March 3, 2017

Volume 11, Issue 9

Feature Article

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Critical Trading Mistakes

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March 8, 2017 at 7 p.m. CT

Avoid the critical mistakes in this business of trading. Be a student of the markets and focus on mastering the basics of trading for profit while managing risk. Most amateurs take unlimited risks for limited gains, this is not a good business strategy. Learn from the mistakes that you make in the market and be persistent. Trading with a proven strategy can reduce these critical errors.

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Exchange Info

Data-Driven Fed's Dilemma Over Rate Decision

By CME Group

 

Off the Charts

 

Despite unemployment and inflation being close to its target, the Fed is unlikely to raise rates at its March 15 meeting, deferring to a May or June hike.

Podcast

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Metals - Gold

Are The Bears in Control of Gold?

Nicholas DeGeorge

In the early morning trade, April gold has continued its sell off and is currently trading at $1,228.7. There are a couple of reasons gold has sold off more than $30 from last week’s high. The main reason is that the latest news of US rate hikes and the US dollar traded at its highest price since January 11. April gold traded lower overnight and made fresh new weekly lows, which should leave the bear camp in control. However, with gold at these prices, any break in the US dollar might give the bulls another chance to buy at these price levels.

If you take a look at the daily April gold chart, you’ll clearly see that gold has broken below all its bullish trend lines, which leaves it vulnerable for a sell of down to the $1,200.0 an ounce level.  However, if gold could hold above $1,225.0, then the gold bulls should enjoy a rally back up to at least yesterday’s high of $1,250.8. If gold could break above that high, then look for another up to $1,270.0, which is currently where the 200-day moving average rest.

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.

Apr '17 Gold Daily Chart

Gold Daily Chart

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Metals - Silver

Sliver Expectations Rise with Rates

Phillip Streible

What a difference one week makes with expectations of a March rate hike jumping from 26% to 76%. It appears that inflation concerns have far exceeded our consensus. Although silver has benefited from industrial demand, dollar strength has been weighing in. I am under the impression that this may be another case where the market rallies once the FED finally does raise rates. Repealing Dodd Frank may also provide an underlying support by enabling banks to take advantage of more flexible lending, which may increase credit available to consumers, thereby creating more inflation. Looking at a chart, we see a high level of resistance at $18.50, and $16.00 as a key level of support. With a 38% retracement on the Fib, we may see the selling subside once we hit $17.50.

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.

Silver Daily Chart

Silver Daily Chart

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Energies - Crude Oil

Crude: Going Nowhere Fast

Dan Hussey

Not much has changed for oil market (price action) since the start of 2017 – and even that might be an understatement.  The range in crude oil futures, between 52.00 handle and the 55.00 handle, is likely reaching a boiling point, however, while in this range its treacherous trading.  For the fifth consecutive report, the EIA reported a build in crude inventories of 1.5 million barrels.  The reaction from April crude was as expected, with yet another selloff in crude to the low end of its range. The selloffs post these reports have all been faded, and crude has continued to test its range highs with little regard for fundamental opinions.

From a technical perspective, let the broken record spin!  April crude, while it looks prime to break out of its range… is still in a range.  Caught below the 55.00 handle resistance form prior highs, and above the 52.00 handle supportive range, I expect consolidation to continue.  I am cautiously optimistic we will see this range resolve higher, and in the near term, a push to test the continuous contract highs into the 56.76 area may be early confirmation of the bulls taking over.  While above 52.00 in the April crude futures, I expect continuation in this range and for crude to catch a bid to test back towards the 54.00 handle in the near term.  Below 52.00 – specifically the 51.87 April contract lows from February - could open the door towards the next tier of support into the 50.45 50% Fibonacci support level.

