January 20, 2017

Volume 11, Issue 3

Feature Article

Webinar - Trading Metal Futures

Fundamentals of Metals Futures

Register now!

In this webinar we will look at the following: 

  • Metals and metal futures basics

  • The benefits of trading this asset class

  • Technical analysis and trading strategy applicable to these markets

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Metals - Gold

Is Gold Going To Hold Onto $1,200 an Ounce?

Nicholas DeGeorge

In the early morning trade, April gold is trading down $13 for the day and currently trading at $1202.0. Even though April gold is down roughly $20 off its weekly highs, we’re not ready to call an end to this short-tern bull rally just yet. In fact, with this week’s weaker than expected jobless claims, trades above the bottom of the uptrend channel, and trades above its 20 & 50-day moving averages, all give April gold a good chance to hold this $1200.0 an ounce handle, and possibly a chance to rally back to the weekly high of $1221.8. Even with the US dollar rallying again, April gold has held its own, which states that the bulls aren’t ready to give into this sell off just yet.

If we take a quick look at the daily April gold chart, you’ll clearly see that gold is currently trading above its trend line channel and above its 20 and 50-day moving averages. If gold could hold onto the $1,200.0 an ounce handle and then break this week’s high, you can’t rule out a rally up to its 200-day moving average which is currently resting at $1276.3. I highlighted these levels below on my RJO Futures PRO platform.

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 Apr '17 Gold Chart

Gold Daily

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Metals - Silver

What’s next for silver?

Phillip Streible

After reaching a two month high this week gold and silver futures took a step back on outside factors like a rising a dollar and Janet Yellen. Yellen was the spear that broke the market after a hawkish speech indicating two–three rate hikes this year may be in play. The inflation data also showed an uptick and will be something traders would want to keep an eye on going forward. The fluctuations in the dollar index due to this data is going to play the biggest role in silver, along with Trump's policies and tensions with China.

Technically keep an eye on this downward channel that is in place. All too many times I have seen traders fall for the upside breakout and become disappointed. Classic studies found in the RJO PRO platform like stochastics, Bollinger bands and RSI are good ways to locate these overbought levels. Only a push through $17.50 or a break below $16.50 would indicate the next medium term trend. 

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 Mar '17 Silver Chart

Silver Daily

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Energies - Crude Oil

Oil Futures Finding Range Ahead of Thursdays Production Reports

Dan Hussey

March WTI crude oil futures continue to find a range between 52.00 handle support and 56.00 handle December high resistance.  In what has been choppy trading into 2017, the oil market is looking primed to break it’s roughly $4.00 range as stops are inevitably building above and below these figures respectively.  Sideways trading can be expected into the 1/19/2017 EIA Petroleum Status Report, where a small rise in inventories of 0.1 M barrels is expected.  The prior 1/11/2017 EIA report sighted a 4.1 M barrel build in inventories, and surprised the market which expected a build of 0.9 M barrels at that time.  OPEC production agreements, the US presidential transition, and a strong US dollar will continue to be at the forefront of traders’ minds.

From a technical perspective, much of the same technical picture I discussed in last week’s Futures Cast remains the same, only now applied to the March contract.  March oil prices still remain above prior highs that were made on 11/22/2016 at 50.83, and formed the bottom of a supportive price band which first proved as support on 12/7/2016 at 51.80.  This price band has continued to offer support for oil futures into the New Year, continues to be tested in this week’s trading.  The 100% equal legs Fibonacci extension also has proven supportive at 52.04, a measurement that is traditionally used to find support and resistance level in a market.

In my opinion, crude oil futures are still holding key supportive price levels and have possibly begun to confirm a consolidative range in this market.  While the lack of follow through to the upside on recent rallies is concerning for the bulls, failure to break through support is equally concerning for the bears. Often times, this can be a signal of a fight over trend between the animal spirits, and lead to range bound and choppy price action before one side ultimately resolves as the winner.  With larger timeframe reversal to test towards the 60 handle still in play, I believe there is still a bias for a rally out of this range, but not before bears are exhausted.  Breaking, and closing on a daily basis, below 51.80 may signal for a larger pullback and test of the 50.00 handle.

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 Mar '17 Crude Oil Chart

Crude Light Daily

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Softs - Sugar

Stochastics say slow, but chart looks ready to launch

Joe Nikruto

This week’s commentary on sugar futures finds the March contract marking time, working off of a technically overbought condition after the recent run up.  That run up, from a low of 17.84 to a recent high of 21.16, leaves the March contract trapped squarely within the bounds of the 38.2% and 50% re-tracement levels from the sell-off that began last September.  That sell-off took the market from 24.00 down to 18.00 in a little more than 3 months.  Recently revised deficit numbers from a few large bank/trading concerns may have caught the market off guard, and added to the buy side pressure brought about by large players who use sugar as a hedge against inflation or long term investable commodity.  Also interesting to note, sugar held up well during index fund re-balancing that saw positions in futures contracts for the sweetener trimmed.  The fundamental situation remains bullish with deficits projected again for 2017. But a healthy bull market needs to be fed more than once a month.  The chart shows a market that is consolidating and appears to be gathering steam for a move toward 22.00 and maybe beyond. It could be that waiting for a new fundamental development will leave traders at the station watching the train make its way down the track.  March options or options spreads give traders the chance to hold positions until the middle of February.

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 Mar '17 Sugar Chart

Sugar Daily

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Softs - Cotton

Cotton Prices Remain Firm Despite Increased Production

Erik Tatje

On January 12th, the USDA published the World Agricultural Supply and Demand Estimates which showed an uptick in production and ending stocks for the US cotton crop.  Favorable yields from key growing areas in Texas helped boost domestic production figures above previous estimates, which was partially offset by an increase in exports.  Despite an initial sell-off in prices, the market has gathered itself nicely and remains in a positive trend.

