RJO FuturesCast

March silver is trading 17.25 up about 10 cents on the day. This morning, the bulls seem to be in charge as the technical landscape is continuing to be supportive of silver. A break above $17.50 is needed to give the bulls the confirmation that near terms lows are potentially in. The global outlook for silver continues to be supportive. I have been watching the copper market closely and will comment on that soon, but in general, industrial demand for metals as the economy continues to rip and roar will be strong. Silver is generally friendly to the stock market. Other factors to consider are the Chinese domestic problem that could potentially could ad additional support. Overall the trend is up; a close below $16.50 will probably trigger a sell-off. I could see silver trading range-bound between $15-20 for a little bit proving a range-bound trading strategy using options.

Oil is under pressure in the early session following a continual daily grind higher and is on pace for third straight week of gains despite a surprise decline in U.S. crude stockpiles on Wednesday. Sentiment has largely settled with oil trading near three-month highs amid improving demand expectations following the completion of a ‘phase one deal’ between the U.S. and China. This comes as a U.S. probe has reported that the attack on the Saudi oil facilities in September came from the north, reinforcing earlier assumptions that Iran was behind the attack, which only serve to heighten geopolitical risk. Prices have also gained momentum from OPEC and other major producers agreeing to further output production cuts. This has come despite the waning open interest and thin volume around the holiday season. The market remains bullish trend but signaling immediate term overbought with today’s range seen between 58.50 – 61.66.

Mar ’20 coffee futures continue with volatile price action but at the time of writing have rejected the lows and have potential to reverse positive as bulls seek to push this rally forward. The previous 3 trading sessions have seen extreme volatility being 3 of the largest daily ranges March coffee has seen! So far, the rally has remained supported by strong fundamentals with tightening supplies and strong demand but after several weeks of steep gains it’s reasonable to expect some resistance. It’s possible that the overbought condition has been corrected but the bulls should be cautious about a sharp pull back in prices if coffee closes below resistance levels. On the daily charts Mar ’20 coffee I still in a strong upward channel, the funds have covered their shorts and are now strong buyers, and the fundamentals are still bullish. In my opinion, there is still an opportunity in coffee.

Posted on Oct 14, 2022, 07:42 by Dave Toth

On the heels of mid-Sep-to-early-Oct's steeper, accelerated, 3rd-wave-looking recovery, the past week-and-a-half's boringly lateral chop is first considered a corrective/consolidative event that warns of a continuation of the uptrend that preceded it to new highs above 04-Oct's 891.0 high.  This count remains consistent with our broader base/correction/recovery count introduced in 13-Sep's Technical Blog following that day's bullish divergence in short-term momentum above 07-Sep's 809.5 minor corrective high detailed in the hourly chart below.

The important takeaway from this month's lateral, sleepy price action is the definition of Wed's 851.5 low as the end or lower boundary of a suspected 4th-Wave correction.  A failure below 851.5 will confirm a bearish divergence in daily momentum and defer or threaten a bullish count enough to warrant non-bullish decisions like long-covers.  A failure below 851.5 will not necessarily negate a broader bullish count, but it will threaten it enough to warrant defensive measures as the next pertinent technical levels below 851.5 are 13-Sep's prospective minor 1st-Wave high at 813.8 and obviously 08-Sep's 766.0 low.  And making non-bullish decisions "down there" is sub-optimal to say the least.  Per such, both short- and longer-term commercial traders are advised to pare or neutralize bullish exposure on a failure below 851.5, acknowledging and accepting whipsaw risk- back above 04-Oct's 891.0 high- in exchange for much deeper and sub-optimal nominal risk below 766.0.

On a broader scale, the daily log scale chart above shows the developing potential for a bearish divergence in daily momentum that will be considered confirmed below 851.5.  This chart also shows the past month's recovery thus far stalling in the immediate neighborhood of the (888.0) Fibonacci minimum 38.2% retrace of Apr-Sep's entire 1128 - 766 decline).  COMBINED with a failure below 851.5, traders would then need to be concerned with at least a larger-degree correction pf the past month's rally and possibly a resumption of Apr-Sep's major downtrend.

