March 17, 2017

Volume 11, Issue 11

Feature Article

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Metals - Gold

Gold is Back on the Rally Track

Nicholas DeGeorge

After a long trading session, April gold has extended its two day massive $40 rally, and is currently trading at $1226.6, which means it will still close below its 20-day moving average at $1,229.2. After the quarter percent rate hike yesterday by the feds, gold bulls have to be pleased with the two day rally as the US dollar continues to sell off form a near-term high. When Fed Chair Janet Yellen explained that she wants to see more confidence in the US economy before shrinking the balance sheet, it might have been the key phrase that got gold to rally once again. Basically, her rhetoric was less hawkish than initially anticipated by traders and investors alike. 

Let’s keep this very simple. If you take a look at the daily gold chart, you can see yesterday that gold broke above the sharp down trend line and above the weekly high of $1210.0 an ounce. Look for gold to possibly pull back to this break out area of $1,217.0 to $1,210.0 and then extend its rally, but if gold breaks above today’s high of $1234.0, it sets itself up for a rally of the old high of $1,264.9 back on February 27. 

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.

Gold Daily Chart

April Gold Daily Chart

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Metals - Silver

Silver Bulls are Back

Phillip Streible

Silver futures have rebounded significantly, and continue to benefit from the Fed’s less hawkish stance after the FOMC meeting. The weakness in the dollar also played an active role, but should keep you on the defensive in case this turns out to be a head fake. So keep an eye on the major moving averages to see where the money flows, where silver has moved back to the 50-day moving average, and daily stochastics have turned higher from oversold territory. The key to this rally will be when ADX gains strength and this will confirm the bulls have taken charge.

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.

Mar '17 Silver Daily Chart

March Silver Daily Chart

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Energies - Crude Oil

Crude Volatility: Don’t Call It A Comeback!

Dan Hussey

This week's EIA report saw the first draw in crude oil inventories in 10 weeks, posting a .02 million barrel reduction and ending the streak of rising inventories.  Compared to the prior inventory builds, it’s no surprise that crude has barely reacted to this news, and has only found a meager bounce of its lows.  While crude has confirmed its heading lower in the near term, after breaking down and out of the 56-52 range it found for the first quarter of 2017, it’s important to remember that crude oil has generally been in a range above 40 but below 60 for considerably longer.

In the near term, the technicals point to a pretty simple scenario on the April crude futures.  Now that the market has broken below the 52.00 handle and the supportive price band in that area, we can expect a potential test of this broken support now as resistance.  Before crude prices can even think of testing 52.00 as resistance, the market will need to get back above the 50.00 handle and the 49.35 50% Fibonacci inflection zone that is keeping the short term down trend in action.  Downside should be expected to continue towards 46.00, while below 50.00, as bears have taken control and will attempt to test support to its fullest.

In my opinion, it will be incredibly important to remember the larger range the crude market has been trapped in, and that any moves inside of this range may simply be consolidation on a larger time frame.  From a geopolitical perspective, the great fight over global energy prices continues, with OPEC trying to cut production (and increase prices) while the US is increasing its shale and rig counts, ramping up production, and offsetting the attempts to support this market.  2017 began with a tighter range, that range is now broken, and the larger range bound market is back in play.  At some point, there will be enough capitulation built up for the market to break this range, but until then: its good until it fails.

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.

Apr '17 Crude Oil 240-min Chart

April Crude Light 240 min Chart

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Energies - Natural Gas

More of the same fundamentals for the April natural gas contract

April natural gas is nothing if not consistent. Underground storage was expecting a draw of over -60 bcf.  We got a draw of -53 bcf.  Plain English, there is a lot of natural gas available.  The 5 year average draw this time of year is closer to -87.  A milder than average winter has also contributed to the huge storage numbers. 

A late cold spell has kept some support in the market, but it should be short lived with rising temps going into the weekend.  Exports to China are not significant to buoy prices right now.

The market is currently in short term uptrend with resistance slightly above the $3.00 and above that at $3.10.   Stochastics are in overbought territory and might increase the speed of move down.  We may see sell offs challenge the $2.83 support level.  In that event a close below support could see a washout to $2.65 or below.  A close above resistance is necessary for bull forces to take control.

Seasonally, I think conservative short plays are in order.  Buying puts or shorting a calendar spread would make sense in this environment.  

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

April Natural Gas Daily Chart

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Softs - Cocoa

Fundamentals or Technicals Leading Cocoa Comeback?

Peter Mooses

May cocoa has attempted a comeback this trading week. Looking at a daily chart, 2050 is an important level – it has been hit three times of late. 2065 and 2080 are also levels to monitor, and Wednesday’s high was 2079. Between the technicals and the fundamentals, this contract should be trading around 2200. Fundamentally, reports out of Ivory Coast are anticipating a decrease in port arrivals in the short-term. Mid-crop harvest may not be as good as once expected, beans/pods may be damaged from sitting around and not being purchased. When the large crop came in, we saw a lack of storage space leading to a crop quality decline. The weather has also played a part in this recent small rally; the question is will it have a negative effect on production in the long-term? The COT may give us another push up this week - multi-year highs in speculative shorts, oversold levels, low prices, all are reasons we can see buyers re-entering the market.

