RJO FuturesCast

November 25, 2020 | Volume 14, Issue 48

The Markets

Metals - Gold is Now Broker

After writing about gold market price action looking weak recently, the market has confirmed my suspicions that precious metals in general continue to look weak, and the weakest of them all being gold. Let’s once again take the noise out of the market and simply look at the technical aspect of how gold is trading. It’s a no brainer that once gold broke a multi month low on Monday at around 1850 (a number I’m sure many traders were watching) the market immediately pushed well through 1800 and even into seven handle range on the December contract. It’s not totally over for gold, there is still some strong support at 1750-1775, but if those get taken out a move to 1700 seems inevitable. I would be positioning myself for a strong selloff soon and covering the position to see how price action trades at around 1750. This is all done on the February contract in gold futures. The only way for me to be bullish gold at this point would be for a significant rally, and close, above 1925. This would be at least giving the bulls a scenario where we are back above 1900, and in a meaningful amount. We would also be above the recent multi week high of just over 1900. Fundamentals are taking a back seat in my opinion, trade the charts.

Gold Feb '21 Daily Chart
Metals - Silver is Range-Bound
Eli Tesfaye discusses the latest news moving a range-bound silver contrct as it still awaits news on a stimulus package.
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 - Oil Continues Advance on Vaccine Optimism

Oil has continued its advance moving to its highest price since March, rallying nearly 10% in the last four sessions on ongoing vaccine optimism suggesting a turn in economic recovery and subsequent boost in fuel demand. In addition, further support may have been drafted from reports that Chinese oil demand in October rose nearly 1% higher than year ago levels. OPEC+ are set to meet Nov. 30 to Dec. 1 with an expectation of a rollover of cuts of at least 3 months from January. Weekly inventories came in with a surprise jump of 3.8 million barrels. Fueling more of the optimism is that the market is now in backwardation signaling higher expected consumption.  Oil continues to remain bullish trend as it takes its inflation higher with today’s range seen between 40.98 – 45.75.

Crude Oil Jan '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 - Cocoa Futures' Prices Pull Back Ahead of Thanksgiving Holiday

Cocoa futures have retreated after recent highs. March cocoa futures broke above 2800 but failed to hold as traders took profits heading into the Thanksgiving holiday. As news broke that Europe would be easing its Covid-19 restrictions in certain areas the hope that cocoa demand would rise has supported the market this week. If businesses have “soft” re-openings and chocolate sales increase – cocoa prices could end the year above 2800.

The latest cocoa rally could also thank the recent announcements from multiple vaccine providers that they are getting closer to releasing their versions. The equity markets like the news, which carried over to most major commodities. Vaccines lead to re-openings of businesses, schools, restaurants and lifts on travel restrictions – all supportive to higher commodity prices. Technically, the chart is vulnerable to a sell-off after a major move this high, this quick. The news that caused this rally is positive for the long-term trade, but nothing certain in the short-term, so expect volatility through the end of the year.

Cocoa Mar '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 pmooses@rjofutures.com.
Agricultural - Grain Futures Update w/Stephen Davis - 11/25/2020
Stephen Davis discusses the latest news moving the grain markets. Corn is trending much higher, but soybeans could go lower as China claims they will not be buying U.S. soy.
Agricultural - Live Cattle Trading High

The cattle market has traded at it’s highest levels since the late spring Covid-19 rally. This recent runup in prices has traders optimistic that the packers will come in and start bidding up cash live cattle this week. The cold storage report was a bit bearish but the market had shrugged off that news and concentrated on the strong cash news. The USDA boxed beef cutout was up $2.69 at mid-session yesterday and closed $2.70 higher at $244.30. This was up from $233.72 the previous week and the highest the market has been since June 9. If you disregard May's Covid rally to a record-high $475.39, prices are at their highest since March and are approaching their second highest since June 2017. The USDA estimated cattle slaughter came in at 122,000 head yesterday. This brings the total for the week so far to 242,000 head, up from 240,000 last week and 229,000 a year ago. Cash live cattle trade is starting out slow this week. As of Tuesday afternoon, the only location reporting was Iowa/Minnesota, which had 1,249 head trading at 109-110 and an average price of 109.74.  A strong beef price trend is keeping a bid under the live cattle market. February support is at 111.27, with resistance at 115.45. Look for choppy to higher trade short-term.

Live Cattle Feb '21 Daily Chart
Equity - Stocks Mixed Ahead of Thanksgiving

The U.S. stock markets are mixed this morning with a dip in the Dow and a Nasdaq rally.

The markets opened today with the Dow taking a break after it traded above 30,000 on Tuesday and the Nasdaq climbing above 12,000.  The market reacted to government numbers released today before the Holiday.  The Department of Labor reported jobless claims had risen to 778,000 opposed to an economic prediction of 730,000. The Commerce Department also released their own data with numbers on GDP and durable goods.  GDP growth was stable with 33.1% annualized rate, the deepest since the government started keeping this data in 1947. Durable goods orders were higher than expected up 1.3%% in October which was below September’s 2.1% but well above the .09% predicted number.  New home sales fell by 0.3% to an adjusted rate of 999,000 units last month, although lower than last month it still beat expectations by 27,000.

Have a healthy and safe Thanksgiving.

Support is checking in today at 360000 and 355500 with resistance at 366500 and 368500.

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 - 11/25/2020

What a year it’s been so far…

With approximately 1 month and a few days left of 2020, it’s definitely been a year to count your blessings and give thanks. When you look back upon the year that we’ve had, you come to realize the many misfortunes bestowed upon people across the world. I think it’s always important to look around you and be thankful for not only what you have in life, but also the PEOPLE you have in your life. For me, I’m just simply a flawed human being, putting one foot in front of the other, trying to do my job better than the day before. And of course I’m thankful for the opportunity not only that RJ O’Brien gives me, but also the confidence that you’ve bestowed upon me. As we barrel into year end, with the markets having come full circle, and seemingly (we hope) the virus as well, there’s plenty to be thankful for in terms of family, friends, and maybe most of all this year, your health. So, during your Turkey Day toasts be sure to know how lucky you are, and don’t be afraid to express your gratitude! 

Jobless claims +778K vs +730K last week - net  +48K w/w – certainly not a positive development

Stocks/Commodities: a very bullish set-up into the holiday, however some caution should be warranted as we’re beginning to build heavy implied vol DISCOUNTS in SPY, and NQ.  Typically a classic “complacency” signal that may present some downside trading action into early December. You should welcome that opportunity, because we believe it will be a fantastic buying opportunity into year end. Our call stands for Growth and Inflation accelerating into 2021, and will likely stand through the first half of next year. You must remember, in 1H2021 Macro data and Corporate profits and earnings data will be comparing y/y to the 1H of 2020 aka the pandemic lows of the market. This could be very  bullish in terms of risk assets. Utilize our levels below for your entry and exit points, and please feel free to reach out if you have questions. 

Drink up, eat up, and we’ll catch you next week! 

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.

Coming Up Next Week...

View Futures Calendar