Until and unless the market fails below 851.5 however, we would remind longer-term players of the key elements on which our bullish count is predicated:

• a confirmed bullish divergence in WEEKLY momentum (below) amidst
• an historically low 11% reading in out RJO Bullish Sentiment Index and
• a textbook complete and major 5-wave Elliott sequence down from 29-Apr's 1128 high to 08-Sep's 766.0 low.

Thus far, the market is only a month into correcting a 4-MONTH, 32% drawdown, so further and possibly protracted gains remain well within the bounds of a major (suspected 2nd-Wave) correction of Apr-Sep's decline within an even more massive PEAK/reversal process from 17-May's 1219 high on an active continuation basis below.

These issues considered, a bullish policy and exposure remain advised with a failure below 851.5 required to defer or threaten this call enough to warrant moving to a neutral/sideline position.  In lieu of such weakness, we anticipate a continuation of the past month's rally to new highs and potentially significant gains above 891.0.

Stephen Davis discusses this week's movements in the grain markets. With the Phase One Trade Deal signed, Stephen discusses how China will impact the grains through the use of monthly charts

After what looked like a breakout in the live cattle market on Friday after a $2.37 rally with the news of Phase 1 of the China deal being done, we are starting to see a little bit of a pullback in the market after Monday and Tuesday’s trade. I see the market continuing to trade sideways or down for the rest of the week and test the 10 DMA at $125.815 (FEB Contract). If more details emerge on what China will be buying, then I would think this market bounces off the 10 DMA and make another move to the upside. The April contract showed us that a top is in with a possible key reversal on the chart and that could signal to the longs in the market to liquidate their position giving back the premium the futures market had to the cash for the near-term.

Managed money fund traders held a relatively large net long position of 78,214 contracts in the last COT update. The USDA boxed beef cutout was down $3.05 at mid-session yesterday and closed $4.27 lower at $212.81. Cash trade for Tuesday was quiet with no trades reported and the drop in the boxed-beef market was the biggest one day drop since Nov. 7 and the lowest since Oct. 7.

 Finally, we have the Cattle on Feed report comes out this Friday and the expectation is that the placements are going to increase 1.2%; marketings are looking to be 2.6% lower than last year; and the on feed number is expected to increase 1.9% from last year. The USDA estimated cattle slaughter came in at 123,000 head yesterday. This brings the total for the week so far to 243,000 head, unchanged from last week, but up from 228,000 a year ago. If we get the numbers that are expected in the CoF report then I suspect that would be the confirmation of the downturn in the market and have further liquidation of the longs, with a target of 122.50 to 120.00 in the Feb contract.

March U.S. dollar futures are 17 points higher Friday morning after a week of gains. This retracement higher is likely the result of higher interest rates and an oversold technical condition. Continue to watch the 96.58 level; any close under key support should hint at further downside. Fundamentally, the breakdown in the dollar can be attributed to two things. The first is the injection of liquidity being pushed into the US economy by the Fed. A higher supply in any market will drive prices lower. The second factor pushing the dollar lower is the business cycle. Higher inflation is one of the goals of the Fed and is often observed during later stages of the business cycle. The dollar index is most heavily weighted against the euro and the pound, so those currencies have the most to gain if the dollar breaks. Once inflation returns to the economy, it will elevate the price of commodities across the board, so commodity currencies, like the Australian and Canadian dollars, will likely move higher as well.

U.S. stock futures are climbing to new record highs this morning as traders are staying optimistic that Washington and Beijing will sign a long- awaited trade deal early this new year. U.S. Treasury Secretary, Steven Mnuchin , said that the deal had already been written and translated and it would not face any renegotiation. “We are going through a technical issue now where again the agreement is translated,” Mnuchin said on CNBC. “I don’t expect there’s any changes. We’ll sign the agreement in the beginning of January.” Overall, the increased Chinese purchases of U.S. agricultural, manufactured goods, energy and services will add roughly a half of a point in the next two years to US economic growth. 

