February 10, 2017

Volume 11, Issue 6

Feature Article

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Metals - Gold

Administration Pulls on Gold

Gold futures ended lower on Thursday, after a five-session streak of higher prices to its highest level in about 13 weeks. The trend on Friday looks to be the same as Thursday with some renewed strength in the U.S. dollar, as well as a rise among most U.S. equities.

Gold prices have gained in each of the last 5 trading sessions to settle Wednesday at their highest level since November 10. A good portion of the bull-run in gold the last several weeks has been a result of the general belief that the Trump rally moved too high, too fast.  Year to date, gold futures have gained more than 7%.

The cool down that started yesterday comes from an imminent tax announcement by the Trump administration, causing gold to take another breather as metal investors are likely taking profit on the recent 10% move off the December bottom.

Meanwhile, the path for U.S. interest rates has also been a key factor in gold.  Data on jobless claims Thursday did little to sway the metals market from expectations for gradually higher Federal Reserve interest rates this year.  The next FOMC meeting is less than 4-weeks away from when the next Federal Reserve meeting takes place.

Short-term Gold Strategy

The April Gold futures are stalling early in the morning continuing to hamper the bull drive higher.  The market looks like it is setting up for a sell around 1229.50.  The short-term bottom to buy back would be around 1225.00. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8558 or thaberkorn@rjofutures.com.

Apr '17 Gold 60-min Chart

Gold 60 min Chart

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Metals - Silver

New Administration is Proving Volatile for Silver

Eli Tesfaye

March silver contract is trading $17.60, down 12 cents on the day. The ongoing theme is that the strength in the US dollar has put a tremendous amount of pressure on metal markets in general, and silver is no exception. Since December 2016, silver has been trying to build a base and post a formidable rally off the December $15.60 area lows. The recent weakness of the last 24 hours, in my view, is nothing but a pullback and consolidation price action. What I find interesting is that silver has been generally friendly to equities, but has recently been moving away from that positive correlation, even as the Dow Jones is posting over 20K.  While a short term top seems to be forming in the price of March silver futures, the real question remains:  where will support come into play?

Traders are continuing to weigh in on the new administration’s policies, and market headlines continue to produce event risks for the silver market.  It will be important to also keep an eye on the US Federal Reserve Open Market Committees statements and actions, as US interest rates should directly affect the trends of the precious metal markets.  Traders will likely view silver futures as an alternative to the US Dollar, so as interest rates rise and the value of the US dollar increases, I expect that to weigh negatively on the price of silver.

From technical prospective, silver futures should continue to pull back a bit, and I will look forward to review the COT report this Friday to see non-commercial and non-reportable positions.  I expect silver futures to continue to post gains towards the full 50% retracement of the prior decline at 18.37.  The first objective of this rally has been met into the 38.2% line at 17.74, and this Fibonacci resistance level has offered a short term top in the market.  I will be looking for support into first the 17.30 prior highs from January 18th, and below that the 16.70 (50% Fibonacci support from the prior rally).  Continued turbulence out of Asia warrants monitoring the geo-political concerns that may arise over South China sea.  It’s clear there are plenty of headlining events that could spark volatility in the silver market, and extra attention to global events should be a top priority.

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.

Mar '17 Silver Daily Chart

Silver Daily Chart

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Energies - Crude Oil

WTI Crude Futures Shake Off Builds in Inventories

March WTI Crude Oil Futures have pared the majority of the decline since February 8 EIA Petroleum report, which showed a 13.8 million barrel build in inventories.  The large increase in crude oil inventories shocked the market, and March oil futures sold off almost $3.00 to lows of 51.22 into that report.  The initial sell-off was sparked by the API inventories number, which was released the night before.  The confirmation between these two numbers of an approximate build of 14 million barrels was well over last week’s reports, where the EIA saw a build of 6.5 million barrels.  The continued increase in stockpiles is likely the main reason behind the stall-out in the rally and forcing bulls to reconsider their long positions in the market.

From a technical perspective, March crude oil futures remain in a trading range.  While my technical analysis is starting to sound like a broken record, the fact remains that this market is still making lows above 51.00 and highs below 54.00.  I was previously tracking a tightening range of 52.00 to 54.00, and it’s clear, bears are gaining more traction with the recent fundamental news, and have re-widened that range to 51.00 prior lows.  The same main technical support, with a price range of 51.07 to 51.77, remains intact and has yet again proven itself in the near term.  Resistance still remains above the market into the 54.00 handle, with a cluster of range highs in that area.

