April 13, 2017

Volume 11, Issue 15

Feature Article

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Metals - Gold

Gold Strength Confirming “Flight to Quality” Trade?

After bottoming in later December, the gold market has done well to gather itself and begin regaining some lost ground from the July ’16 swing high.  The market has built solid positive structure coming out of the Dec low and yesterday’s close produced the first close above the 200-day SMA since November 7 2016.  With prices now trading above both the 50 and 200 day SMA, precious metals traders appear optimistic that the recent strength in gold is here to stay.

This optimism in gold prices comes amid heightened geopolitical risk stemming from military action in Syria.  Global tensions appear to be escalating and gold has historically been the recipient of increased buying interest in times of geopolitical uncertainty.  Gold as a “safe haven” asset appears to be in agreement with the near-term technical action on the Jun’17 daily chart, both of which paint a strong argument for higher prices. 

While a cross above the 200-day is certainly a promising signal, it doesn’t comes without caution a descending trendline originating from the July’16 swing high will likely come into play around the 1300-1308 area.  Structural resistance from the early November peaks can be seen at 1318.7 and participants should be cognizant of the potential resistance area from 1290 – 1318.  Initial support comes by way of a Fibonacci confluence zone from 1225 – 1230 and the near-term positive bias remains in effect above the 1198.0 swing low in March.

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.

Jun '17 Gold Daily Chart

May Gold Daily Chart

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Metals - Silver

Silver’s Key Moving Average Crossover

Phillip Streible

A moving average is the average value of a market’s price over a defined time period, and can mark important support and resistance levels in the market. The basic concept is to be long when the market is trading above the moving average, and short when below. The most common moving averages are the 50-, 100- and 200-day, although traders use other numbers. You can use whatever you are comfortable with to gain a unique edge.

The moving average crossover is a trend identification tool that compares different moving averages. It provides a trading signal when momentum shifts directions. When a shorter moving average crosses a longer one, the trend is seen as up. When a shorter moving average crosses below a longer one, the trend is seen as down.

Moving averages do give a delayed signal, because they are computed using historical data. Using end-of-day data is more useful for some traders, because there can be an intraday crossover that could give a less reliable signal.

In the May Silver chart, we did see the Blue 50-day moving average cross the Red 100-day recently as the market began to rally, and it seems as if the Green 200-day moving average would show that Silver is starting a bull trend. If the market trades above the 200-day for a few sessions, that reinforces a bullish shift we were seeing with our other indicators.

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.

May '17 Silver Daily Chart

May '17 Silver Daily Chart

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Energies - Crude Oil

Crude Oil Higher on Growing Geopolitical Tensions

Throughout recent weeks, there have been two major players causing a tug-of-war in WTI Crude Oil prices. They seem to be manifesting in terms of which camp has the more dominant influence on the commodity. It has been known that US rig count is up significantly and that shale company inventories have been stockpiling in recent months, but what has been looked over is the actual reasoning behind this increase in WTI production. There has been gradually increasing stability in the energy sector, thus causing stimulation in manufacturing activity as well as a spur in capital spending. The Trump administration has been very adamant about increasing the American influence over the energy sector, as well as increasing corporate profits across all sectors (energy included). This has caused an increase in productive activity by domestic energy companies and this has only been further incentivized by Trump’s ideology of being less dependent on foreign nations for vital resources such as petroleum. This in turn caused a slump in prices down to the lower $47/bbl range but the market has been telling us that the OPEC accord has much more influential capabilities than the oil situation in the US; yes, it has been known that the OPEC nations are planning on cutting 1.8 million bbl/day in production, but what the market has been particularly fond of is the periodic updates from OPEC official speeches regarding compliance by the different nations on the deal. Actual execution on the deal will cause prices to further surge as investor sentiment will transition from buying the rumor to buying the fact. Execution of the deal is looking continuously more and more likely as even Iraq has been mentioned to be more likely to comply with this accord compared to previous attempted production cut deals.

