays out.
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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