RJO FuturesCast

November 27, 2019 | Volume 13, Issue 48

The Markets

Metals - Gold Trending Lower Off Possible U.S./China Trade Deal

In the early morning trade, February gold has backed off yesterday’s high and is now trading down $6 and currently trading at $1,461. Gold has shown some resilience this week especially with positive economic news and with technically bearish charts. The market has bounced back from last week’s lows even though there have been positive statements this week from both the U.S. and China that they are getting ever so closer to a Phase One Trade Deal agreement. However, with the slight sell off overnight maybe the rally will be short lived as the stock market consistently breaking all-time highs this week, which have caused a shift away from risk on commodities such as the metals. Furthermore, India’s gold prices have gone down for the seven straight trading sessions as gold buyers in that country are yet enticed at these low levels and suggesting maybe they’re still waiting for a further sell-off.

If you look at my daily February gold chart, you might see a lot of lines drawn, so let me highlight them for you. Two things that I’ve spotted and that have piqued my interest are that gold is in a bearish descending triangle pattern and at the same time is in a bearish channel. These are two very important bearish patterns that now gives a greater probability of gold trading to lower levels and gives the bear camp a clear edge. For the gold bulls, if you see gold trade above the descending triangle and bearish channel, then the shiny one has a chance of rallying back up to contract highs, but that is roughly around $1,500 a troy ounce. I have highlighted these levels below on my RJO Pro daily February gold chart.

Metals - Silver Looks to Continue Sideways to Lower Move

January silver started this shortened trading week continuing the sell-off from last Wednesday’s high of 17.22 but has had a good bounce on Tuesday to start the day. There will be no trading for the Thanksgiving holiday and a half day on Friday. Global equity markets overnight were mixed and there have been no major changes either way with U.S./China trade negotiations. The market is bearish short term with U.S. equities at all-time highs and a slowing of U.S./China trade headlines. A close below the recent low of 16.68 would signal a selloff to 16.35 where we would see some value buying coming into the market. A push above 17.25 is needed to go test resistance at 17.48. Look for rallies to be sold as this sideways to lower action should continue until we see a change in fundamentals.

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 - Crude Edging Higher on Trade Optimism

Oil prices are edging higher as of Tuesday afternoon amidst unrelenting optimism on U.S.-China trade talks, hopes of an OPEC extension, lower U.S. production, as well as reports of strong Chinese import demand. Reports of Chinese imports from Saudi Arabia have gone up 76% with imports at a record 10.7 million barrels per day with demand up 3.7% in October versus year ago levels. This comes amid a continuing decline in the U.S. rig count with the lowest number of operating rigs since March 2017. Despite prices near 2 ½ month highs the market is nearing near term overbought levels with today’s range seen between 55.56 – 59.05.

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 - No News Brings Cocoa Volatility Heading into the Holiday

As we head into Thanksgiving and the holiday schedule, cocoa has moved lower. After making new highs the market has turned volatile. The current channel looks negative and with lower volume we may see follow-through as trading picks back up Friday.

Positive demand news is needed to move prices back above 2650. Now that traders have been moving out of the December contract and into March futures it appears some longs have exited. COT data Friday will provide more information.

Currencies have provided little support as they have remained quiet. The continued move higher in the U.S. equities have given a positive tone to the global markets.

Look for the technicals to help the market find support. If 2585 can hold, a move above 2625 should be next.

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.
Softs - Coffee on a Bull Run

Continued strength in U.S. stocks, along with supply issues have driven December coffee prices to highs not seen since July of this year. For quite some time, traders have been waiting on key harvest numbers from Vietnam, and they seem to have gotten them. Our friends at the Hightower Group have reported that “Vietnam has seen delays in their harvest this year, and there are some early doubts that their 2019/20 production will reach 30-million bags”. This appears to be enough to keep prices for December coffee in solid support for the time being.

