January 6, 2017

Volume 11, Issue 1

Feature Article

Welcome!

We are pleased to bring you our new RJO FuturesCast newsletter. This futures market commentary replaces the bi-weekly eView newsletter. To keep you better informed of important market movements the new RJO FuturesCast will be sent out weekly, each Friday morning.

There's an old saying, we must learn to walk before we can run. At RJO Futures we feel the same about trading the futures markets. Our tagline, LEARN. DISCUSS. TRADE. signifies the steps one should take in establishing their trading plan. RJO Futures is your one-stop brokerage to learn about futures trading with our vast educational material, discuss the futures markets one-on-one with a personal strategist and trade the worldwide futures markets with our online trading platforms. 

Written by the RJO Futures market strategists, this RJO FuturesCast newsletter is a sounding board and your opportunity to DISCUSS the futures markets with us. So feel free to pick up the phone to contact any of our market strategist. They're passionate about the futures markets and would welcome the chance to engage in a conversation with you.

Enjoy!

RJO Futures Team

 

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Metals - Silver

Could Silvers Bottom be in Place?

Phillip Streible

Perhaps no other metal has the investor following that silver has created, along with the allure of possibilities once a bull market gets going. Recently, silver has forged out an impressive 4% gain year-to-date with only 6 days into the year, and many traders believe this is the tip of the iceberg. Of course, strong arguments are made that the FED will be extremely aggressive in it's policy stance with interest rates and 2 or 3 rates already cooked in the books. My suspicions are that we are more likely to see just 2 rather than 3. I base this on the assumption that the FED neither wants to raise rates to jeopardize the housing recovery, nor wants to jar the stock market rally. However, a correction in the stock market may be received as another breath of fresh air for metals with the Dow struggling to reach 20,000. Another driving force has been the cash grabs in India and Venezuela, and a steady flow of capital into crypto currencies like Bitcoin. But with bitcoin north of $1000 it may have priced itself too high and funds may flow into other safe havens like silver. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or pstreible@rjofutures.com.

Daily Silver Chart

Source: RJO Futures PRO

Silver Chart

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Metals - Gold

Inflation Good for Gold

Nicholas DeGeorge

In the early morning trade, February gold is trading $6 lower and currently at $1175.0. Monthly non-farm payroll rose to a lower-than-expected 156,000 in December, but a revision to the two prior months added a net of 19,000 more jobs. However, the big story is another 0.4 percent rise in average hourly earnings - the second such gain in three months. With that positive data in the report, it brought gold to its highs. This number can also be seen as a positive sign for gold in the long term, because it’s widely viewed as feeding an overall rise in inflation.
If we take a quick look at the technicals, you’ll clearly see that gold broke above a bearish trend line and is trading above its 20-day moving average. With some signs of real inflation, look for gold to test it's 50-day moving average that currently comes in at $1200.0 an ounce and if momentum becomes very strong, look for a rally up to its 200-day moving average that currently comes in at $1274.9. Below is a daily February gold chart with all the technical levels from this article.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-453-4494 or ndegeorge@rjofutures.com.

Daily Gold Chart

Source: RJO Futures PRO

Daily Gold Chart

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Energies - Crude Oil

Buyer Beware in Crude Oil

Michael Sabo

Crude oil inventories dropped by 7.1 M barrels in this week’s EIA Petroleum Status Report, while February WTI Crude oil futures trade up 45 cents on the day (as of 3 pm CST on 1/5/2017). The recent draw on crude stockpiles confirms supplies have tightened in the US, and is likely the catalyst for the rise in the price of crude oil since mid-November. As price continues to rise, we can expect to see a correlated trend in the number of active rigs online. Both the price of oil, and the most recent draw to inventories, could be a catalyst for previously off lined rigs to come back into production over the coming weeks. Continued instability in the Middle East is adding to the uncertainty of global supplies, and a catalyst for the continued rally in global crude prices.

While the fundamental picture is firming for oil prices, the technical picture and chart of WTI crude oil futures is calling for some caution. The uptrend that began with November 14th lows is still intact, however the daily candlestick chart for February WTI crude futures is showing signs of topping and warrants caution for the bulls. Price has been locked in a range between the 52 and 55 handles since the start of December, and has lost a significant amount of momentum into its recent highs. The 53.82 is the February contract highs from mid-summer, and is currently offering resistance on the daily chart, that has caused a pause in the uptrend and consolidation in the near term.

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.