In my opinion, traders will need to continue to expect range bound price action and consolidation above the 52.00 supportive price band, but below the 56.76 prior highs.  While the recent price action has pulled the market back a bit, the fact remains that this market is still in its treacherous range.  If the price of crude does begin to break down further, and can close below the 51.87 recent lows in the April contract, I expect the next supportive price band into the 50 to 49 handles.  In due time, this range will break, and when it does the weeks of building positions (and stops above and below the range) should produce a solid move (one way or the other). Define your risk, pick a side, and get ready for what could be a volatile ride.

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.

Crude Oil Daily Chart

Crude Light 240 Chart

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Energies - Natural Gas

High Temps Cool off Natural Gas

Jeff Ratajczak

Natural gas for April remains in downward trend, and is trading in lower range.  Above average temperatures in February and lower draws on the storage both are contributing to a drop in gas prices.  A storage build of 7 bcf v an expected draw of 5 bcf have also has put pressure on prices in the short term.  Another contributing factor is that natural gas is well above the 5 year average.

Yesterday’s session had a high of 2.835 which was a high for the April contract.  However, it was well below the President’s day gap from 2.946 to 2.913.  If prices don’t fill the gap soon, the new trading range will be established. 

Resistance is at the top of the gap 2.946, and the longer it takes to get there, the lower the expectations for resistance to the lower side the gap near 2.910.  Close support is at 2.641 and below that at the contract lows around 2.310.  Momentum studies are at mid-levels and holding steady on daily charts.

Chinese imports may be putting some placing a bit of support in near term pricing.  They are trying to convert from coal to cleaner burning gas.  With massive coal usage this is a daunting task for the Chinese economy.   I’m going to be a buyer on a pull back, near support levels 2.640-2.620.  Maybe selling 290-295 calls above the gap would be another trade to consider.

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.

Apr '17 Natural Gas Daily Chart

Natural Gas Daily Chart

 

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Softs - Cocoa

Cocoa Surplus Hits a Six-Year High

Peter Mooses

ICCO projects global cocoa production will hit 4.55 million tonnes, Ivory Coast has a record crop of 1.9 million tonnes and cocoa surplus hits a six-year high – you can’t get more bearish than that. With a steady increase in production the past year and very little demand, futures have not been able to turn around. A once bullish chart has little hope of a recovery at this point. Traders will monitor grindings for some direction moving forward. Europe and North American grindings are not expected to help the trade. Asian demand may give slight hikes in prices but will not be enough support to carrier the market higher. The fundamentals have not offered us any volatility and the technical haven’t been of much help either. 1890 is still support in the May contract for traders looking to buy on dips. A breakout above 1950 is needed to have cocoa head back to 2000. The range created in the second half of February will need to be met and broken to create any long-term change in the market from a technical standpoint.

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.

May '17 Cocoa Daily Chart

Cocoa Daily Chart

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Softs - Coffee

May Coffee Wobbling

Adam Tuiaana

Brazilian Robusta growing areas will likely see increased production going forward with fairly favorable weather, but that may simply counter-balance a decline in the Vietnamese crop. It would likely be that decline in the Vietnamese crop that helps to support prices of May coffee from diving back down to the 135 level. A strong US stock market should help on the demand side, but there is apparently a good supply to sustain demand for a while.  

On the daily chart of March coffee below, we can see the violation of the 14420 critical low, which shortly after, was followed up by some short covering. In today’s price action, we’ve been able to recover from the overnight lows, and may see a move back up to 145 before we see a continuation of the downtrend that has been in place for quite some time. The key area to monitor is the 135 level. If this area is able to hold support, we may see a bounce back to higher coffee prices. However, a violation of this area spells a major selloff, likely back to lows not seen since June of last year.

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.

May '17 Coffee Daily Chart

Coffee Daily Chart

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 3/3/2017

Stephen Davis

Agriculture is booming overall, grains continue to hold as MVP.

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

Initial Weakness in the USD Should Be Watched

Tony Cholly

March Dollar: While the dollar index is showing initial weakness today, the action is probably the result of technical balancing and not a tampering of bullish attitudes toward the greenback.  In fact, with the exception of a six year high in European services PMI readings the economic information from Asia was supportive of the dollar.  It also goes without saying that a large portion of financial markets today expect to see hawkish dialogue and hints from the FED which could result in another upside breakout in the dollar.  Initial support is seen at 1.0179 and a rise back above 1.0217 could ignite a fresh wave of buying.

