April 21, 2017

Volume 11, Issue 16

Feature Article

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Metals - Gold

Buy Gold On a Pullback?

Joshua Graves

June Gold futures has seen quite the rally over the past few months. The question is how much more room does it have to go? Right now June gold trades at $1285/oz. It’s been as high as 1297.40 just last week. Most of this can be attributed to the geopolitical tensions overseas. The biggest potential for gold that I see at this point is the uncertainty surrounding North Korea. The leader of the country is a fanatic, who can be seen as completely unpredictable and speaks of constant nuclear threats against the United States. North Korea is a ticking time bomb that could have serious ramifications on the gold market. I think there is a real possibility that at the very least, a North Korean missile is shot down via a US guided missile destroyer. The retaliatory response from North Korea is likely to be minimal, but the perception of this could have investors flocking to gold. Gold could easily be seen at close to or even surpass 1350 over the next month if tensions continue to rise.

Taking a look at this from a technical perspective, everything seems to be supportive of the bulls. There are a number of reasons to support this. Gold is trading above all three main moving averages (50, 100, 200). If there is a pullback, 1262 is the first main support with the 200-day coming in right in line at this level. The MACD still indicates a buy, and has since March 21. The RSI is not into deep overbought territory right now either. There are a number of ways to play gold to the long side given the geopolitical tensions in the world, coupled with the supportive technical. 

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.

Jun '17 Gold Daily Chart

Jun '17 Gold Daily Chart

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Metals - Silver

More Silver Pull Backs

Eli Tesfaye

May silver is trading $17.94 down about 21 cents on the day. My previous article discussed the potential for a pull back side ways to lower type of price action from the move above 18.50 range. It appears trading is moving to a support zone, possibly low $17.50 area. As I've mentioned in the past, the near-term upside target seem fulfilled provided we continue to hold below $18.50. It's worth noting, this range type of price action can provide option trading opportunities. For now, unless we get a blowout type of price action i.e. rally above $18.50, trades look to go from sideways to lower type of price action.

On the news, from the geopolitical stand point, Syria is waiting in the background as North Korea comes back into the picture once again. I believe the real audience is China. U.S wants China to get aggressive with North Korea, or else risk potential conflict near its borders. For now, at least, geopolitical concerns are not driving silver. 

Again, for now at least, silver is taking a bit of a breather. There is nothing right here right now that calls for being super bearish of silver. Further weakness will probably find bargain hunters.  

The technical picture has May silver futures looking sideways to lower price action near term. Low to mid $17.00 range probably will provide some opportunities. Of course, a close above 18.50 will ignite momentum price action. 

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.

Silver Daily Chart

Silver Daily Chart

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Energies - Crude Oil

Round and Round Crude Goes, Where She Stops, Nobody Knows!

Dan Hussey

WTI crude oil inventories fell by 1 million barrels in the most recent EIA Petroleum Status Report released on 4/19/2017.  Contrary to the fundamentally bullish news (a drop in inventories), crude futures have quickly become a technically driven trade, and have fallen just over $2.00 to the June ‘17 contract lows of 50.51 yesterday.  While today’s price action has not taken out those 50.51 lows, the muted rally into the 51.40 area could be considered a textbook “dead cat bounce”.  With global oil markets anticipating an extension in OPEC production cuts, it will be important for traders to keep eyes on the news wires for continued consensus from OPEC nations in renewing their supportive measures.  Continued tensions in both the Korean peninsula and the Middle East should also be monitored, as “hot conflicts” are often followed by a rise in oil prices and considered a strong geopolitical event risk.

From a technical perspective, June ’17 crude oil futures have traded lower into a 50% Fibonacci support zone, measured from the March 47.01 lows to April 53.76 highs on the continuous contract.  This inflection zone may find buyers at the 50.39 to 49.59 price band, and while above could signal for a retest of the trend line resistance drawn against the series of 2017 highs since January (see chart below for the trend line in question).  As I mentioned in a previous article, crude futures also previously found support from a similar trend line drawn against lows.  This supportive trend line also aligned with the 47.00 handle and a 50% Fibonacci inflection zone, which provided a bounce higher and March lows.  The combination of both these trend lines puts crude futures inside a compressing range, and suggests there may be an extended fight over the medium to long term trend still under way.

