RJO FuturesCast

November 6, 2020 | Volume 14, Issue 45

The Markets

Metals - Gold Locked and Loaded×

December gold futures have cracked the most important trend line in recent months, as gold is now set to make new highs and once again climb back above the all too important $2000 level. My most recent write up on gold basically stated that unless that trend was broken, and a close was above roughly $1925 or above (breaking the trend line lower) that we would likely see a push higher from that point on. I think the technical aspect for a bullish bet on gold now seems to make sense. Fundamentally, everyone is going to have their own theory on metals often especially. The inflation aspect could very well be the biggest factor here as a Biden presidency might mean even more stimulus than the original bill was calling for. It appears that endless money printing by the fed is going to continue, and once again keep the bullish case longer term for gold alive and well. India and China have been buying quite a bit of gold in the spot market as of recent, and the gold and silver ETF inflows have been increased month over month week after week for quite some time and should continue to support the physical buying. Last but not least the USD index seems to be once again get shoved to the side and new lows are expected sooner than later. Yesterday the December USD index futures hit fresh recent lows and it appears that another close beneath the contract lows will come soon, boosting golds chances at a return to glory. Traders should consider a number of bullish bets but exercise caution as the volatility is nowhere near gone.

Gold Dec '20 Daily Chart
Metals - Solid Week for Silver×

We have seen a positive week for Dec silver with a big up day on Thursday following a pullback on Wednesday. This week’s stock market gains and better than expected US economic data has provided the support needed for silver to rally. Although stocks have started today’s trading session red we have seen a rally of almost 7% this week and US non-farm payrolls came in at 638,000 vs an estimate of 600,000 with the US unemployment rate coming in at 6.9% vs an expected 7.7%. With the US dollar showing signs of continued pressure the silver market should hold this week’s move and look to continue a push to the upside. At this time it looks like Biden will become the next president, but the markets seem to be focusing more on the hopes of another stimulus package which is supportive for silver as well. To see the rally in silver continue we would need to see a continued move lower in the US dollar, a slowing of virus cases, and/or a stimulus package agreed upon. Dec silver traded up to a high of 25.975 today before pulling back some and to keep its momentum we would need to see a close above yesterday’s high of 25.54. Support comes in at 25.00 and the next resistance level is 27.50.

Silver Dec '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - Oil Up Too Far, Too Fast×

Oil prices are moving lower here in the early session on Friday as increased lockdowns and a surge in cases in Europe and the US have continued to weigh on global demand prospects with additional anxiety related to the drawn-out vote counting in the US election. OPEC+ are considering a differed increase in oil output in January as a ‘second’ wave would continue to add to the already fragile outlook in fuel demand. OPEC+ are set to ease output cuts by 2.2 million bpd in January from the current 7.7 million bpd. Both benchmarks extended gains earlier in the week after weekly US crude inventories fell sharply to a 30-week low, however, the draw was largely attributed to production shutdowns in the Gulf. Oil volatility (OVX) continues to remain elevated with the market remaining bearish trend with today’s range seen between 35.23 – 40.27.

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 - Coffee Needs Bullish News×

With continued unrest in the US Elections, added volatility has struck most all commodity prices, including that of December coffee. While December coffee prices continue to trade mostly sideways, during continued increases in Covid 19 cases, it seems clear that December coffee prices have not received the required fundamental news need it to turn the market to the upside.

With the realistic potential of a new administration looming, the threat of potential new lockdown measures throughout the US has added some pressure to commodity prices. Although we’ve seen the US stock market has rally over the past 24 hours, likely due to a new administrations potential easing tariff measures against China, more bullish news in the way of coffee demand will be needed to lift coffee prices higher. From a technical perspective, December coffee prices continue to trade well below the 200-day MA (now resting at around the 114 level) which is continued neutral to bearish, and likely will see follow through selling to the key support area of 100.  

Cioffee Dec '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or atuiaana@rjofutures.com.
Agricultural - Grain Futures Update w/Stephen Davis - 11/06/2020×
RJO Futures Senior Market Strategist, Stephen Davis discusses the grain futures market and the action ahead of next week's crops report
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7181 or sdavis@rjofutures.com.
Currency - Futures Market Outlook - 11/06/2020×

Chasing blue waves, red waves, and other nonsense…..

