RJO FuturesCast

November 12, 2021 | Volume 15, Issue 45

The Markets

Metals - Gold on a Run Higher

It’s about time, isn’t it? Explosive upside breakout in gold has finally happened. It’s never been a question of if, just a question of when. Of course, it is about gold traders looking for an inflationary hedge, but it is equally due to the technical buying that was triggered by a close at $1,834 this past Tuesday. Some talking heads out there are going to tell you it’s about a “dovish” Fed. I say it’s about heated inflation data. It’s about the idea that rates will move higher before the Fed starts real tightening and not just tapering. The market will do its job! Look at how ten-year note yields have moved this week also. There’s a direct correlation. Now that gold has begun to move higher, dips are likely to be shallow and good opportunities to add to long positions. I would like to see that gold can hold levels above $1,835. A close under $1,825 would be a game changer and considered a reversal. A pop over $1,875 and we will be at $1,900 in short order. Gold trade may take a little breather and chop between $1,835 and $1,875 for a short time before moving higher again. This was a big move and happened fast. That’s how technical buying works.

Inflation is impacting everything, everywhere! Gold should continue to be attractive under $2,000. Once it reaches above $2,000

The strength in the US dollar comes from the prospect of rate hikes and dollar strength can put pressure on all commodities. Those dips in commodities are more temporary in nature. Commodities are in a super cycle bull market and now that gold traders can see that inflation is here to stay, gold will continue to move higher in my opinion.

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 Continuing Its Run

This week we saw the December silver market continue its move higher, adding to gains from last week after trading down to 23.045 on Wednesday Nov 3rd. Silver posted a new weekly high of 25.39 before trading lower to start today’s session. Silver managed to move higher despite a rally in the US dollar to 95.270 and a pullback in stocks on Tuesday and Wednesday. The metals market’s move higher this week, even with everything that should have added pressure, is showing that the inflation trade is really starting to develop and looks to be here to stay. The US CPI report showed inflation at a 30-year high on Wednesday which increases the chances that the Fed will be forced to raise US rates much sooner than originally expected. The bulls have the advantage here but need to see continued buying to push above the next resistance level of 26. Bears need to see a close below 24.89 which would reverse the short-term trend and leave 24 as the next downside objective. As of now the bulls are in the driver’s seat and a rally through the 26 level would leave 28 as the next upside target.

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 800-826-2270 or therrmann@rjofutures.com.
Energy - Oil Poised for Third Consecutive Week of Losses

Oil prices have fallen early Friday amid a firmer US Dollar as well as speculation of the potential release of US strategic reserves. OPEC+ noted that it projected its October production to have increased by 217k barrels per day while simultaneously reiterating their objective of returning 400k barrels per day until output is restored. In addition, OPEC+ cut their demand forecast for the fourth quarter by 330k barrels per day from last months forecast. US crude stocks rose 1.002 million barrels for the third consecutive week with stocks now -53.60 million barrels below last year and -30.705 below the five-year average, according to the EIA. Gasoline stocks, however, fell -1.555 million barrels for the fifth week with stocks coming in at the lowest since November 2017. The market remains bullish trend with today’s range seen between 78.37 – 85.81.

Crude Oil Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Coffee in a Position to Resume Trend Higher

With bullish developments from the supply and demand side of the market, coffee should be able to maintain upside momentum. A more than 1.5% rally in the Brazilian Real provided coffee with carryover support as that will ease pressure on Brazil’s farmers to market their remaining near-term supply. In addition, analysts at the University of Sao Paolo indicate those farmers are holding onto their coffee in anticipation of tight supply next season. Guatemala’s October coffee exports were over 67% higher than last years total, which shows that the flow of the Central American coffee supply continues to recover from last years sever storm damage. The daily technical indicators have crossed over up which is a bullish indication. Positive momentum studies in the neutral zone will tend to reinforce higher price action. Resistance comes in at 21680 and 21940 with support coming in at 20975 and 20535.

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 in Consolidation Mode Today

Two weeks ago, on October 29, I advised traders on the following “At the time of this writing December Corn is trading at $5.67.  While I do think the market may hit some resistance at this level, I believe the current fundamentals and technicals still favor the bulls.  The market appears to be on track to head towards the upper major trendline (red line on chart).” Last week we saw exactly that, December corn made the move higher and hit resistance at the major trend line (see red line on chart below on November 2).  Corn then sold off until the USDA Report that came out on Tuesday November 9th. A classic case of sell the rumor, buy the fact. In other words, the trade “baked in” most of the bearish news and the USDA numbers came in within the range. Without extremely bearish news outside the expectations, it made sense the market has been moving higher. At the time of this writing corn is forming an inside day, if this continues and forms today, watch for a breakout next week.  Upside number $5.80 and downside number $5.64 ½.

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 - Interest Rates Still Digesting Record CPI

Looking at the December 10-year note, we have a high of 130-23, a low of 130-10, and currently sit on the highs at 130-23. The market feels like it’s digesting the big news that we saw on Wednesday where CPI came in much higher than forecast and subsequently pushed the yield on the note sharply higher and prices lower. Let’s face it, numbers don’t lie. Whether one goes to the grocery store, gets into a car and drives, or travels by plane, one is getting pinched by higher prices across the board. As the Fed continues to say that this up move in inflation is transitory, many are getting hurt and need to see prices lower for the consumer to resume spending. The problem that many are facing is that this model the fed created doesn’t work. As wages are stagnate, meaning they aren’t increasing as prices go up, the middle to lower class is getting destroyed by this move up in consumer prices. They don’t care if it is being caused by bottle necks in the economy or the fed asking OPEC to increase production, people need relief now and not later. The fed caused this and are to blame. The continued printing of money and talk of a gigantic infrastructure bill, has led to a to the sharp increase in prices that consumers are eventually paying for. With unemployment near pandemic lows, and rates near zero there is no reason at all for the fed to continue the process of printing money to keep rates artificially low any longer.

10-Year Note 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 gperlin@rjofutures.com.
Equity - Stocks Look to Pump the Breaks on Slide

The indices were hanging on to slight gains in anticipation of this morning Consumer Sentiment reading. Traders were expecting to see a reading of about 72. The actual reading was way off, coming in at 66.8. That is the worst reading we’ve seen in a decade. This follows Wednesday’s Consumer Price Index reading which showed inflation had hit a 31-year high. At some point or another, higher prices were going to lead to a more reserved consumer. It appears we’ve arrived at that point.

The rest of the month’s news slate is relatively light. Traders will be most interested in GDP on the 24th, and PMI on the 30th. The next two-day FOMC meeting takes place on December 14th and 15th. Fed funds are now suggesting we’ll see a rate hike by the Fed’s June meeting, and the odds of a second (and even a third) hike in 2022 have also increased dramatically. 

E-mini S&P 500 Dec '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or bdixon@rjofutures.com.

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