RJO FuturesCast

November 1, 2019 | Volume 13, Issue 44

The Markets

Metals - Will Todays Job Number Keep Gold Above $1,500?

In the early morning trade, gold has pulled back slightly off its overnight highs because of a blowout jobs number of 128K after expectations of only 85K. Furthermore, African-American unemployment has hit another record low of 5.4% along with a three-month average of 176K jobs added to the U.S.-this is great news that we should ALL be celebrating! Remember, we hit these blowout numbers even though the GM strike of 303,000 people was going on and an ongoing trade war with China. The numbers don’t lie-America Rocks! December gold has pulled back slightly off today’s news but remains technically strong and with the announcement yesterday that the Democrats are proceeding with the impeachment of our President. Again, even though we had a great jobs number this morning, I think with the ongoing trade war with China and this impeachment that the bulls might keep gold above $1,500 an ounce.

If we look at December gold, you’ll clearly see that yesterday it broke out of the symmetrical triangle pattern and is trading above all its major moving averages, which should be a very bullish sign for the shiny one. Furthermore, it leaves gold open now to trade back to contracts highs of $1,566 an ounce made back in early September. I highlighted these levels below on my RJO Futures Pro daily December gold chart.

Metals - Silver Continues in Sideways Range

The silver market has been stuck in a sideways range for the month of October and we saw that continue this week with December silver starting this week with a move lower before concerns of global economic slowing helped the market recover from Wednesday’s 17.59 low. Reports from China that a long-term trade agreement with the U.S. is unlikely lends support to the silver market and counter acted the Fed’s rate-cut, but Friday’s nonfarm payrolls and unemployment numbers added pressure. Weakness in the U.S. dollar and calls for a coming global recession give the bulls hope but until we see continued economic data to support those views, silver looks to continue in this sideways range. A close over resistance at 18.225 is needed to continue the move higher to 18.80 while a break of 17.60 would most likely push the market down to support at 17.30 or 17.00.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - Oil Prices Continue Slide

Oil prices have fallen for the fourth consecutive session amid a 5.7-million barrel increase in EIA crude stocks as well as soft global economic data with Chinese manufacturing activity falling to an eight month low and Chicago PMIs falling into contraction territory and the lowest on record since December 2015. Adding to the bearish sentiment were renewed concerns over the ongoing U.S.-China trade war with Chinese officials reportedly skeptical of a longer-term deal. In addition, record U.S. production has weighed on prices. Despite the recent pullback, Dec crude remains about 4.00 above the October low with geopolitical risk an ongoing threat. The market is bullish trend with today’s range seen between 53.09 – 57.38.

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 - Weather Premium and Global Risk Sentiment Leading Cocoa Futures

Current weather conditions are supporting cocoa prices. Rain in key growing regions could cause supply issues. The ongoing concern with global demand is also causing prices to consolidate and trade in a range. 2495 has held as resistance.

Global risk sentiment has added to volatility in currencies, which has carried over to cocoa prices - the Pound and Euro are the two main contributors.

If dry weather returns in West Africa after this recent rain, new crop cocoa beans could have some disease and damage, this could propel futures’ prices over 3000. This will be critical as traders begin to roll from the December to March contract over the next few weeks.

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.
Softs - Coffee Holding Support

The price action in December coffee has been quite supportive, with higher highs and lows consistently. Many fundamentals, such as a strong Brazilian currency and weaker U.S. dollar have lent some strong support to December coffee prices, as well as several other commodities.  At this point, many traders have eyes on weather issues that may be forming in key growing areas of Brazil, coupled with the expectation that the second largest producing country, Vietnam, will fall short of its projected exports. Our friends at The Hightower Group have reported that “Vietnam coffee exports are expected to come in at 1.365 million tonnes (22.75 million bags) which is 13.8% behind last year’s pace. ICE exchange coffee stocks rose by 180 bags on Tuesday but with 2 days to go remain nearly 38,000 below September’s month-end total.”

On the technical side, a battle awaits at the 103-resistance level in the near term, and after a noticeably impressive rally, a correction is likely at this point. Momentum levels are strong, but until we get a good feel for how bad the upcoming weather conditions in Brazil will be, we are likely to see December coffee prices remain in a sideways consolidation pattern.

Agricultural - Harvest Weather Looks to be Improving for Corn, Focus Shifts to Nov USDA

For three trading sessions in a row now, the corn market has closed up, near the daily highs. As focus shifts to November 8th crop production update, the market may be supported today and into next week. Weekly exports were disappointing again, which was what caused early weakness yesterday. Export sales came in at 549,100 tonnes.  Pre-report estimates were 350,000 to 750,000 tonnes. As of October 24th, cumulative sales were only 23% of the USDA forecast for 2019/2020, vs. a 5-year average of 36%. The market would need to see sales of 824,000 tonnes are needed each week to reach the USDA forecast. The recent snow and cold through the Midwest has slowed harvest, but a shift to drier weather the first 10 days of November should get things back on track.