Well, our Implied volatility signals wound up being correct – ahead of the election Tuesday, we saw MASSIVE implied Volatility PREMIUMS in the stock indices. For those that have been following for a while now, know that when you see IV Premiums, it’s a strong indicator that suggests investors/Wall Street was heavily hedged for the downside. If we know anything about markets, it that they tend to please the least amount of investors. We saw a strong move lower in stocks last week, only to see a massive reversal back higher with the ATHs back within reach. On the other side of that, the Bond market has been showing a massive short position being built in over the past month, typically another counter indicator (at least in the short-term), Bonds made one of their largest percentage moves EVER inside of a day on Tuesday night.  Now what are we looking for moving forward? We’ll wait and watch to see if the IV Premiums sweat off (they already are), and turn into DISCOUNTS which is a classic complacency signal, usually coupled with an immediate overbought condition. 

Commodities:

Nearly the entire complex is signaling immediate-term overbought.  Grains, including Soybeans, Corn, Wheat are all trading at the top end of the range, and we expect buying opportunities will present themselves from better prices. Our Natural Gas position, unfortunately has been front running this OB condition in equities, we’ll address this later – but NG immediately oversold right now (again). 

3 Key Markets to Watch:

Gold/Silver- big upgrades in the charts following yesterdays break-out. Platinum prices are also beginning to join in, following there immediate oversold levels last Friday. 

Oil- signaled immediate-overbought yesterday, but we’re looking for signs of a bottoming process here. Oil has been certainly the lagging commodity since we went bullish on Commodities back in June. 

US Dollar- pounded to the low end of our range, and now immediate oversold. You could easily see a correction in commodity assets in the next coming week or 2 just based off of the immediate-term oversold status of the Dollar. This is important to watch. 

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.
Currency - Could See a Key Reversal in USD Today×

Despite ongoing bad data and the potential for a disappointing US monthly non-farm payroll report later today, the dollar broke out to the lowest level since early September earlier today. We suggest that position traders prepare to buy the USD after further weakness this morning, as an extension of record infection counts into next week seems to be likely to spark a series of lockdowns. These lockdowns should rekindle macro economic slowing safe haven buying.

Technically speaking, the close under the 60-day MA indicates the longer term tend could be turning downward. The daily stochastics have crossed over down which is also a bearish indicator. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market back below the 18-day MA suggests the intermediate term trend could also be turning down. Resistance comes in at 9310 and 9386 while support is at 9204.

USD Dec '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or tcholly@rjofutures.com.
Interest Rates - Interest Rates Trading High as We Await Election Results×

As of this writing, the December 10-year is trading sharply higher, currently 138-26 and had a range overnight if 137-205 to 139-01.  As Globex opened last night, we saw the price plummet right out of the gate on early indications that Biden was ahead, albeit was just as many polls were closing. Traders sold the note because as Biden was leading early, traders view that a Biden stimulus package is going to be significantly larger than Trump’s, hence adding to more money in the people’s hand which will lead to more of the inflation trade. As soon as Mitch McConnel was announced as the winner of the Senate race in Kentucky, we saw the note shoot up as investors immediately sensed gridlock as the republicans retained control of the senate and the note market has continued to be very strong still with the yield on the 10 year at .778 after reaching a high .945 early last night. Currently, we still do not know who won as some key states have not finished counting all ballots. Trump did have a news conference late last night and gave people the hint that he is ready, waiting in the wings to contest the election if Biden does eventually win. If that does happen, the market hates uncertainty and I would expect the note complex to continue to have a bid as long as a winner is not declared.

30yr Note Dec '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.
Equity - Stocks Lower in the Early Going×

Despite all the election uncertainty, stocks have been on an impressive run. President Trump’s odds for a victory seem to be diminishing by the minute, but we’ll see how long this takes to play out in the courts. It does appear that the GOP will hold the senate and the market seems to be happy with the idea of that. Stocks were lower overnight, but the non-farm payroll data boosted the markets at least temporarily. The labor market added 638,000 jobs (575,000 consensus), and the unemployment rate came in at 6.9% (7.7% consensus).  The rally was short-lived, and we’re well into negative territory to kick things off today.   We’re overbought technically, and I can’t blame investors for wanting to book some profits ahead of the weekend. The trend is strong to the upside, we’ve seen nice rallies into the end of year holidays in the recent past, so now the question is how low will we be able to get back in?.

E-mini S&P 500 Dec '20 60-Min 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.

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