Dollar Index Daily Chart

 

March Euro: As mentioned already, the trade was presented with a six year high in European services PMI data early today and that appears to have provided a strong measure of support above the 1.0500 level.  Unfortunately, for the bull camp in the euro short covering off this week’s wave down action could be quickly truncated by the prospect of another wave of rate hike hints from the US Fed.  Downtrend channel resistance from the last months range is seen up at 1.0598 but that level shouldn’t be sustained.

Euro Index Daily Chart

 

March Yen: With negative chart action and weak than expected January household spending results from Japan overnight, the technical and fundamental path of least resistance in the Yen looks to be down today.  The Yen might garner some minimal cushion from Bank of Japan suggesting that they will taper off purchases of super long debt instruments.  Overhead resistance comes in at 88.00 zone today.

Yen Daily Chart

 

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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Interest Rates

Recent Rejection Confirms Neutral Environment in Bonds

Erik Tatje

Despite closing last week on a relatively positive note, the bond market finds itself on the defensive once again following a rejection from the upper end of the recent consolidation range.  Yesterday’s rejection from the 153’10 – 154’00 resistance area was confirmed by further declines this morning in the wake of President Trump’s address to Congress.  US Equity markets continue to soar to new all-time highs and the probability of a March interest rate hike doubled overnight.  So long as the market doesn’t produce a close above 154’00, the directional bias appears to remain neutral-to-negative in the 30-yr bond market, especially in light of recent events.  The recent swing up in price, which produced a relatively lower high on the chart, corresponds with a relatively higher high in the RSI indicating that the market was “more overbought” at a lower price level.  This signal could allude to potential weakness in the market and, sure enough, the market hosted a fierce rejection from the range extreme and now finds itself trading more than two handles lower.  Given the monetary policy outlook provided by the FED, an argument could be made for further sideways to negative price action in the 30-yr bond market going forward.  Technical structure can be seen from 149’08 – 149’23 below the market, which could serve as an initial downside target for the current negative momentum.

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.

Mar '17 30-Yr T-Bonds 60-minute Chart

30yr 60 min Chart

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Equities

Bears Gain an Edge Moving into Fed Speech Windows

Manon Lasserre

Global equity markets were all lower overnight with all markets down less than 1%. At the start of the day, it would appear as if the definitive risk on wave is waning. In fact, the inability of the bull camp to benefit form a very favorable and widely covered tech sector IPO event highlights a market that is unable to grasp potential windfalls. In looking ahead, the markets are facing an extended list of Fed speeches which are largely expected to provide additional hints of action from the Fed later this month. With the initial lower low track and the extending corrections from this weeks’ high some measure of a rate hike is factored into prices. However, given the compacted two day rally earlier in the week, the overbought condition into the March 1 high and what appears to be a lull in pro-growth policy attention in the headlines the bear camp clearly holds sway. Earnings announcements with include Big Lots before the Wall Street open.

From a technical standpoint, the March E-mini S&P from this week’s high to the overnight low is down 27 points and it would appear that the overnight fundamental news flow has left control in the hands of the bear camp. Near term downside targeting in the March E-mini S&P is seen down at the top of a late February consolidation zone of 2370.75. Uptrend channel support off the last three weeks action is seen at 2370.10 but pushed into the market today we have to favor the downward tilt. 

Mar '17 S&P E-mini Daily Chart

Emini Daily Chart

 

Like the rest of the stock market the mini Dow has remained under pressure to start the last trading session of the week. It does appear, however, as if the 21,000 level is offering up some measure of support but scheduled data and the Fed speech schedule today favors more downside action. The March E Mini NASDAQ is sitting roughly 55 points below this week’s high at the overnight low and we have to lean bearish toward the index, at least to start today. 

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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