Daily Crude Oil Chart

Source: RJO Futures PRO

Daily Crude Oil Chart

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Softs - Sugar

Fundamental picture shifts and March sugar futures go on a tear

Joe Nikruto

What a difference 6 trading days has made in March sugar.  6 relentlessly rapid, rallying days have seen the March sugar futures contract go from near 18.00 all the way up and over the 50 day moving average, 20.20, to near 21.00, well into overbought territory.  Technicians not stopped into new positions on the way up are now waiting for a pull back to the shorter term moving averages, 19.07 and 18.90, the 10 and 18-day moving averages respectively.  With over 70k contracts traded and only a 3k contract change in open interest the March contract is undergoing a wholesale change in ownership.  Commercial participants who have been buyers on the break from the highs in September are now handing positions off to the Fund trader.  The fund trader category shed almost 200k contracts on the move lower from the September highs and is now beginning to add them back to the long side of the ledger, quickly.  Many of the large commercially connected banks and industry groups were recently trumpeting ideas that the sugar market could alleviate deficit conditions in 2017 and move to surplus in 2018.  Recent reports show India reducing their mill count and South American production being called into question.  This new news combined with old, but continuing news of Asian consumption levels outstripping domestic production has changed the fundamental tenor of the sugar market.  The violent change in the technical picture makes it difficult to mount any opposing market view from anywhere but the safety of the sidelines.  I will be waiting for the next COT report to shed some light on how many contracts the Funds have added back to their long position.  It could be that some of this rally is new money, either Index fund or traditional speculative trader, looking to gain exposure to an uptick in inflation which could result in a rally in commodities.  Sugar has been one of the markets that these participants have historically used in their basket to get this exposure.  Check back on Friday to see if the COT has given us any clues.  In the meantime, if a 6 day move higher to the 50% retracement of last quarter’s drop, 20.96, doesn’t give you vertigo, by all means get long.  21.16 and 22.60 are price levels where the funds will extend their buying and shorter term traders may look to take the other side of those trades helping March sugar futures work off the overbought technical condition we currently see.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-453-4494 or jnikruto@fjofutures.com.

Daily Sugar Chart

Source: RJO Futures PRO

Sugar Daily Chart

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Softs - Cotton

Will Cotton Retest August Highs?

Erik Tatje

As we ring in the New Year, the cotton market is ringing in a new wave of buying interest bringing prices in the March contract above the prior consolidation range high.  This renewed strength in price comes amid concern that global demand will continue to dwindle world stocks.  Outside markets have been supportive as well with recent counter-trend weakness in the USD index temporarily taking pressure off commodity prices.  These two themes will continue to affect price action moving forward and traders should continue to monitor the fundamental situation in the cotton market.  Technically, the market remains strong with consistently higher highs pointing to a positive directional trend in prices.  The intermediate term positive bias will likely remain in effect so long as price remains above the 65.85 swing low on a closing basis.

If you’d like to discuss potential trading strategies in the cotton market, I encourage you to contact me directly at 866-397-8195 or etatje@rjofutures.com.

Daily Cotton Chart

Source: RJO Futures PRO

Cotton Chart

 

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Softs - Cocoa

New Year, New Cocoa Market?

Peter Mooses

Entering the New Year, some analysts are anticipating cocoa to be the best performing commodity of 2017. After being down 34% on the year in ’16, there doesn’t seem to be much downside left. Cocoa hadn’t performed this poorly since 1999. The reasons for this type of year – lack of demand, constantly changing supply data, an abundance of production and a lack of conviction by long-term bulls to give this market another chance. But traders were not confident to short the market either at times. West African data was uncertain, demand fluctuated based on the time of year and weather was extremely positive for growing regions at times, but also created black pod disease for some areas.

2017 is here, so far cocoa has started off fairly strong. A bottom may have been put in December 30th, the last trading day of 2016. Little rain has been received in Ivory Coast and this could hurt mid-crop production. Once again the market is expecting a large global production level – but we know this can change quickly. Ghana is seeing its crop numbers down, lack of rain and dry conditions have hurt that area of world thus far. These prices have reached an attractive level for funds and hedgers to buy back in. Speculative traders that are cautious have started looking at buying calls instead of outright futures. These options are at lower prices than the past historically. If demand can make a comeback, production can come down a bit due to the recent weather front cocoa prices may see a rally back above 2300 by February as traders start to focus on the May contract

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.

