January 13, 2017

Volume 11, Issue 2

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

 

Webinar - Trading Energy Futures

Webinar - Energy Futures

Register now!

Wednesday, January 18 at 7 p.m. CT

In this session you will learn:

  • Energy Commodities 101
  • The benefits of trading energy futures
  • Basic technical analysis and trading strategy applicable to these markets

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Metals - Gold

Is the short-term rally in Feb gold over?

Joshua Graves

If you take a look at the gold market over the past few weeks, the bleeding seems to have stopped for the near term. We formed a low of $1124.30 in Mid-December. Since this low, we’ve managed to claw back roughly $80 breaking through the psychological and important $1200.00 level. Looking at the past week from a fundamental perspective, there was little news of significant impact to influence the gold market. The biggest would be the first speech of President-Elect Trump on Wednesday. This speech was viewed as bearish for equities and bullish for gold. During this speech Trump failed to outline some of his policies, and went on the offensive speaking about media coverage rather than focus on his tasks during the first 100 days. The jobless claims number (which came in at 247,000, with a consensus of 255,000.) was viewed as a positive for the stock market. Both of these had clear effects on the gold market.

Now let’s look at this from a technical perspective. The market was obviously much oversold when it formed a short term bottom of $1124.30, and a correction was likely in some fashion. Gold has stabilized right around $1200, but has a longer term bottom been formed? Traders need to be aware of the golden cross and the death cross. They are two of the most important technical indications on any chart. The golden cross is formed when a market crosses above the 200-day moving average. A death cross is formed when a market crosses below the moving average, it’s as simple as that. The gold market formed the death cross on election night, and closed well below the 200 day right after the election. Although we have recently crossed the 50 day moving average at $1191, we are a far cry from the 200 day moving average at $1273.80. Gold should be considered a bear market until we cross that threshold. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-435-4805 or jgraves@rjofutures.com

Daily Feb '17 Gold Chart

Gold Daily

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Metals - Silver

Is silver keeping an eye on Trump policies?

Eli Tesfaye

President-Elect Trump will inherit rather a stable economy, and if his policies continue to stimulate farther growth, Fed will probably continue to tighten monetary policy and stymie inflation pressure to that extent any real change for a protracted bull run in silver might be limited. Of course, all of this could change if there is any geo-political concerns surface and to that regard do keep very close eye on South China Sea developments. Something to note, yesterday after the Trump press conference, dollar gave away a bit and caused a bit of silver pop. FYI, I am not recommending you day trade Trump press conferences, but I find it interesting. Recent price action in the dollar suggests sideways lower price action. With that in mind, any real pull back in silver could be seen as an opportunity to the upside.

I strongly recommend making a regular habit of keeping an eye on the Commitment of Traders with Options report (COT) that the government releases every Friday afternoon. Looking at price actions in recent days in silver, I would not be surprised to see the COT report coming out this Friday show more longs of Non-commercial and Non-reportable position coming to the markets.

From a technical prospective, trade moved support from 16.00 to 16.50; therefore, any pullback to 16.50 area will provide an opportunity to participate on the upside.  Please see the attached chart below. From my prospective, the weekly chart is friendly. Also, I have attached daily silver chart overlay over dollar index to show the impact of the high dollar had on silver. I am bullish on silver, with any real pullback as an opportunity. Any break above $18.00 will accelerate momentum. 

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.

Weekly Silver Chart

Silver Weekly

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Energies - Crude Oil

February WTI Crude Oil Futures Have Found Short-Term Support

Dan Hussey

February WTI crude oil futures have found short-term support into the 51.00 handle despite the most recent EIA status report from 1/11/2017 sighting a rise in crude oil inventories by 4.1 million barrels.  Continued talk of OPEC production cuts remains at the forefront of traders’ minds, with most recently Saudi Arabia decreasing its oil exports to Southeast Asia.  The strong dollar trend that has been weighing on the entire commodity sector has found a pullback into the New Year, alleviating the pressure on export figures, and helping to support commodity prices across the board.  WTI crude oil futures have also benefited from a jump in US refinery operations, up 1.6% week over week to 93.6%, and well above the 5 year average (88%).  Increased refinery operations suggest there is still solid demand throughout the crude complex.

From a technical perspective, February WTI crude oil futures have held the short term 51.00 handle, and are now in a mode of testing resistance.  The pullback off the 55.58 highs from December 12, took the market lower in a three wave correction into equal legs 100% Fibonacci extension measurement at 50.69 on January 10th.  This area of confluence was also supported by a trend line from November 14th lows to November 29thlows, and continued through the New Year.  Broken prior resistance into the 51.00 handle from November through December is also now holding as tested support, adding just another rational for the most recent bottom earlier this week.  Upside technical projections can take crude higher towards the 58.00 area, if it’s able to sustain its rally, and push through prior highs at 55.58.

In my opinion, crude oil continues to confirm its longer term reversal and bottoming process that brought the market to decade lows in February of 2016.  The constructive price action from those lows, coupled with continued OPEC production cuts are helping to support US oil prices.  Global uncertainty with the election of President Trump and continued conflict in the Middle East are also helping support commodity prices with crude oil benefiting almost directly.  Traders can look for continued rallies in crude, and supportive price action while above the 51.00 handle.  Although every rally in crude will likely cause more oil rigs to be brought back online, a key test of the 60.00 level is likely, as that is a widely rumored price level for many newer rigs need to cover their cost of production.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or dhussey@rjofutures.com.

