RJO FuturesCast

November 13, 2020 | Volume 14, Issue 46

The Markets

Metals - Gold Losing Steam

December gold continues to be one of the most volatile futures markets to trade right now. The only thing that is holding gold up here is the technical price level which all gold traders are watching not being taken out. This level happens to come in at 1850 and is quite important in the grand scheme of things. If this level gets taken out the most likely immediate direction of gold is lower and with no support coming in until all the way down at 1800 even. I think that what is likely to happen here is gold will not have the strength to take out the recent high of 1980 without a stimulus bill, or something along the sort that is a “big headline” type of event. Want to know something “spooky,” check out the biggest gold ETF having its biggest liquidation since March 20th yesterday selling off 503,000 oz of physical gold. The way to play gold right now is to the short side, with buy stops sitting above the recent high of 1966. If a trader is wanting to be long gold they need to be willing to give up the gains between current levels and the recent high. I think being long from this level is unlikely to avoid a washout selloff that appears more and more likely as bearish sentiment creeps in once again. Gold is currently up at 1890 and the volume is extremely light. This could be a draw for bulls but beware that no trading volume means no confidence. If a trader wishes to be long I would suggest using a defined risk call spread rather than outright long futures.

Gold Dec '20 Daily Chart
Metals - Silver Waiting for a Second Stimulus
Silver is stuck in a waiting pattern looking for some help from a second stimulus package. If and when this happens it could drive silver higher.
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 - Covid-19 Continuing to Dampen Demand Outlook in Crude Oil

Oil has continued to move lower following an early week surge as the market assess the ongoing demand destruction as coronavirus cases continue to surge in the US and Europe with added restrictions being implemented. This has been coupled with an unexpected rise US crude stockpiles as inventories rose by 4.3 million barrels. Global consumption and dampening fuel demand continue to remain at the forefront despite the recent vaccine developments as the International Energy Agency (IEA) stated that global demand prospects were unlikely to accelerate well into 2021. In addition, the sentiment was echoed by OPEC, lowering its demand forecast stating that consumption was likely to rebound slower than initially expected. Notwithstanding, Algeria’s energy minister noted that OPEC+ may extend current production cuts of 7.7 million bpd into 2021 or deepen if necessary. OPEC+ is not expected to move forward with easing supply restrictions as was initially expected due to the increasingly grim demand outlook. This comes as US and Libyan production have continued to rise with Libyan production reportedly now up to 1.2 million bpd. The market has transitioned to bullish trend after breaking out above (~39 trend) but has been correcting from the top end of its range earlier in the week with today’s range seen between 38.31 – 42.89.

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 - US Presidential Election Results, Covid-19 Cases Rise and Demand Concerns for Cocoa

The US markets started the week off with a positive tone, surging higher on Election results and a potential Covid-19 vaccine breakthrough from Pfizer. As indices moved higher, most commodities followed suit. This rally was short-lived due to the growing number of Coronavirus cases in the US and worldwide. Europe has implemented lockdowns; the US is rolling-back restrictions in certain areas due to the rise in positive tests – these changes will add volatility to all markets in the short-term. Until a vaccine is approved and available to the public, anticipate this pattern for months to come.

Cocoa is already dealing with demand issues, add in lockdowns in Europe and the closing of indoor dining in areas of the US, cocoa futures could see more downside. Demand for chocolate is critical this time of year – Hershey and Barry Callebaut may be seeing the fourth quarter a little more positive than anticipated which can help cocoa prices rise heading into 2021.

Weather patterns in West Africa could be causing concerns for production in that region. If this holds, support could be seen on the chart at these current levels.

Cocoa Mar '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 - Grain Futures Update w/Stephen Davis - 11/13/2020
Stephen Davis discusses the latest news moving the grain markets amid post-election fallout
Equity - Stocks are Up Today After Slow Week

The U.S. stock futures are up this morning looking to end the week on a good note after the market was down this week on record number COVID-19 cases.  The market had also been dealing with new stimulus concerns and the vaccine reports.  The U.S. coronavirus problem hit hard this week as new cases saw a record number of 150,000 on Wednesday alone.  This increase has led numerous states and municipalities imposing curfews and restrictions once again to help curtail the spread. Earnings also helped the market rally with Disney and Cisco leading the way.  Disney shares rose with the company announcing it now has 73 million paid subscribers for its streaming service, Disney+.  Cisco shares jumped 7% with of a strong report on earnings and revenue and better than expected prediction on the new quarter.

Support today is 350000 and 347500 with resistance showing 356700 and 360000.

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.
Economy - Futures Market Outlook w/John Caruso - 11/13/2020

The USD has finally found some resistance, back down -0.16% this morning, while risk assets roll-up. 

Metals: Copper +0.60%, Platinum joining in +1.41%, Gold and Silver +0.92% and +1.99% respectively. Copper specifically looks to be on a solid path to 3.30 as US inflation (and Chinese growth) continues to accelerate.

10yr yields back -10bps day/day. We’ve removed Bonds from our basket of long ideas, and will likely make its way onto the “Sell” list.  Inflation will (and already is) be accounted for and expressed via rising rates at the long end of the curve. Don’t be surprised to see a “Sell 10yr Notes” trade pop up in your email soon. 

Oil- pulling back, be ready here. We still may take a peak under 40 – but I may not wait. Sometimes its OK to be early, so long as you have the trend in your corner. We’re not going to “nail” every top and bottom, that’s just not realistic. We’ll keep our positions small, and trade with the overall trend, which moved to bullish again earlier this week.

Producer Price Index PPI accelerated y/y from 0.4 to 0.5 – Inflation accelerating

If you haven’t already learned by now, the economy is NOT the market and visa versa. Unfortunately for most of this country, they don’t have the wherewithal to purchase risk assets (or short the USD) that help them offset the burden of rising inflation costs. For most of America, they punch their time clock in the morning, and punch out at the end of the day.  And while it’s nice to get a stimulus check in the mail or extra unemployment benefits every week, don’t for a second think that that doesn’t come with a price. Inflation. This has been ongoing since June, following the crash in March, and this is likely to persist through the first half of next year according to our forecast.

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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