The EIA petroleum status came out Wednesday showing a decline in wk/wk inventory of -2.15 million bbls by the US.  Conversely to the bullish data expressed in the report, Trades used the news to book gains from the 10% price increase seen mo/mo. What seems like the most critical factor now outside of OPEC’s deal and US inventory are the growing geopolitical tensions across the board; with the US launching a missile attack on a Syrian airbase, Russia considering the attack an act of aggression, North Korea continuously exemplifying itself as an aggressive force, and supply disruptions in Libya as well as a supposed pipeline explosion in Yemen, it would be safe to say that increasing US inventory is the lone factor slightly hindering the oil bulls. As these international factors continue to culminate and as US production begins to stabilize, crude oil prices could continue to see rallying into the $54-$56 range within the near-term with slight pullbacks from long profit-taking and minimal short interest along with moderately likely bearish EIA and Baker-Hughes data within the coming months.

If you have any questions or would like to discuss the markets further, please feel free to contact me at (800) 669-5354 or lluna@rjofutures.com.

May '17 Crude Light Daily Chart

Crude Light Daily Chart

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Energies - Natural Gas

Natural Gas Deflating

Jeff Ratajczak

The overall trend in the May Natural gas contract is down. It is between the heating and cooling seasons, so the usage figures should be down. Underground storage should increase too. Storage may be increasing because of the pipeline as well. Resistance is seen at 3.190-3.210, then above that at 3.290. A close above 3.300 is needed to reverse the trend. The momentum indicators are at mid levels and turning lower. This could support lower action if support is broken.

Support is 3.140-3.110. A close beneath the gap near 3.020 may signal sell offs to a new trading range below the three dollar mark.  

Today, we were expecting a 5 bcf build is natural gas storage. The previous week saw a draw of 2 bcf. The actual number was double that and came in at 10 bcf. More Gas equals lower prices. These numbers are above the 5 year average, but slightly lower than last year’s storage numbers. 

The 7-10 day weather forecast has slightly lower than average temperatures forecast, which may increase usage, but not enough to support new hi’s. 

Exposure to the short side of the market is warranted in my opinion. Short the May contract with a trailing stop, or long puts or put spreads for the more cautious trader.

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.

May '17 Natural Gas Daily Chart

May '17 Natural Gas Daily Chart

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Softs - Cocoa

Cocoa moves lower on technicals and lack of demand

Peter Mooses

Key technical levels have been broken – 1990 and 1950. 1900 is the next support level that could be tested this week. Demand continues to be an issue in the cocoa market. Euro and Pound weakness also has pulled down cocoa prices. First quarter European grinding data will be released Wednesday, giving the market fresh news to trade off of. Ghana has raised its production estimates, weakening prices further. A close under the 60-day moving average has traders thinking 1900 is a realistic target lower. Traders still interested in taking the long-side of the market could look at 2200 calls in the July contract, market was just there a few weeks ago.

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.

 Jul '17 Cocoa Daily Chart 

 July Cocoa Daily Chart

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Softs - Coffee

Could Coffee Hold Support?

Adam Tuiaana

News from Brazil is that the 2017/18 output for coffee is actually falling approximately 10% compared to last season. This potential for less supply may be the force that not only allows support to coffee prices, but in fact may push them higher. However, this bullish news may see offset with a strengthening USD which will put pressure on all commodities (with probably the exception of gold and crude).

