RJO FuturesCast

November 19, 2021 | Volume 15, Issue 46

The Markets

Metals - Gold is Coiling Before Secondary Rally

It’s no surprise that gold is taking a “breather” after adding $100 in premium in the first half of November. A bid of consolidation is in order before resumption of the rally. So far, $1,850 support has held up well, but a breakout above $1,875 is necessary to kickstart a secondary rally towards $1,900. In spite of US dollar strength, I still have a high degree of confidence that gold will continue to attract new buyers. As gold prices begin to move above $1,900 the buying will become more aggressive as “fear of missing out” will kick into high gear. You see, gold is that rare commodity that attracts more buyers at higher levels. When it comes to gold, higher prices do not curb demand like it does in other raw commodities, and we cannot just open the spicket and more gold pours out. It just doesn’t work that way.

Silver has been lagging and I don’t expect that to last much longer. Silver has struggled to punch through $25.50, but once it does, silver will rally very quickly towards $28.00.

Gold Feb '22 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.
Energy - Oil Falls on Possible Reserve Release

Oil prices are poised for their fourth consecutive weekly decline as we come into options expiration amid a recent surge of Covid cases in Europe as well as the possibility of the release of strategic reserves. This global coordinated effort is rumored to be led by China who may release 7 million barrels from their strategic reserve. Largely discounted were reports that OPEC+ output last month came in below their expectations. Oil inventories reported a draw of -2.101 million barrels against an expected build, registering its first draw in four weeks, according to the EIA. Stocks are now down -11.5% year over year and 3.1% below the 5-year average. The market remains bullish trend with today’s range seen between 77.14 – 84.78.

Crude Oil Jan '22 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 - Fundamentals Carry Cocoa Futures Higher

Supply and demand news for cocoa has been positive of late. The fundamental side of the equation has been helping bullish traders at the halfway point of the quarter. Demand for chocolate has been higher during the holiday season. Grinding data has also provided support. The currencies have also helped the recent rally. The Euro’s correlation to cocoa has helped prices move back to prices we saw last month.

Current weather patterns in key growing regions are somewhat supportive for more production – but light rain and hot temperatures may keep data intact at current estimates. The next few weeks will be telling.

Technically, we are at a key point of resistance. After the recent rally, prices have failed to move above 2600 and hold. Friday’s trade showed a big pullback in prices as some trader’s appeared to take profits from the recent move. The COT data released later should be telling on where traders are positioning themselves.

Cocoa Mar '22 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 - Grains - Corn, 10-Year Cycle Pattern?

Last week on November 12, I advised traders on the following “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 actually forms today, watch for a breakout next week.  Upside number $5.80 and downside number $5.64 ½.”  While we did not form an inside day on Nov 12 because the market finished that session with a high of $5.82, the two trading sessions after both formed inside days. Then on November 17th corn broke to the upside hitting a high of $5.84.

In todays market insight I wanted to give a quick look at the major rally we saw in 2010-2012 and compare it to the current rally that started in 2010. As they say a picture, or chart in this case, is worth a thousand words. See chart below.

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 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.
Equity - Stock Futures Mixed on New Covid Fears

U.S. Stock futures are mostly lower this morning with the Dow and S&P 500 trending to extend Thursday’s losses. This is mostly due to new Covid-19 fears creating some lockdowns in Europe. Early gains were wiped out after the Austrian government imposed a new 10–20-day lockdown in response to rising cases seen in that country. This will include both vaccinated and unvaccinated. Conversely, Nasdaq futures are trading higher this morning supported by stocks related to the “Stay-at-Home” trade that was very prevalent in 2020.  These stocks include Amazon, Zoom, Netflix and Teledoc. There isn’t any relevant economic data being released today but traders will be watching D.C. as the House is expected to Pass Biden’s “Build Back Better Bill”. This bill includes the spending of $1.85 trillion on healthcare, education and climate.

Support today is 4668500 and 465500 with resistance checking in at 472500 and 473200.

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 888-861-1656 or jyasak@rjofutures.com.
Economy - Futures Market Insight w/John Caruso - 11/19/2021

Bond shorts are getting “hugged” this morning. We’ve mentioned the massive short position in the bond market as of the latest CFTC position report (nearly 100% of CTAs are short according to some sources). So you get a net consensus position and BAM! Bond yields are back down 10 bps from the recent high of 1.64%. This won’t last, but it could carry on for a few more sessions – remember, it’s widely recognized that being long on US treasuries is one of the worst places you could be invested. When adjusted for inflation, real rates on the 10yr are NEGATIVE. We’ve been busy covering the bulk of our short position over the past week, but still leaving a core short (which we’ll be grossing up from the low end of the 10yr yield range of 1.48%). 

Stocks: the NASDAQ 100 Index closed at another ATH on the year yesterday (16,508) and is etching out new ATHs once again this morning.  The small cap Russell 2000 isn’t fairing as well this morning (-1.42%), which is likely due to the slide in bond yields and energy (remember 26% of the RTY consists of Financial stocks). I’m not concerned with this slide, because we’ll likely see that rotation BACK into small caps over the next 1 or 2 weeks. We’ve signaled 4 times to buy the Indices this year, and have hit on all 4. We’ll wait on watch a little before we look at perhaps grossing up the small caps. 

Oil- Another deep dive overnight. I’m hearing certain parts of Europe are locking down again, as well as Australia. I haven’t heard anything further on SPR releases from the US and China, besides, in the past those have been buying opportunities. Those reserves eventually need to be refilled.  Oil is immediate OS right here right now, low end of the range, and BULLISH TREND remains intact. 

Bitcoin- I’ve been thinking about re-adding the bitcoin range back into our table below.  BTC remains BULLISH TREND, Neutral Momentum, and immediately OS right here right now. I’ve been lightly buying over the past few days in BTC and ETH. 

Lastly, every and any negative headline on Covid-19 has been a buying opportunity for the past 1.5yr. I don’t suspect this time is any different. 

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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