Daily Cocoa Chart

Source: RJO WebOE

Cocoa Chart

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Softs - Coffee

March Coffee Questionable Support

Adam Tuiaana

The weakness in the US dollar has put tremendous pressure, and has essentially pushed the price of March coffee back to December highs. There are also weather related concerns, as the Hightower Group reported, “the market is becoming increasingly concerned with Brazilian dryness over the next ten days”, which is adding some continued support to coffee prices.

Technically, the area to monitor will be the last major corrective high of 14525. This level should provide some formidable resistance to coffee prices. Look for some consolidation and long liquidation to take place over the next few trading sessions, followed by a continuation of the prior downtrend. Bearish traders who wish to enter with futures contracts should risk above the 14525 area.

There are several strategies that traders can apply in this situation. If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or atuiaana@rjofutures.com.

Daily Coffee Chart

Source: RJO Futures PRO

Coffee Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 1/6/2017

Stephen Davis

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7181 or sdavis@rjofutures.com.

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Currencies

Major two-sided action today, but USD gains might not hold

Tony Cholly

March Dollar:  While the USD is showing some initial strength, we have to think it remains technically and fundamentally vulnerable to more declines ahead.  In fact, strength in the Chinese currency this week is clearly a fresh major negative influence on the dollar and that in turn might require something definitively positive from the US data front.  As in other financial markets, we think USD bears are likely to retain control unless the numbers today can be judged as stronger than expected.  Over the last two trading sessions the dollar was unable to capitalize on decent data and therefore, USD bulls might need stellar data just to slow the descent on the charts.  All in all, the trend in the dollar is lower, unless there is a surprise “beat” number this morning.  Resistance in March USD is 10178, 10220, and 10285.  Support comes in at 100985, 10047, and 10065.

Dollar Index Daily

 

March Euro: Significant down-trend channel resistance is seen up at 1.0632 and that level might be a critical pivot point for the Euro.  Overnight scheduled data flow from the Euro zone was a little disappointing and the trade is bracing for some pressure in the wake of the US payroll window.  Traders might expect a washout to 10470 before a major uptrend is seen.  Resistance is at 10665-10690 with support at 10576 and 10538.

Euro Index Daily

 

March Yen: In addition to distinct windfalls from unfolding weakness in the USD, we should also suggest that part of the recovery off this weeks lows have been the result of evidence of improving conditions inside Japan.  In fact, the Yen overnight should be supported by hints that BOJ might be poised to revise their inflation outlook higher and that follows some improvement in Japanese data.  As in the Euro, traders should look to a noted washout in the Yen later today and then a recovery following.  Resistance is at 8726 then 8780.  Support is at 8621 and 8548.

Yen Daily

 

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.

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Equities

Stocks Under Pressure after Weaker than Expected Nonfarm Payrolls Report

Manon Lasserre

What is Nonfarm Payroll?

The nonfarm payrolls released by the US Department of Labor present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility across the forex board. Generally speaking, a high reading is seen as positive (or bullish) for stocks, while a low reading is seen as negative (or bearish), although previous months reviews ​and the unemployment rate are as relevant as the headline figure, and therefore market's reaction depends on how the market assets them all.

This past week, Wall Street was been expecting a 178k payrolls print for president Obama’s final full monthly December jobs report, however the December nonfarm payrolls number disappointed us coming in at 156k. On the other hand, however, average weekly earnings continued their muted performance, rising 2.3% Y/Y in December.

December Nonfarm Payrolls Effect on Stocks:

S&P 500:

The bulls in this market needed a fresh injection of optimism from payrolls, however after a nonfarm payroll increase of just 156k this was far from an expected 175k. So far the Mini S&P remains just above unchanged on the day at 226550. Global equity markets were mostly lower overnight in the wake of softer Euro zone data, and I expect stocks to remain under pressure going into next week after this morning’s release of weak economic data.  

Emini Daily

 

Other US Indexes

The Mini-Dow has shown some erosion on the charts this week and pushing into the market today, we have to favor the bear tilt. Down trend channel resistance is seen up at 19,862, and there might be little in the way of support seen until the 19,733 level. The Mini-Nasdaq seems to be poised to out-perform the rest of the marketplace with favorable close and the capacity to hold near the recent highs.

Overall, the December Nonfarm Payrolls number came out weaker than expected and we can assume stocks will trade lower throughout next week and possibly into the inauguration. 

 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or mlasserre@rjofutures.com.

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