On the daily chart of May coffee below, we can see the violation of the 13860 critical low, which shortly after, was followed up by some short covering. Over the past few trading sessions, we’ve been able to recover from the 138 levels, and may see a move back up to 145. As I mentioned in my last article, the key area to monitor is the 13520. 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

May Coffee Daily Chart

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Agriculture - Grains

USDA report to highlight burdensome world and US stocks for corn market

Tony Cholly

Focus on old crop burdensome supply today could spark some selling pressure, but a shift in focus to the new crop outlook might spark the need for some weather premium.  Crop progress is not as far along as expected and the 7-day forecast models shows lots of areas of Missouri, Iowa, Illinois, and Indiana with 1-3 inches of rain.  The results of the USDA update might spark some short-term movement but the market focus may shift to the new crop situation.  For the USDA supply/demand update for release during the session today, traders see US ending stocks near 2.324 billion bushels as compared with 2.320 billion last month.  Improving demand for ethanol production could partially offset the weaker feeding demand.  World ending stocks are expected to jump to a record high 222.2 million tonnes as compared with 220.7 million last month and 210.9 million last year.  December corn closed sharply higher on the session yesterday and experienced the highest close since April 3 as a rainy forecast in the US may have helped to spark some short-covering ahead of the USDA report.  Trend-following fund traders were still net-short 138,510 contracts as of April 4.  It will not take much in the way of a weather threat to spark a bounce.  Close in support for December corn is at 385.  Resistance is at 394 and a move through that level leaves 404-413 as next levels to the upside.

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.

Dec Corn '17 Daily Chart

Corn Daily Chart

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Currencies

USD holds positive tone in front of today’s US data

Tony Cholly

June Dollar:  The US dollar started out under pressure today because of the comments from the US president that the dollar was too strong, but it did appear as if the dollar garnered some buying interest in the wake of JP Morgan earnings this morning.  With US initial claims expected to be softer later this morning, residual weakness in US equities and the appearance of total disarray in Washington, the path of least resistance in the dollar should remain lower.  If the dollar is going to turn this around, it would take a move back above 10030.

Jun '17 Dollar Index Daily Chart

Jun '17 Dollar Index Daily Chart

 

June Euro: With the short covering bounce in the euro over the prior 24 hours of trade off efforts to talk the dollar down, the euro might be set to garner a temporary windfall because of geopolitical issues in the United States.  However the euro is limited on the upside because of nondescript European inflation results.  Thick resistance in the June euro is seen this morning at 10707.  Given the fundamentals inside Europe, the euro could have difficulty avoiding a setback toward the recent consolidation low of 10620 next week.  The most significant bull argument for the euro today is its windfall from the weak action in the dollar.

Jun '17 Euro FX Daily Chart

Jun '17 Euro FX 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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Equities

Stock Indices: Bear Camp has the Edge to Start Today

Manon Lasserre

US stocks are showing initial weakness and would seem to remain injured into the last session of this holidays shortened trading week, however we are surprised that the trade wasn’t able to benefit from a series of favorable Chinese economic developments overnight. We acknowledge the potential for lack of positive US data this morning and that might justify some of the weakness but traders need to be alert to the prospect of a major trend decision this morning off impending earnings news, especially since the markets came under initial pressure off JP Morgan results. There will be a big day for earnings announcements in the US financial sector with J.P. Morgan, Wells Fargo, Citigroup and PNC Financial reporting before the Wall Street opening.

S&P 500: Residual weakness in the markets to start today is clearly the result of the after effects of this week’s political and economic turmoil. However, one can’t discount the prospect that investors will remain disappointed in the prospect of pro-growth efforts in Washington. In fact, the odds of ongoing pro-growth policies seem to have been reduced with the best case scenario now calling for August or later timing. Some in the market are probably concerned that pro-growth policies might not see the light of data at all because of the Trump administration squandering of its political capital from just after the election. With the June E-Mini S&P this morning sitting right on this week’s low and a flurry of potentially critical financial sector earnings, traders should be poised to go with the earnings reaction. The failure to get positive earnings could set the stage for a big range down trade today. On the other hand, a recovery back above 2337.50 could elicit a week ending short covering balancing.

Today’s Market Idea: The overnight slide lower by June Mini S&P has started the expected downturn for the day, therefore voiding the recommendation.

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.

Jun '17 Emini Daily Chart

Jun '17 Emini Daily Chart

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