RJO FuturesCast

December 18, 2020 | Volume 14, Issue 51

The Markets

Metals - Gold is Showing Signs of Life

A very impressive rally in gold this week brings the market back towards the pivotal $1,900 level. The bulls will need to see a close today above $1,895 and then a close above $1,900. It shouldn’t take much to get back to November highs around $1,50 to $1,960 range.

You can say the rally is about an additional stimulus agreement, Dollar weakness or possible government shutdown. Taken together, these things all add up to the same thing. More money. Print more money. Spend more money. This is all they know how to do. After the FOMC Meeting conclusion this week, Chairman Powell reminded us that we face significant challenges due to the virus. The Fed is fully committed and will use every tool in their box to hit their targeted rate of inflation. They already let us know also, that there will be NO rate hikes thru 2021. Most would agree that there’s no sign or at least no concerns about inflation. So, let me ask you this. Have you seen what’s going on in the energies, crude and gasoline? How bout soybeans? How bout copper?

I’m telling you now, that this is the early stages of the next big bull market in commodities. The signs are there. Look at the Money Supply at record highs. Look at what the Fed is willing to do. We now have several vaccines being distributed and the economy will have a huge rebound as businesses around the globe begin to re-open. Demand will return because there’s tons of cash out there! Gold will break out above $2,000 again, and that will become the new bottom in gold.

Gold Feb '21 Daily Chart
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Metals - Silver Still Trading Sideways

This week we saw silver trade to the upper end of the sideways range its been in since the second half of September. With positive moves higher on Tuesday, Wednesday, and Thursday, The Jan silver contract reached a weekly high of 26.20, a level not seen in over a month. This week’s rally had many bullish factors, reports of progress on a US stimulus package, continued pressure on the US dollar, and a dovish take away from this week’s FOMC meeting. The Fed looks to continue asset purchases and let inflation run which is supportive for both gold and silver. There has been a little bit of a pullback to start Friday’s session with the market unable to extend this week’s gain through support at this time. With the weakening dollar, low rates, and the Fed not looking to curtail inflation a longer-term rally in silver could be developing. We would need to see this rally continue up to the next resistance point of 27.50. First support comes in around 25.15 and if that level is broke expect the market to trade down to around 24.00 to 24.50.

Silver Jan '21 Daily Chart
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Energy - Oil Advances but Signaling Overbought

Oil prices are continuing their advance this morning amidst continued optimism in economic recovery, aided by the prospect of relief and continued vaccine rollouts and the subsequent impact on fuel demand. China and India are leading the Asian recovery move with record refining demand in India, which along with the continued crash in the US Dollar, which broke down to a 21/2-year low on Thursday, has only lent further support. In addition, US inventories fell more than expected coming in by 3.1 million barrels, according to the EIA. The market remains bullish trend but is signaling immediate term overbought with oil volatility (OVX) suggesting a move a lower with today’s range seen between 44.95 – 48.80.

Crude Oil Feb '21 Daily Chart
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Softs - Coffee Rallies Again

March coffee futures have been breaking out recently, clearing all levels of resistance, mostly in part due to the continued bullish outlook for 2021/2022 crop year. This bullish supply outlook is due to the extremely dry weather in Brazil earlier this year, and the subsequent wet weather events precipitated by El Nina have not proven to be enough to offset the tight supply. Although there is wet weather forecasted for this week for the Brazilian States of Sao Paulo and Minas Gerias, these rains also most likely will not be enough to offset the supply effects of the earlier dry weather.

The UK and EU have also seen less demand due to Covid restrictions, but the announcement of the distribution of the Pfizer vaccine, along with several other vaccines on the horizon, give the much awaited promise that many will gain the confidence to overcome their fears of returning to coffee shops and restaurants, and ultimately their lives as they knew them.

From a technical perspective, strong support is being held at the 200-MA, resting at 1.14. In addition, a break above the key resistance level of 1.25 is also very bullish, and RSI and Volume levels holding steady. It is likely that corrective action will take place, back down to 120, before another leg higher is made.  

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Coffee Mar '21 Daily Chart
Agricultural - Grain Futures Update w/Stephen Davis
Stephen Davis discusses the latest news moving the grain markets including continued news on china and how the Covid-19 vaccine will impact U.S. grains
Interest Rates - Should Be Interesting Day in Interest Rates Ahead of Potential Stimulus Deal

Looking at the 10-year notes today, we have a high of 138-005 and a low of 137-095. We should have a very interesting day. Many are expecting Congress to pass a Covid-19 stimulus bill today, but details of what is included in that bill remain unknown.  Two big sticking points that remain are; does congress give money to most democratic states that are in deep financial distress, and are there going to be checks sent out to Americans. There has been talk the checks could be in the $300-$600 range as Pelosi is pushing for higher and McConnel pushing for the lower. We shall see. The other important item on the docket today is the last FOMC meeting today with the announcement coming at 1:00 PM central followed by a Q&A a 1:30 by chairman Powell. Consensus is that there will be no change by the Federal Reserve, but traders will be listening closely for any changes in the wording, which is very important because it gives traders insight on what the fed is thinking go forward. So, as we wait on both announcements today traders should be cautious looking ahead for early afternoon volatility.

10yr T-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 Dipping to Close Week

Three of the four major indices are lower this morning in the wake of the opening bell.  Stimulus talks continue to be encouraging, but we still can’t seem to get over the goal line there.  Despite the fact that it’s been nearly ¾ of a year since we last approved some form of relief/stimulus, the market continues to get excited every time these talks seem to heat up.  One has to wonder how much of the proposed $900 billion package is already priced in. 

We also have more news on a significant hack to SolarWinds that effected several high profile users like the US Treasury and the US National Nuclear Security Administration.  It is believed that the upwards of 18,000 users were affected by the hack.  Of those, the hackers have pursued seem to have focused on about 40 including the previously mentioned government agencies and Microsoft. 

E-mini S&P 500 Mar '21 Daily Chart
If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or bdixon@rjofutures.com.
Equity - S&P 500 and Gold Futures Update w/Adam Tuiaana - 12/17/2020
Adam provides an update on the E-mini S&P and gold futures. Adam also provides an overview of today's system pick, Golden Boy.

Coming Up Next Week...

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