December corn ended the month of October up 2 cents, with a 24.25 cent range. Resistance comes in at 392 and 395 with support coming in at 386 and 382.

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 - Grain Futures Update w/Stephen Davis - 11/01/2019
RJO Futures Senior Market Strategist discusses how the changing weather and early winter could affect the grain markets. Most of the mid-west was hit with snow this week and Stephen predicts this could lead to a bearish report next Friday.
Currency - Friday's Jobs Number Holds All The Cards for the USD

U.S. dollar futures gapped lower off the open on Thursday due to deteriorating trade headlines and the potential for disappointing U.S. jobs data Friday morning. September nonfarm payrolls are expected to increase by 90,000 jobs, compared to 136,000 in August. Furthermore, the Federal Reserve cut the fed funds rate another 25 bps on Wednesday, strengthening downside pressure on the greenback. Although the FOMC decided to cut another quarter point, they hinted at a potential pause in the rate cut cycle. The odds of a December cut are at 28% Thursday morning. The ambiguous attitude of the Fed can be credited to the strength of the labor market and the resilience of the American consumer. Being that consumer spending makes up 70% of GDP, the U.S. economy is unlikely to enter recession so long as the labor market remains strong and consumers continue to spend. This is the reason all eyes will be on Friday’s jobs number. Any weakness is likely to break the dollar down further, while a surprise beat is expected to hold Dec futures at the pivotal 97 support level. A close under 97 will antagonize sellers.

Meanwhile, foreign currency futures are moving to the upside this week, with leadership from the Australian dollar. European currencies are performing well but have been held back by another Brexit delay. Should the dollar break under the 97-support zone, investors should be bullish on all foreign currencies. Should there be further deterioration in trade talks, or a continued breakdown in economic data, the safe-haven currencies are likely to show leadership (i.e. the yen and the Swiss franc). The resilience of the U.S. dollar has kept other currencies suppressed. As the dollar weakens, a plethora of opportunities will be created as currency markets reverse trend. If you have any questions about how to get started trading currency futures, don’t hesitate to contact me directly.

Interest Rates - Fed Expected to Cut Interest Rates by .25%

Today is a big day for both the treasury and stock markets as the Fed is widely expected to cut rates by ¼ point. The announcement comes at 1:00pm central with Powell’s press conference at 1:30pm. Noteworthy news already out today is the GDP number, which came out at 1.9% while the street was looking for 1.6%, so it was a beat. However, the GDP was still below 2% so the news wasn’t all that bad although it beat the lowball number at 1.6%. In addition to the GDP report, we also saw ADP which came out near expectations around 125k.  

About 30 minutes ago, the Chilean President Pinera announced that he was cancelling the APEC summit schedule in Santiago next month. This is important because that is where the U.S. and China had planned to sign “Phase 1” of the trade deal.  Going back to today’s major news, the market has already priced in the expected .25% cut today which should be no surprise, but what is of major importance is what Powell says in his press conference. Traders will key on any change in language and will pay extra attention whether he comes out as hawkish or dovish and the trade will dictate as such. On Friday we see monthly payrolls. The street is expecting 85k vs last month 136K gain.

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 - Strong Jobs Data Move Equities to All-Time Highs

U.S. equity futures are unanimously in the green Friday morning after the release of upbeat jobs data. Nonfarm payrolls were expected to increase by 90,000 in September, but the actual number came in at 128,000. The labor market remains strong, with average hourly earnings growing by 3% year-over-year, right in line with expectations. The wage growth component will be a key factor moving forward. When the economy moves into the late stages of the business cycle, we see wage growth accelerate. This is the result of a saturated labor market, and it tells investors the economy is operating at full employment. From there, nonfarm payrolls can be expected to slow down. We are not there yet. Chairman Powell acknowledged the strong labor market when he hinted at a pause in the rate cut cycle during Wednesday’s Fed announcement. Essentially, the strong labor market is helping to prop up the American consumer, which is helping to prop up the broader economy. And these labor numbers indicate that we have not yet reached a tipping point. Technically speaking, the e-mini S&P chart could not have a more bullish configuration. Each dip over the last 6 months has been proceeded by higher lows, and stocks are now breaking out of a one-year consolidation period. In short, the bull has not yet run out of steam, and a close over 3055 hints that another leg higher is in short order.

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