This year the S&P 500 is up roughly 28%, on a dovish Federal Reserve, upbeat economic indicators and expectations of the improving trade relations between the world’s two largest economies. The market hit a sixth straight intraday high on Thursday with the benchmark index gaining 1.2% this week.

Resistance is showing 322000 and 322500 while support is checking in around 320300 and 319000.

Posted on Nov 08, 2022, 07:51 by Dave Toth

In Fri's Technical Webcast we identified a minor corrective low at 2.6328 from Thur as a mini risk parameter the market needed to sustain gains above to maintain a more immediate bullish count.  The 240-min chart below shows the market's failure overnight below this level, confirming a bearish divergence in very short-term momentum.  This mo failure defines Fri's 2.8172 high as one of developing importance and a parameter from which very short-term traders can objectively base non-bullish decisions like long-covers.

Given the magnitude of the past three weeks' broader recovery however, this short-term momentum failure is of an insufficient scale to conclude anything more than another correction within this broader recovery from 26-Sep's 2.1877 low.  Indeed, overnights failure below 2.6328 only allows us to conclude the end of the portion of the month-and-a-half rally from 31-Oct's 2.4822 next larger-degree corrective low.  2.4822 is the risk parameter this market still needs to fail below to break the uptrend from 18-Oct's 2.3526 low while this 2.3526 low remains intact as the risk parameter this market needs to fail below to break the month-and-a-half uptrend.  From an intermediate-to-longer-term perspective, this week's setback falls well within the bounds of another correction ahead of further gains.  This is another excellent example of the importance of technical and trading SCALE and understanding and matching directional risk exposure to one's personal risk profile.

The reason overnight's admittedly minor mo failure might have longer-term importance is the 2.8172-area from which it stemmed.  In Fri's Technical Blog we also noted the market's engagement of the 2.8076-to-2.8159-area marked by the 61.8% retrace of Jun0-Sewp's 3.2758 -2.1877 decline and the 1.000 progression of Sep-Oct's initial 2.1877 - 2.6185 (suspected a-Wave) rally from 18-Oct's 2.3526 (suspected b-Wave) low.  We remind longer-term players that because of the unique and compelling confluence of:

• early-Aug's bearish divergence in WEEKLY momentum amidst
• historically extreme bullish sentiment/contrary opinion levels in our RJO Bullish Sentiment Index
• an arguably complete and massive 5-wave Elliott sequence from Mar'20's 0.4605 low to Jun's 4.3260 high (as labeled in the weekly log active-continuation chart below) and
• the 5-wave impulsive sub-division of Jun-Sep's (suspected initial 1st-Wave) decline

The recovery attempt from 26-Sep's 2.1877 low is arguably only a 3-wave (Wave-2) corrective rebuttal to Jun-Sep's decline within a massive, multi-quarter PEAK/reversal process.  Now granted, due to the magnitude of 2020 -2022's secular bull market, we discussed the prospect for this (2nd-Wave corrective) recovery to be "extensive" in terms of both price and time.  A "more extensive" correction is typified by a retracement of 61.8% or more and spanning weeks or even months following a 3-month decline.  Per such, the (suspected corrective) recovery from 26-Sep's 2.1877 low could easily have further to go, with commensurately larger-degree weakness than that exhibited this week (i.e., a failure below at least 2.4822) required to consider the correction complete.  Indeed, the daily log chart above shows the market thus far respecting former 2.6185-area resistance from 10-Oct as a new support candidate.

These issues considered, very shorter-term traders have been advised to move to a neutral/sideline position following overnight's momentum failure below 2.6328, with a recovery above 2.8172 required to negate this call, reaffirm the recovery and re-expose potentially significant gains thereafter.  For intermediate- and longer-term players, a bullish policy and exposure remain advised with a failure below 2.4822 required to threaten this call enough to warrant neutralizing exposure.  We will be watchful for another bearish divergence in momentum following a recovery attempt that falls short of Fri's 2.8172 high that would be considered the next reinforcing factor to a count calling that 2.8172 high the prospective end to the month-and-a-half 2nd-Wave correction.  In lieu of such, a resumption of the current rally to eventual new highs above 2.8172 should not surprise.