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

May Cocoa Daily Chart

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Softs - Coffee

May Coffee Consolidation, When Will the Market Wake Up?

Adam Tuiaana

Lately, the coffee trade has been put into “snooze mode” with all of the consolidated price action. However, one must consider the fact that prices of commodities, such as grains and energies, have plummeted substantially on reaction to a strong US Dollar. All the while, coffee prices have refused to sell off substantially. This divergence from other commodities may in fact signal that coffee still may have some “steam” left in it after all. Okay, okay, I won’t quit my day job. While said consolidation continues, traders believe that the recent favorable weather will be the key to increased production in Brazilian Robusta growing areas. More coffee ahead may spell a long term continued down trend.

On the daily chart of May coffee below, we can see the violation of the 140 low from March 13 was in fact a breakdown out of the consolidation range which has been in place since the end of February. However, that very same day, May coffee managed to dust itself off, rally, and close positive, leaving a massive outside day up in its wake. This outside day up (price engulfing pattern) may produce some technical follow through buying in the coming days, resulting in a run to the 145 range highs. In a nutshell, don’t count May coffee out just yet, it looks to be “grinding it out” for a comeback.

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

May Coffee Daily Chart

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Softs - Cotton

Cotton Strength Continues to Gain

Erik Tatje

Not much of a change from our last report as cotton prices continue to grind higher.  The market has been technical strong since early 2016 and recent price action continues to carve out new relative highs.  Strong US exports continue to be at the forefront of this rally with the latest USDA WASDE report citing both an increase in exports along with a decrease in domestic ending stocks.  Strong demand coupled with declining domestic stocks continues to support price action in the cotton market confirming the near-term bull trend.

In terms of technical structure, recent swing lows around 72.30 and 69.74 – 69.90 could be used to assess the sentiment in cotton, which will largely remain positive until the market is able to produce a close below one of these recent swing lows.  Current prices remain well above the current trend line originating from the Feb 29, 2016 low and likely won’t become relevant in the near-term until the 73.75 – 74.50 area.  Remember that “the trend is your friend” and has been for several months now.  Traders are encouraged not to overcomplicate things in this market.  To that end, contrarian participants looking for an opportunity to fade the strength in cotton would be well-served to wait for a confirmed signal of weakness before aggressively pursuing this type of strategy.  So long as relative price action remains positive, the expectation is for this trend to persist over the near term.  RSI remains within the 80-40 range, confirming the bullish environment and prices remain firmly above the 200-day SMA.  

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.

May '17 Cotton Daily Chart

May Cotton Daily Chart

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 3/17/2017

Stephen Davis

China is buying big across several markets, trends in grains are consistent.

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

Expect the USD to Continue to Slide on its Charts

Tony Cholly

June Dollar:  With the dollar falling below parity in the early going today, it would appear that the sell the fact reaction to the Fed remains in motion.  However, we would expect the dollar to find some support from what could be a clean sweep of positive US scheduled data.  At least in the near term the trade appears to think the next rate hike could be difficult to engineer quickly without a noted progression in US data.  Near term downside targeting in the June Dollar index is seen at 99.79 and to turn the tide back in favor of the bull camp probably requires a recovery back above 10020

June Dollar Index Daily Chart

 

June Euro: With the euro set to end the week on a very strong note, it would appear that the currency is respecting the usual buy the rumor/sell the fact reaction to the latest Fed action.  In fact, with another range up extension and the highest euro trade since February 6th sentiment appears to be embracing veiled threats of rising rates in the euro zone.  Some might suggest the prospect of a European hike is more a function of a desire to get away from zero/negative rates than a sign of prowess in the European economy.  In other words, the odds of a mechanical adjustment in European rates are higher than the trade was anticipating two weeks ago.  Initial support is seen at 10812 and there might not be much in the way of resistance until 10835.

June Euro Daily Chart

 

June Yen: The move by China to hike interest rates combined with the US rate hike earlier this week and talk of the prospect of a hike in European rates has probably stalled the rally in the yen.  Initial support in the June Yen this morning is seen at 8843 but a rise above 8875 could put the bull camp right back in control.

June Yen Daily Chart

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Equities

Stocks Lower Ahead of FOMC

Bill Dixon

After a quiet day to kick off the week, stock indices have been taking a bit of a dive today.  The chart on the mini Dow appears to be a bit weaker than the mini S&P, and mini Nasdaq as that market was actually able to break below last week’s lows.  The mini S&P looked as if it was going to do the same, but it ultimately caught some buying interest slightly above the lows from last week.  The mini Nasdaq is also lower on the day, but the short term charts appear to be much more constructive as the selloff died out well short the levels we saw last week. 

Markets have already priced in a rate hike tomorrow, but I believe most traders will be looking for more information on whether or not the FOMC is still planning on additional hikes, and if so, how many this year.  For a while now, Yellen has eluded to the FOMC’s desire to raise three times in 2017.  I tend to think that those are lofty expectations.  I just don’t see how we go from two interest rates over the past ten years (December 2016 included) to three of them in this calendar year.  Maybe I’m wrong, but I would think that the Committee will want to see how tomorrow’s rate hike ultimately plays out before prematurely committing to multiple hikes in the near future.  Time will tell. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5342 or bdixon@rjofutures.com

E-mini S&P 60-min Chart

Emini 60 min Chart

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