In my opinion, we can continue to expect a range bound market at this time.  Nothing has really changed from a technical perspective, however the fundamental picture has turned rather dramatically with the recent “extreme” build in inventories.  That can be outweighed by increased demand for crude as-well-as oil rigs responding by cutting production, so it will be important to watch rig counts and gasoline refinery numbers in the coming weeks.  With that being said, while the March crude oil futures remain above 51.00, even with the recent fundamentals being priced in, crude futures are rather well supported and can continue for a re-test of the 54.00 handle resistance.  Below 51.00 will likely see a retracement to test 49.80 (50% retracement of the entire prior rally from 43.23), and a more bearish price scenario taking over.

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.

Mar '17 Crude Light Daily Chart

Crude Light Daily Chart

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Softs - Sugar

Aggressive consolidation underway. Coiling for move to new highs?

Joe Nikruto

This week’s comment finds the March sugar futures contract in wait-and-see mode. After a dramatic rally off the lows in January, the March contract has been marking time building a well formed flagging pattern. Fund traders were forced into new long positions toward the end of January, as the March contract moved above 21.20. According to Reuters COT data, the funds are currently long a healthy but not burdensome 147,000 contracts. 20.40 and 20.04 are levels that, should they not hold, could force the funds to trim their long position. So, upon closer inspection, we see that there is a bit of drama to be found in typically reserved sugar. The trend is up, but within spitting distance of sideways. Funds have the start of a healthy position. Will they stand pat in the face on weakness? The needs of Asian purchasers should remain the dominant fundamental, but where and when will they ramp up buying? Will sugar begin to build another leg higher without testing the resolve of traders with a move under 20? The 50 day moving average comes in at 19.82 in the March futures contract and presents a good risk management level for even the longest term traders. The chart and fundamentals both say that sugar is likely headed to test the highs. But should the tide of fund purchasing ebb due to technical damage or weakness resulting from a well-worn fundamental story, 18.00 could be in play.

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.

Mar '17 Sugar Daily Chart

Sugar Daily Chart

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Softs - Coffee

While Range-Trapped, Coffee Offers Favorable R/R Scalp for Bulls

Following the market's bearish divergence in momentum discussed in 01-Feb's Technical Blog that exposed a correction or reversal lower, the market finds itself wafting around in the middle of the past month-and-a-half's range between 28-Dec's 132.85 low and 24-Jan's 156.95 high.  On the one hand such range-center conditions include higher odds of aimless whipsaw risk and present a poorer risk/reward condition from which to initiate directional exposure.  For a couple of technical facts discussed below however, we believe the market may be offering a favorable risk/reward condition from which shorter-term traders can take an objective punt from the bull side.

Coffee Daily Chart


Drilling down to an intra-day 240-min scale below, this chart shows a bullish divergence in momentum on a very, very short-term basis that defines Wed's 141.70 low as one of developing importance and a micro risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.  The Fibonacci fact that this level was in the same neighborhood as the (142.06) 61.8% retrace of Dec-Jan's 132.85 - 156.95 rally lends this low a little more street cred.  Furthermore, the relapse attempt from that 156.95 high looks to be a 3-wave affair, suggesting a correction of Jan's rally ahead of an eventual resumption of that rally to new highs above 157.00.

We still need this market to recoup 01-Feb's 151.70 smaller-degree corrective high needed to, in fact, break the downtrend from that 156.95 high and confirm this relapse as a 3-wave and thus corrective structure.  But for those shorter-term traders willing to take an objective risk to Wed's 141.70 low, we believe the conditions are ripe, favorable and objective for a punt from the bull side from current 146.50-area prices.


Coffee 240 min Chart


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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 2/10/2017

Stephen Davis

China is back from a national holiday, causing an expected boost. Support for US farmers is increasingly important.

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 futures consolidate following cattle on feed weakness

Fed cattle futures filled gaps on daily charts today created by the bearish COF report on 01/27. Placements were up much more than expected. 2017 production was up 2% year over year, and herd expansion is expected to continue through 2019. This data should keep a short term lid on prices and keep those deferred on the defensive.

The late 2016 and early 2017 advance in prices offered spreaders opportunities to take advantage of the historically wide spreads between Feb/April, and deferred contracts from June through December. There is still room to narrow. April/June should see resistance around $10. (see chart below)

RJO Market Insight’s technical blog identified 117.70 as the latest short term corrective high proceeding the report on 01/30. Dave offered a cautious bearish stance at 116.00 OB in April. Overall, I think long term players should look at the 108 area to the downside and 132 area to the upside for monthly value levels. Active management is advised this year. 

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 April 2017 Daily
Source: Track'nTrade

Livestock Daily Chart

Live Cattle – April over June Spread

Source Track’nTrade

Live Cattle Spread


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Video Daily Market Update - Currency Futures 2/9/2017

John Caruso

Watch your ranges in both the USD and British Pound. Political changes could twist the current down-trends.

