RJO FuturesCast

December 4, 2020 | Volume 14, Issue 49

The Markets

Metals - Gold Found a Short-Term Bottom

In my last update I discussed that gold was under pressure with risk on trade and vaccine news.  Since then the $1,850 level and then $1,800 level were both violated. The selloff spiked down to $1,762 and bounced back very quickly. I expect that now we see gold consolidate in the range of $1,850 to $1,875 before ultimately moving back above $1,900.

Now, in my mind the whole reason that gold reached as low as $1,762 was due to a huge flow of money into BTC! I personally don’t understand that but that’s what happened. I’d rather own something that I could touch! So, gold had a sharp selloff and an equally sharp recovery bounce. That is because the Dollar is weak. The Dollar will continue to be weak. You’ve heard what they’re calling it now…”Modern Monetary Theory”. Easy money, Fiscal Stimulus, Printing Money, Quantitative Easing all add up to the same thing. Debasement of the currency. This is why I will remain bullish on gold. Inflation will be unavoidable.

Gold Feb '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 fcholly@rjofutures.com.
Metals - Silver Holding Around Resistance

Monday we saw the silver market continue last weeks slide, posting a new recent low of 21.925 in the January contract before turning back positive for the week on Tuesday. The second half of the week we saw the move higher hold but not extend as the market holds around resistance. The silver was making new highs for the week with continued weakness in the dollar but less than desirable jobs numbers pressured silver off its highs early in today’s session. The bulls are in control with the inflation outlook increasing with the continued move lower in the US dollar and the Fed showing no signs of raising rates in the near term. A stimulus package getting passed would also support the silver market here. Since the second half of September January silver has been trading in a sideways range of 22.50 and 25.00 and although the market was trending higher this week it will take positive fundamental news to push the market through the 25 level and back to resistance at 27.50. I still believe the longer-term outlook for silver is to the upside but there will most likely be some back and forth along the way. The market would need to hold support of 23.45 and 22.50 to avoid another washout to the downside.

Silver Jan '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.
Energy - OPEC+ Come to Agreement

As of the Thursday afternoon session, oil prices have continued to edge higher following a multi-day retracement despite reports that OPEC+ have agreed to a collective output increase of 500k bpd next month ending a deadlock in discussion. The agreement was viewed as a form of cohesion following the impasse as the initial expectation was of a continuation of oil production cuts of 7.7 million bpd through March. The deal will be set proportionally with an agreement in place to review production each month as demand prospects continue to remain uncertain. This comes amidst a slight draw in EIA crude stocks and a surprise build of 4.1 million barrels in API crude stocks with a large increase in the weekly inflows of the product markets. The market may have been supported in by reports that the US exported nearly 3.5 million barrels last week, however, the refinery rate declined indicating a perhaps a setback in demand following the holiday uptick. The market remains bullish trend with today’s range seen between 42.07 – 47.11.

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 - Coffee Holds Support

Some continued wet weather is key growing areas of Brazil has helped to keep March coffee futures prices in check, as earlier dry weather had been forecasted to be a large bullish factor. However, lock downs on restaurants and coffee houses will continue to prompt sluggish demand on coffee, but the promise of a future-tight crop should continue to provide March coffee prices with some support.

The UK has announced that they will begin distributing the Pfizer vaccine, which should be viewed as a bullish factor on the demand side for coffee. Although several factors will continue to play a role in how effective the vaccine and distribution of the vaccine will be, on-the-whole, the news is positive for the future of coffee shops and restaurants.

From a technical perspective, the aggressive bullish crossover of the price action through the 200-day MA has been followed by consolidation and strong support. The March coffee price action has also managed to back and fill the gap from 11/27/20 at 119, and has subsequently held support above the 200-day MA. There are several strategies that traders can apply in this situation.  

For more frequent commentary, please check out and subscribe to my daily futures market videos on coffee and other commodities. https://www.youtube.com/channel/UCfl6aH8DY9UiqFOMpeGJOCg?view_as=subscriber

Coffee Mar '21 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis - 12/04/2020
Stephen Davis discusses the latest news moving the grain markets. He believes traders should look for corn to close out the year strong as China is still buying U.S. corn
Currency - USD Outlook Remains Poor

While the USD short term remains technically oversold, the bias does remain down. Unfortunately, the US nonfarm payroll report is a coin flip, as historic conditions and large numbers should mean big surprise potentials. This report came in lower than expected today at 245,000. With a prevailing view in the marker that the US economy is losing recovery momentum against the idea that the economy will get beyond the crisis, today’s reaction in the dollar should be temporary.  Getting short the USD is suspect from a trade location perspective but should agree with the ultimate trend. Today’s disappointing jobs report reaction might be delayed until late in the session when expectations for stimulus will either be confirmed or denied. Resistance comes in at 9095 and 9130 with support at 9035 and 9010

USD Dec '20 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or tcholly@rjofutures.com.
Interest Rates - Interest Rates Facing Pressure from Covid-19 Vaccine

Looking at the March 10-year, overnight we saw a high of 137-21 and this morning we had a low of 137-09. Currently, we are trading at 137-105. We have seen pressure in todays trade on continued optimism on the vaccine front with deliveries taking place in the next two weeks. That has certainly added to a "risk on" environment in the trading complex. Earlier this morning we saw the monthly ADP employment report come in lower than expected. The street was looking for 410k, and the actual number came in significantly lower at 307K. Normally, this would have been a bullish sign for treasuries, but the market seems fixated on vaccine news rather than economic numbers. Friday morning, we have the monthly employment numbers which will certainly be watched closely as the weekly claims numbers in the last month or so have ticked up, so I would expect a weaker than expected payroll number as well.   Technically the March 10-year being below the 50-day moving average is a bearish sign and that number sits at 138-105. On the downside, traders should be cognizant at the 136-265 level which was the low in the contract on November 11. First time down I would expect a bounce at that level.

10-Year Note Mar '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.
Equity - Stocks Remain Near Record Levels Despite Weak Jobs Data

This morning’s employment report did not exactly give the bulls something to hang their hat on.  We expected to see a reading of 500k jobs added.  The actual number was only 245k.  We also revised the prior reading lower by 28k.  Private payrolls and manufacturing readings also missed expectations and saw previous numbers revised lower.  While the news wasn’t the best, stocks continue to trade at or near their all-time highs.  Perhaps we’re back into the “Bad news is good news” cycle in which bad readings just mean larger stimulus packages.  Speaking of which, stimulus has been back in the news this week as it appears we are getting closer to a bipartisan, Covid-19 relief bill.  The word is that the package will be in the neighborhood of one trillion dollars, and both sides seem to be confident something will get passed in short order. 

New highs were printed in the S&P and Russell.  We’re not far off on the Dow and Nasdaq.  Perhaps we’ll see some profit taking to close the week out, but seasonal trends still favor upside.  Buyers of dips remain active, and I see little reason for that to stop in the near term. 

E-mini S&P 500 Dec '20 Daily
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.

Coming Up Next Week...

View Futures Calendar