RJO FuturesCast

December 17, 2021 | Volume 15, Issue 50

The Markets

Metals - Fed Revives Gold

Since the Fed announcement on Wednesday, the gold market has added $62.00 of premium. A close today above $1,800 would confirm a short-term bottom and reversal. The next big test for this rally will be in the range of $1.832 to $1,835. I have said before that this next rally would likely have an easier time moving back towards the November swing high of $1,882. But let’s not get too far ahead of ourselves just yet. I like gold and do expect that there will eventually be a challenge of the $2,000 level, however, I’m reluctant to get too excited about gold doing what it should have been doing all along. We have been faked out and disappointed too many times already. Considering all the cash, the money printing stimulus and emergency type measures taken by the government, gold should be much higher. That’s just my opinion! Gold will attract more buying as the trend up becomes more pronounced. When it comes to gold, the higher it goes, the more people want it.

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.
Metals - Silver Showing Signs of Life

The monthly silver chart was showing signs of life even before the Fed's minutes. Inflation is front and center. The pace of the Fed rate hike might be just slow enough to give silver traders some ammunition to expect higher price action. As I stated in previously, once the Covid-19 variants takes a back seat, silver will shine once more. Also, I have said before, one thing to remember is that rejection of the downside from these price levels (which is playing out in this week's sessions) will result in a strong rally. Seasonal support should come in to support silver right now. The $21.00 level continues to be supported. A break above the $23.50 range would likely extend really near $25.00. The long-term chart shows that you need above $23.50 to reject bearish price action entirely. Please give me a call to discuss strategies from these levels.

Silver Monthly 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 etesfaye@rjofutures.com.
Energy - Oil Poised for Weekly Loss

Oil prices are falling early in the session after rebounding yesterday and are poised for a weekly loss as uncertainty surrounding the omicron variant continue to dampen sentiment and raise concerns over fuel demand. OPEC+ has stated that it my convene before their Jan 4th meeting if the demand outlook warrants a change in their plans to add 400k per day in January while simultaneously noting an expected increase in demand for the first quarter of 2022.  In contrast, the International Energy Agency (IEA) came out on Tuesday noting that oil output is set to out outpace demand, specifically domestically, at least through the end of next year. Crude stocks fell -4.584 million barrels with stocks now down -71.810 million barrels below last year and -33.779 million barrels below the five-year average, according to the EIA. Oil volatility (OVX) continues to remain elevated in the mid-upper 40s with the market transitioning to bearish trend with today’s range seen between 65.33 – 73.26.   

Crude Oil Feb '22 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or aturro@rjofutures.com.
Softs - Will Cocoa Futures End the Year at $2600?

Cocoa futures have been trading around 2500. After the lows we saw earlier this month, cocoa futures have been able to rally slightly despite renewed fears of Covid lockdowns. As the Omicron variant spreads and the medical world tries to figure out next steps – commodities have been volatile.

On the cocoa side of the equation, supply issues could be what this market needs to get and trade above 2600 in the March contract. Many areas of the cocoa world are coming in with lower production estimates. Weather premium could also still boost prices as well. If demand can increase in the coming weeks and months, these factors could be just enough to carry the cocoa bulls higher. COT data will give us an idea where trader’s heads are at as we approach year end.

For now, traders should take a cautious approach as the Fed announcement earlier this week gave us an idea of what the next two years could look like. The ECB changing its course of action has also affected the markets and potentially the longer-term moves in their system.

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 - Consolidation on Corn Weekly Chart

Last week I advised traders “At the time of this writing March corn is trading at $5.91, a solid move higher since last Friday.  At 11am today the USDA will release the Supply/Demand and Crop Production Report, this could be a market mover. I would recommend traders watch for a breakout above $6.01 ¼ or break below $5.55 ¾ (see red lines below) to gauge short term market direction.” March corn continues to push higher and at the time of this writing it has hit a daily high of $5.98 3/4.  Traders should watch for the breakout above $6.01 ½ .  Yesterday, March corn had an inside day which appears to have been a nice setup since the market is breaking higher today. Watch for the major breakout above $6.01 ½ .

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 Weekly 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 - Stocks Down on Tech Sell-Off

Stock futures are trading lower this morning after Thursday’s sell-off in tech sector as traders look past growth stocks in anticipation of a tighter monetary policy next year. Higher rates and the central bank speeding up of their asset purchase tapering has weighed heavily on the value of technology and growth stocks. Through Thursday’s close the Nasdaq composite has fallen 5% in the last month. The Fed is not the only one responding to faster inflation, Thursday also saw rate hikes from Mexico, the U.K. and Norway with the European Central Bank pledging to reduce the rate of bond purchases in the upcoming year.  Europe’s largest fund manager at Amundi stated. “We see a risk of a bearish steepening of the yield curve. This reinforces our negative view on duration and is generally positive for value equites relative to growth equities.”

Support is checking in at 461000 and 457400 with resistance showing 471100 and 477800.

E-mini S&P 500 Mar '22 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 - 12/16/2021

FOMC Highlights:

-Taper accelerated to $30B (up from $15B)
-Dot plot shows and extra hike in 2022 to 3 (up from 2)
-The Fed will not hike rates if A. the Economy cannot withstand one and B. Not until the USA has reached FULL EMPLOYMENT

That last part was the “olive branch” to the bulls. There’s plenty of ambiguity around the definition of “Full Employment”, and when asked about it in the Q&A…Powell bobbed and weaved. Powell even went as far as saying something to the effect that they “didn’t want to roil markets”. That was good enough for a +2.00% rally across the board in the broader stock indices.

Interest Rates: This is going to be fairly unpopular with many, and always subject to change, but my bias still lies on the side of the “bond bulls” at the moment. Why? Well for one thing, bond yields have the tendency to remain “range bound” as growth continues to accel, but the Inflation component of the economy begins to cool. Furthermore, we believe there is going to be a pending shift to Scenario 4 aka Risk-Off backdrop headed into Q2 2022 – which in that case, it’s a clear cut BUY TREASURIES. Once again, this is akin to Q4 2018 – when the FED went HAWKISH right at the cycle TOP! While consensus was bearish bonds (because the Fed was Hawkish obviously), we were BULLISH bonds because we had the highest probability suggesting that the cycle was COOLING and we were moving to Scenario 4 in spite of the Fed being too HAWKISH. You got that? So in essence you could say that the Fed is a HAWKISH as they’re going to be RIGHT NOW.

Side note: The BOE raised interest rates to 0.25% vs 0.10% exp. EVEN in light of the Omicron breakout in the UK. So maybe that should tell you something about how central banks are going to set policy even in the face of Covid19 going forward.

I will be traveling today, but I’ll be in front of the market tomorrow for the morning session and into the close. So if there’s something actionable, you’ll get a signal, and you can call the desk for assistance.

All the best. Good luck.

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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