Given the uptick in both domestic and world ending stocks for the 16/17 crop, market participants are now asking “Can cotton futures maintain these prices?”  Fundamentally, the market seems to be well-supplied with the recent USDA report confirming an uptick in ending stocks; however, the intermediate term bull trend in cotton remains in effect until price action deviates from the higher high, higher low market structure.  In order for the market to do this, the March’17 contract would need to produce a close below the 69.32 swing low from 12/20.  Until then, the trend remains positive for the cotton market and a retest of the August 5th highs cannot be ruled out of the equation.

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 Mar ’17 Cotton Chart

Cotton Daily

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Softs - Coffee

March Coffee Looking Strong

Adam Tuiaana

In spite of some recent strength in the US dollar, we’ve seen March coffee prices rally over the last week or so. Many traders are a bit apprehensive about initiating new long positions due to a forecast of significant wet weather headed for major growing areas of Sumatra.  We should know more over the next two days. La Nina may be producing some good numbers in Indonesia after a sluggish production. 

Technically, we’ve been able to clear a critical high of 14525 from December 20th. This area should have posed strong resistance but since March coffee prices have cleared this area, we’ve seen 5 out of the last 7 trading sessions go positive. In the near term, we could see a strong pullback in the price action, down to this level. We won’t yet call a bottom on a market that has been free falling since November of this year. Traders should look to initiate a buy with a pullback to the 14500 level, use options to allow time, and manage risk.

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 Mar '17 Coffee Chart

Coffee Daily

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 1/20/2017

Stephen Davis

RJO Futures Senior Market Strategist Stephen Davis discusses the grain futures markets. Argentina is a big player in grains. See how their impact is affecting the markets today. 

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

The market seems to be looking for least objectionable currency

Tony Cholly

March Dollar:  Fortunately for the dollar bulls the US has produced a series of stronger than expected data points this week and that should help to cushion the Greenback against a slight beat on Chinese growth and it might also help the dollar stand up to anti-Trump protests today.  However, we get the sense that the Dollar needs stellar data and hawkish FED dialogue just to arrest the month long slide in prices.  In other words the trend is down and bullish fundamentals only look to have a fleeting influence.  Resistance comes in at 10146-10160 and support at 10625 then 10007-9980.

Dollar Index Daily

 

March Euro:  We think the Euro is lucky to be holding anywhere near the last months high in the wake of this week’s ECB assessment of growth and inflation in Euro zone.  In fact, given the combination of stronger than expected US data and ECB interest in leaving QE in place, the Euro is fortunate to be holding above 1.06 today.  However, the USD ineptitude is apparent in the wake of 4 straight better than expected data points and hawkish FED dialogue.  In other words, the lack of leadership within the currency markets has allowed the Euro to hold up. Resistance comes in at 10723 and 10761 with support at 10624-10603.

Euro Index Daily

 

March Yen: Like the Euro and USD, the Yen trade just doesn’t appear to be capable of exerting a dominating opinion on current conditions.  In fact, the Yen overnight has not benefited from a partially up beat BOJ view toward the Japanese economy perhaps because favorable Chinese growth results have, to a degree, reduced safe haven interest in the Yen.  Resistance comes in at 8773 and 8801 with support at 8685-8660.

Japan 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

March Dow Jones, Is the Trump Rally Over?

Joshua Graves

It’s Inauguration Day! Wall Street and the Banking Sector has enjoyed a very nice rally post-election. Now it’s finally time to see if the stock market rally can continue with Trump policies rolling out over the coming months.

If we look at the March Dow Jones from a technical perspective, we posted an all-time high of 19933 on December 20th, and have yet to break this level for a run to 20,000. The market has since traded sideways, and more recently broken some good support at 19661. This was a level that we saw as a low on December 30th. Draw a trend line from November 11th (two days after election) and we broke this uptrend 3 days ago. This is significant in that the market has been trending up since the election until this break. If you look at this chart, there is no real clear support until around 19200. It’s “a lot of white space” to say the least. The next level of support beneath this is the 100 day moving average, which coincides with a period of consolidation at 18760.

Fundamentally, this rally has been more emotional than anything. Positive economic data has been reported, but it’s the excitement that has everyone piling in. Talk of increased infrastructure spending, defense spending, and deregulation of the financial sector with the rolling back of Dodd-Frank have all been major reasons for this rally. The question is will Trump be able to follow through with his campaign promises. If he waffles on any of these promises, or seriously considers tariffs on Chinese goods we could potentially see a sell-off across the board. Now is a good time to consider hedging your long equities exposure with a variety of strategies across not just the Mini Dow Jones Futures, but also Mini S&P, and Mini Nasdaq Futures as well. 

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 Mar '17 E-mini Dow Chart

Dow Chart

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Energies - Natural Gas

The Short-Term Trend is up in March Natural Gas

Jeff Ratajczak

A rejection of the former resistance will neutralize the market, as March natural gas with another close above 3.410.  We may see sideways movement if this happens.  To start another leg down a close in the 3.250 area is needed.   Technicals still favor the Bull camp, however, caution is recommended adding to long positions.   Momentum oscillators are at mid level and trending higher. 

Above-average temperatures in the coming week are limiting gains, but a weak Dollar is contributing to the strength in the natural gas market over the short term.   Cautious bullish plays are advised, watch out for falling temps early next week and a larger than anticipated draw in storage later this week start another run for the 3.500 -3.600 range.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-874-81104 or jratajczak@rjofutures.com.

Daily Mar '17 Natural Gas Chart

Natural Gas Daily

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