Daily Crude Oil Chart

Crude Light Daily

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Softs - Cocoa

Is there no saving cocoa?

Hector Galvan

This week has proven tough for the cocoa market.  The downtrend that began to form at the start of November is still plaguing the market, and news that oversupply will continue into February is not incentivizing anyone to buy.  The one question that seems to come up every day is, when should I look to buy the contact? 

We have not been priced this low in cocoa since 2012.  A time when the British pound was trading at a significant premium to the US dollar and during a time of very little to no political unrest.  Two things that, for many years, we as analysts used to gauge where to look next on Cocoa prices.  Yet, today we look less at currency and instability and more towards the supply and demand side of a product like cocoa.  We look at the quarterly grind numbers to tell us how many more people in Europe, Asia, and North America look to satisfy their sweet tooth.  In addition, we look at how fast West Africa can push cocoa out of their ports. 

Currently, the price of cocoa is being pressed by the fact that many West African producers gambled on higher prices that never materialized.  They are now at a point where they need to sell at any price to make sure they can stay liquid and look forward to their next crop.  In addition, with current prices looking so favorable to the consumer, I would argue that demand will improve over the next two quarters.  This should give the trade a reason to buy the market back up and possibly test values last seen a couple of months ago.  Furthermore, the Funds should find the values in cocoa attractive for longer a longer term hold that could also help propel prices higher.

In the end, there are a variety of methods that one can use to both speculate and cover their price risk in the cocoa Market.  I am happy to review these methods and welcome your questions.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 877-963-6484 or hgalvan@rjofutures.com.

Daily Mar '17 Cocoa Chart

Cocoa Daily

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 1/13/2017

Stephen Davis

Corn and soy stay consistent, while wheat comes in with a positive surprise of its own. 

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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Agriculture - Livestock

Fed Cattle Hits Value Area Resistance – Cash Firm

Jeff Gilfillan

Every two weeks since the live cattle futures bottom in October, my blog entry has been in “Ground Hog Day” mode. I talked about the long term value area around 92-93 and we swiftly bounced off that level and never looked back. The weekly and monthly charts developed an impressive “V” bottom and the daily charts fulfilled head and shoulders targets. Strong long-term value areas have been reached on the upside and monthly 50% fib price level around 113 now serves as support while the 130 area is the peak of the monthly value area. My previous posts targeted the 117-120 area and the trade hit this area when the continuation charts reflected the roll from Dec 16’ to Feb 17’.

Where do we go from here? Cash is trading in the high teens and being offered around 120. Seasonals should support and exports have been strong despite the strong US$. There are signs of retailer discounting that should support demand and possibily recapture some market share. In years past this area’s sports season started at Soldier Field in the Fall. Now as football popularity declines and our team struggles, the grills will burn more come Spring training and well into opening day.

Traders should favor the long end and respect the confident consumer. Action may get choppy and I anticipate a range between 113-130 in the next few months. Strength should favor Feb contracts but longs should should use Feb/Apr spreads to roll some of any gains if fed cattle breaks out towards 125-130.

Please follow RJO Market Insight’s Technical Blogs in LC. Dave Toth offers excellent insight for RJO clients. If you would like direct access to RJO's extensive in-house and independent insight contact me directly for a trial.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-0382 or jgilfillan@rjofutures.com.

Live Cattle Weekly Chart
Source: Track'nTrade

Livestock Weekly

Live Cattle Monthly Chart
Source: Track'nTrade

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Currencies

Video - RJO FuturesCast Currencies - 01/12/2017

John Caruso

John Caruso discusses the currency futures markets.  Global inflation trends are appearing around the globe. Keep a bullish bias on the USD until we see a shift.

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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Equities

The bulls are in control in S&P, but retail sales readings are paramount

Tony Cholly

Global equity markets were mostly higher, but weakness was seen in some Pacific Rim markets, perhaps because of disappointing Chinese trade figures.  Economic data overnight was mostly positive from outside of China, but the Chinese news isn’t all bad, because the import of some base/industrial commodities reached record levels in 2016 and that might point to an economy getting back on its feet.  With positive reading expected from US retail sales figures today, and more balanced technical condition in place, (following the washout and recovery yesterday) we have to give the bull camp an edge today.  Earnings announcement will include JP Morgan, Wells Fargo, Bank of America, BlackRock and PNC Financial before the Wall Street opening.  The E-mini S&P forged a big range down washout and recovery in the prior trading session, which would seem to point to the prospect of a low.  While the Chinese trades figures overnight were a little discouraging, the negative influence of the Trump press conference is drifting into the background. The trade might be able to put on a more optimistic face in the event that today’s scheduled data manages to meet expectations of a sweep of positive results.

The S&P is bullish, and penetration into new highs suggests an emerging drive to 228800+.  Near term trade may yet ease for sideways corrections along 226100, but sideways action favors a staging level for rallies.  A close under 224650 is needed to trigger near term selloffs to press for 221350, testing a larger top/downturn.  Today’s resistance comes in at 227300 and 228800, with support coming in at 225700 and 224650.  The upside target for today is at 228800 with the market needing a close under 224650 to negate the current up-trend.

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.

Daily Mar '17 E-mini S&P 500 Chart

Emini Daily

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