RJO FuturesCast

November 24, 2021 | Volume 15, Issue 47

The Markets

Metals - Gold Down Hard on Dollar Strength

A huge reversal in gold this week as the US Dollar Index hits new contract highs. Once gold broke below $1,850, technical selling took over as sell stops were triggered. Gold and outside markets are reacting to the renomination of Fed Chairman Jerome Powell. The believe is that Chairman Powell will be more “hawkish” than what a new Fed Chairman would be.

Gold has quickly become over sold and while I’m unsure if the market will have an equally sharp rebound, I do see a good opportunity to get long again in the $1,785 to $1,780 range. Dollar strength is gold’s biggest obstacle right now. I do believe that gold will adjust to rising rates and Dollar strength in a positive way. There’s a level on the chart where the slide lower will reverse. Traders should not have been so invested in the prospect of a new and more dovish Fed Chair. Better the devil that you know.

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 Higher Despite Strategic Reserve Release

Oil prices fell to around $75 a barrel earlier in the week before moving back into positive territory following reports that the US will lead a global coordinated effort to release their strategic petroleum reserves (SPR). The US is set to release 50 million barrels with 32 million released in the next few months and 18 million of a previous sale. Other countries who have committed include China, India, Japan, South Korea as well as the United Kingdom. The UK has agreed to release 1.5 million barrels with India committing to 5 million barrels with the remaining countries unspecified. This effectively equates to one day’s worth of global oil consumption, which is not going to able to offset this structural deficit. OPEC+ is scheduled to meet next month as they are set to release an additional 400k barrels per day. Oil volatility (OVX) has come off the top end of the range as the market remains bullish trend with today’s range seen between 75.03 – 83.34.

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.
Agricultural - Grains - Highest Close for December Corn Since July 1!

Over the last two weeks December corn has been consolidating just under what I believe to be a major trendline (see red trendline on chart below). Yesterday December corn hit a daily high of $5.81 and closed at $5.80 ½, which is the highest daily close that contract has seen since July 1st, 2021.   Two weeks ago, 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.”  Then on November 19th I advised traders “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.”  The last three sessions, including today, we have seen higher highs and higher lows with December corn hitting a daily high so far today of $5.89. The market appears poised to continue higher, but not without some selling pressure from time to time. For now I remain bullish especially with a break above the trendline I mentioned earlier. A close above $5.84 today would bode well for the bulls in my opinion to keep prices moving into Friday. Keep in mind this Friday is December grain option expiration so we could see increased volatility on both sides.

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 Down on News of Powell Nomination

Looking at the December 10-year note, we have a high of 130-24 that came early last night and a low of 130-065 and currently trading 130-10. Some big news came out this morning as President Biden intends to nominate Jerome Powell for a second term as Fed chair. The stock market rallied on the news and the note fell. As dovish as Powell has been, the market believes he is less dovish as Fed Brainard so that’s why were seeing price down and yields up. The note market rallied late last week on continued talk that China and Japan were going to release oil reserves in hopes of increasing supply to the market as OPEC does not seem willing to increase production. Soon after the rumor about China and Japan, WTI fell around $3 as most traders don’t believe that the release will do much in the long run and as a result the price of crude has stabilized and is currently up 77-cents at 76.70.

Looking at technicals, we are still in a bear and the inability for the December 10-year to hold gains over the key 131-00 puts the low ff the move at 129-31, which is a double bottom that we saw on October 21 in focus.   A close below that key level brings 128-28-31 in play. 

10-Year Note Dec '21 Daily Chart
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Equity - Stocks Continue to Slide

All four indices are lower to kick off the week’s last full day of trading. While the Russell and Nasdaq managed to make new lows for the move, the Dow and S&P have failed to do so.  Tech has led the way down as bond yields are on the rise once again. Lockdowns are back in some corners of the world due to surges in coronavirus cases. Inflation also seems to be a bit stickier than some would have guessed. Factor in that Powell is still driving the bus at the Fed (Brainard would have likely been more dovish), and you’ve got some ingredients for a selloff.  With all that in mind, we’re dipping into oversold territory in the Russell. The Dec VIX is trading above 21, and while that doesn’t mean it can’t go higher, it has struggled to tread water at these levels for any meaningful amount of time. 

Trading hours are cut short tomorrow and Friday for Thanksgiving. We’ve got a few important data releases next week including PMI on Tuesday and the jobs data on Friday.  Happy Thanksgiving to you and yours.    

S&P 500 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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