RJO FuturesCast

October 16, 2020 | Volume 14, Issue 42

The Markets

Metals - Gold is Broken Right Now

December gold futures have had anything but a calm price action the past few months, and the gradual trend is sideways to lower. Look for gold futures to continue chopping sideways to lower. Traders should be at this point focusing on two real factors and they are quite easy to understand. The first is the fundamental aspect of a stimulus bill or fed commentary that might drive the direction of gold to the upside. $1.8T is no small amount of money, double the 08 bailout to be exact, which would more likely than not drive gold back above $2000. The second factor is technical and it’s simply looking at the breakout point on the upside for a break in the lower trend we’ve been in for months. This level comes out at the 1940-1950 level, which I would think a few days of closing in this area allows traders to again step in and buy gold futures. This is not something I would be buying into until this happens. Everyone trading gold has their own theory based on fundamentals, and quite frankly nobody knows where it’s going except the managed money. If traders want to smartly trade gold they would wait for a breakout to the upside before buying and continue to trade with the trend; sounds familiar doesn’t it? The margin increases from the CME on gold futures sit around $12,000 on a full 100 oz contract, so traders should be prepared for bigger swings and if not need to utilize options instead, to which we can assist in strategy development.

Gold Dec '20 Daily Chart
Metals - Silver Needs More in Order to Move Higher

Dec. Silver is trading around 24.495 as I write. Interestingly, the market was around this area when I lkast wrote about silver. A succession of rejection is keeping silver from flying higher. As you can see below, we have a decent-sized flag forming that requires sustain action to come out of these congestions.

Honestly, it is impressive that the bears have been keeping silver in check with all the headlines such as the U.S. election just a few days away, the stimulus deal, and Brexit. Given the U.S. dollar index technical improvement, silver will need a great deal of news to make gains. Flight to safety type of buying hasn’t been as present as one might expect with one of the most challenging election seasons in recent history. Maybe Silver fears deflation.

For now, I think we are looking at a wait and see the type of price action. A break below $23.30 will signal further selloff. And we need to see $25.50 or above for the bulls to assert their will. For now, everything we see shows a sideway to lower type of price action. The daily dollar chart also shows a sign of turning upwards and added downside pressure on Silver.

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 Focus in Demand Amid Covid

Oil prices have seen a two-sided trade this week and have formed a consolidation range but are slipping here in the early session amongst an increase in corona cases in Europe, which is only further exacerbating the grim outlook in growth and recovery in fuel demand.  This comes amid some recent bullish supply side developments with continuing oil production outages in the Gulf, which is expected to wane in the near term coupled with a more than expected decline in weekly oil stocks according the EIA. OPEC+ is set to reduce supply cuts from the current 7.7 million bpd to 2 million bpd in January despite noting that the outlook for fuel usage appears ‘anemic.’ The demand outlook continues to remain bleak, which coupled with a continuing rise in supply from Libya may cause OPEC+ to extend the current production cuts into next year. Continue to keep an eye on oil volatility (OVX) with the market remaining bearish trend with today’s range seen between 38.06 – 41.90.

Crude Oil 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 aturro@rjofutures.com.
Softs - Cocoa Grinding Data and Trading Technicals

Cocoa futures prices are feeling pressure from multiple sources. Grinding data is being released this week – most traders are anticipating levels lower than last year at this time. Demand is a continued issue for cocoa as we move closer to the holiday season. European markets have also shown a weaker currency and equity trade – adding to the global pressure this commodity is facing.

Technically, the December cocoa chart looks bearish, but oversold. Look for support to hold at these current levels. The market should be strong enough to hold above 2335 even after all the grinding data is released this week. Look for opportunities at these levels, a positive earnings reports or weaker production data can send prices back above 2500. As we get closer to the US election and closer to year end, look for continued volatility across the board.

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 - Live Cattle in a Rut

Dec cattle has closed lower today for the 5th time in the last 6 sessions, with the outlook of weaker seasonal demand and a cash market starting to trend lower cattle futures are now trending down back into price level we saw back in the beginning of September. Beef supply is still high with weights being at a 5 year high so even if we get a slight increase in slaughter numbers, that would put additional pressure on the market possibly bringing prices down to the early July levels of $106. With Dec cattle’s close under 109.65, the market has looked to violate $110 level and would look to continue to trend lower. In Nebraska 1,720 head traded at $107-$108 and an average price of $107.62 versus $108.16 last week. In Texas/Oklahoma 4,811 head traded at $108-$108.25 and an average price of $108.02 versus $108.90 last week. The USDA estimated cattle slaughter came in at 119,000 head yesterday. This brings the total for the week so far to 356,000 head, up from 355,000 last week and up from 351,000 a year ago. December cattle closed moderately lower on the session yesterday and the selling pushed the market down to the lowest level since September 11. Outside market forces are bearish with a negative tilt toward the economy as virus cases are on the rise in the US and around the world.

Live Cattle Dec '20 Daily Chart
Equity - Stocks Up on Retail Sales

U.S. Stock futures are up this morning after a strong retail sales number and very promising news on a Covid-19 vaccine from Pfizer.  According the U.S. Census Bureau “Advance estimates of U.S. retail and food services sales for September 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $549.3 billion, an increase of 1.9 percent (± 0.5 percent) from the previous month, and 5.4 percent (± 0.7 percent) above September 2019. Total sales for the July 2020 through September 2020 period were up 3.6 percent (± 0.5 percent) from the same period a year ago. The July 2020 to August 2020 percent change was unrevised at up 0.6 percent (± 0.2 percent). Retail trade sales were up 1.9 percent (± 0.5 percent) from August 2020, and 8.2 percent (± 0.7 percent) above last year. Non-store retailers were up 23.8 percent (± 1.6 percent) from September 2019, while building material and garden equipment and supplies dealers were up 19.1 percent (± 2.1 percent) from last year.”

Also, this morning, Pfizer Inc stated that is applying for emergency use of their experimental Covid-19 vaccine that they are co-developing with BioNtech SA.  This could come as soon as the end of November. This is a bit longer than they had first anticipated but it will be filed once two months of safety data are compiled per FDA rules. This news had Pfizer shares trading up 53% in the premarket.

Support today is 345000 and 341500 with resistance showing 351000 and 352500

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.

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