On the technical side, we’ve seen a strong pullback in December coffee prices today, but this will likely be followed by strong buying in the coming days, with a target of the 119-resistance level in the near term. A break above the critical 119 resistance level will likely spark continued aggressive buying over the next couple of weeks. A break above the 120 level will begin to make a strong case for a reversal in the trend to the upside. It may be a great time for bulls to jump in again once the pullback reaches 114 support level.

Agricultural - Grain Futures Update w/Stephen Davis - 11/27/2019
With harvesting season coming to an end, Stephen Davis discusses what that means for grain futures going forward.
Currency - U.S. Dollar Futures Remain Strong

U.S. dollar futures are slightly higher Tuesday morning, testing resistance at the previous cycle high of 98.30. A close above this key level will entice buyers and squeeze the market toward 99. Economic data this week has been slightly positive, propping up the dollar. New home sales came in above consensus Tuesday morning, up 733,000 in October vs expectations of 707,000. Consumer confidence clocked in at 125.5, slightly below expectations but till within the consensus range.

Meanwhile, the October trade balance ran a deficit of $66.5 billion, less than the expected deficit of $70.8 billion. The question is whether or not “warmer data” is indicative of economic recovery stemming from Fed policy, or if this is an “economic correction” with less-than-stellar data set to return next year. Either way, I believe the dollar will outperform other major currencies over the next few months. Should the world economy continue to slow, the greenback will likely acquire some “safe-haven” interest. If global economics start to perk up, this growth will likely be led by the U.S., keeping the dollar strong compared to foreign currencies. The technical pattern on the chart looks bullish, and it appears the only thing that can stop the dollar form moving higher is an extremely dovish Fed. The most recent testimonies coming from the US central bank have been neutral to hawkish.

Interest Rates - Interest Rates Waiting on China

As we enter a holiday shortened week due to Thanksgiving, I would expect the week in treasuries to be fairly quiet unless anything comes out of the trade negotiations with China.  It seems to me that every day we either get a tweet from the U.S. that we are close to a deal, or we are far away from a deal and the market is not paying attention to the economic numbers at all, but are only moving on the verbiage.   It makes the trade difficult to say the least.  Even if we get “Phase 1” agreed upon as most think we will, Phase Two would seem to be much more difficult to achieve. I don’t believe China will be willing to agree on anything in the Phase Two deal as they will most likely want to wait until after the 2020 election to proceed. The thinking behind this is that if a Democrat is in the White House, they can try to garner a better deal for them.

Looking at the technical picture of the Dec 10-year note, the market acts like it’s building a base with last week marking a series of higher lows which bodes well for further gains. A key level to watch is the 129.24 level which is the 100-day moving average. If we get a close above that level, look for the market to test the 130-000 fairly quickly.  An interesting trade that is playing out this morning is both the stocks and notes are higher. So, it could mean that the treasuries are sniffing out some weakness on the near-term horizon in stocks. Will have to wait and see.

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 - Another All-Time High for U.S. Stocks: No End in Sight

U.S. equity futures tagged another all-time high on Tuesday, with the e-mini S&P rallying nearly 10 points in the last two hours of trading. More headlines came out on Tuesday stating that the U.S. and China are “close” to a phase one deal, but it is starting to seem a lot like the boy who cried wolf. It appears as if the stock market rally is dependent on the never-ending progress in trade talks. The classic model of “buy the rumor, sell the fact” looks to be at work in the equity realm. Economic data has been on par lately, which is proving to ease investor worries that the U.S., and the rest of the world, are heading for a recession. Fed policy has once again propped up an inflated stock market, and it appears a top is not yet in place. I would look for more upside over the holiday season, unless Wednesday’s GDP number comes in below expectations and scares investors back onto the sidelines. Without a negative geopolitical event, or extremely poor economic data, it would make sense to see the stock market continue this rally into next year. First support comes in at 3116.50 in the Dec e-mini S&P, while a close under 3097.75 could cause retracement to 3063. As we are trading at all-time highs, resistance levels are not yet in place, but a close over the 3160 level will likely spark more buying into next month.

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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