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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Trump: Love Him, Hate Him, Look at the Mexican Peso Instead

Joshua Graves

It’s safe to say everyone is talking about “The Trump Effect” on the economy. Everything from his effect on trade to immigration has been discussed on every media outlet since January 20th. The March Mexican peso, thanks mostly to a the newly elected President Trump, has been crushed under the uncertainty of Trump’s policies on Mexico; that is until recently. The peso came down 20% after the election, but after the January 20th swearing in of President Trump, the peso has actually strengthened 7% to 20.49 pesos per USD since the inauguration. Right now, 1 USD is equal to a little over 20 Mexican pesos. Some currency trading firms are talking about how the performance could mean the peso strengthens to just 19 pesos/1 USD. That would be an almost 8% increase from this level, notable for any currency. Keep in mind a stronger peso, makes US exports more competitive against Mexico exports. This is something that is good for the US economy. In the short term, the March peso has seen a run up to .04885, and right up against the 100 day moving average. It’s highly overbought, and at levels we have not seen since December 12th. Is there an opportunity over the next few weeks to take advantage of this run up? I believe there is. Let’s look at some factors that could affect the price of the peso over the next month or so. The border tax and the NAFTA trade policies were roughly 70-80% priced by the time Trump was elected. Most would say that a 20% tariff on all Mexican imports could have been bigger, say 30%, or even 35%, and was largely discounted by traders. The post inauguration rally has told us this. In the end, Trump may be doing exactly what he said he would with his policies, but market perception is the main driver behind these moves and not newly enacted laws. Trump could find it hard to impose real meaningful impacts on Mexico without full congressional support. This opportunity to trade a currency doesn’t come along often.

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.

Mar '17 Mexican Peso Daily Chart

Peso Daily Chart

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Interest Rates

How can you trade the yield curve?

I was asked about the NOB spread today, also known as the "Note Over Bond" spread. In a nutshell, this is a spread that is used by interest rate traders to trade the yield curve. If you think the yield will widen, buy 10-yr Note (TY)/sell 30-yr Bond (US), narrow sell (TY)/buy (US).

When the yield widens, this means the 30-yr bond yield is rising faster than the 10-yr note yield, thus the 30-yr future is selling off quicker than the 10-yr futures.  Remember that the price is inverse to the yield.  Price goes down/yield goes up. 

In a rising rate environment, the proper trade would be to buy the NOB, buy 10-yr (TY)/sell 30-yr (US) because the yield should widen.  It is consensus that with the Fed is raising rates the 30-yr yield should go up faster than the 10-yr yield.  Or looking at it the inverse way, the 30-yr future price should go down faster than the 10-yr future price.  Thus, the appropriate trade would be to buy the 10-yr future, and sell the 30-yr future.  Both these contracts are exchange traded and extremely liquid. 

You can tinker with the ration, but the standard is 1.6/1, thus 1.6 10-yr to 1 30-yr.  One can’t trade 1.6 of a contract on the exchange so you could trade 8 to 5, or even 3 to 2 if you wanted to ballpark it.  You could even do a 1/1 ratio for more bang for the buck.  It’s not going to protect you as much if you’re wrong, but you’ll make more money if you’re right.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-672-0664 or thusseini@rjofutures.com.

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US Stocks Look Set for Gains

Greg Perlin

U.S. stocks looked set for more gains Friday after a record-breaking session inspired by President Donald Trump’s promise of a “phenomenal” announcement about his tax plan soon. The main indexes were on track for a third straight weekly gain.  Dow Jones Industrial Average futures rose 34 points, or 0.2%, to 20,170, while S&P 500 futures gained 2.95 points, or 0.1%, to 2,307. Nasdaq-100 futures added 7.25 points, or 0.14%, to 5,219.50 Led by energy and financial stocks, major U.S. indexes on Thursday after Trump’s comment on taxes. The Dow Jones Industrial Average rallied 0.6% to end at a record 20,172.40, while the Nasdaq Composite Index logged a third-straight record close, gaining 0.6% to 5,715.18. The S&P 500 index rose 0.6% to finish at 2,307.87, but earlier tapped an all-time high of 2,311.08. I think that these movements could continue in the next few days, as the theme of tax and fiscal reform comes back under the market’s microscope and expectations build up further.

The session today could be dominated by further political headlines, as the U.S. leader is due to hold a meeting with Japanese Prime Minister Shinzo Abe. The suggestion is that today’s meeting will be about more than just two-way trade and should have a focus on a full range of economic ties, with Abe supposedly planning to discuss creating jobs and also building infrastructure in the U.S.

Economic data today: The cost of imported goods surged by 0.4% in January, rising for the third time in four months, mostly because of rising oil prices that are nudging U.S. inflation higher. A February update on consumer sentiment is due at 10 a.m. Eastern. The Federal budget for January is due at 2 p.m. Eastern.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-82-2270 or gperlin@rjofutures.com.

Mar '17 E-mini Daily Chart

E-mini Daily Chart

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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