In my opinion, there is a clear cut opportunity for bulls to defend a key technical area here above the 49.00 handle.  As long as June ’17 crude futures can remain above this area, and the trade can find its way higher, and eventually above the current April 53.76 highs, there is a chance for a more sustained and substantial outlook higher.  While inside the current range, and with a failure below 49.00, a subsequent drop to test the 47.00 trend line / 50% fib / prior lows will ultimately keep this market sideways and choppy.  There are few markets right now that are taking current geopolitics to such a literal head spin, and the trade in crude is printing it on the chart.  Technicians are at work, and there are key levels that will be respected or not…pick a side, reduce risk, and may the trade be with you.

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.

Jun '17 Crude Light Daily Chart

Jun '17 Crude Light Daily Chart

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Softs - Sugar

July sugar consolidating for next leg lower or are funds all chased out?

Joe Nikruto

This week’s comment finds July sugar futures continuing to consolidate.  Midweek price action showed the July contract giving back almost all of the previous days outside up move, closing at 16.50, well into the lower half of the previous day’s range.  A surprisingly large number of fund contracts remain on the long side according to the last COT report.  How low this market will have to go to get the holders of these contracts to capitulate cannot be known.  But, the chart is indicating that the July sugar futures contract is consolidating in preparation for the next leg lower. Without some change in the fundamental situation, discounted though it is, or until the July sugar futures contract can find a way to close over the 18-day moving average more than one day in a row the path of least resistance is lower.  

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@rjofutures.com.

Jul '17 Sugar Daily Chart

Jul '17 Sugar Daily Chart

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Softs - Coffee

Is the price of coffee going down the drain?

Hector Galvan

With the fundamental picture for coffee production firming as initial concerns of drought in Brazil have subsided, ICE coffee futures have extended their decline and are now testing below the May 2016 lows in the continuous contract.  Weather premiums being discounted for the world’s largest coffee producing nation (Brazil at over 35%), have sent coffee futures into free fall into next month’s harvest.  While this is seasonally a time of the year for coffee futures to price in the new crop yields, and May often finds a seasonal low in price for the year, the coffee trade is currently flush with good Arabica beans in stockpiles across major consuming nations, and it’s estimated that over three months of consumption is already on hand.  While seasonality suggest the 2017/2018 global coffee crop will be an off year for production in Brazil, recent news of improved conditions are forcing the trade to reconsider this stance.

From a technical perspective the daily chart of ICE coffee futures has broken below multi year lows as well as trend line support drawn against January ’16 lows (128.55) to December ’16 lows (137.60).  Below these critical levels for coffee futures signals there may be a broader adjustment in Arabica pricing, when you consider where global stocks are currently.  The trade can expect to find resistance where broken support once was, into the December 2016 lows (137.60) and April 2016 lows (132.65).  The next major support comes in at 128.55, where the market found its lows in January of 2016, and testing these levels will ultimately bring into question if those lows can hold.

In my opinion, the fundamental trade is pricing in the improvement in crop conditions and the technical trade is confirming this trend.  Unless there is a weather event that sends the upcoming harvest into a panic, or the global market increases its demand for Arabica (to alleviate the 3 months of consumption stored away) the trade has spoken and is favoring the bears.  Breaking below key levels, improving weather conditions, and global stockpiles with coffee on hand is a triple threat that will continue to drive trade until one of these situations changes.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 877-963-6484 or hgalvan@rjofutures.com.

Coffee Daily Continuation Chart

Coffee Continuation Chart

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Agriculture - Grains

Intra-Range Corn Pendulum Swinging Back South, Could Get Nasty



Ahhh, the trials and tribulations of the range-center, chop-city blues.  03-Apr's recovery discussed in a previous post that day's Technical Blog stemmed the sell-off attempt from 16-Feb's 3.94 high in the now-prompt Jul contract and, along with historically bearish sentiment, exposed something potentially bigger to the upside.  Three weeks on, the market's failure yesterday below 07-Apr's 3.65 low renders this month's recovery attempt a 3-wave affair as labeled in the hourly chart below.  Left unaltered by a recovery above 13-Apr's 3.80 high and new short-term risk parameter, this 3-wave recovery attempt is considered a corrective/consolidative event that warns of a resumption of Feb-Mar's downtrend that preceded it.

Jul '17 Corn 60 min Chart

 

While it's risky to place too much importance on choppy, aimless price action typical of the middle-halves of long-established ranges, this week's admittedly smaller-degree relapse could have farther reaching consequences following a break below 27-Mar's 3.62 low.  For, indeed, Feb-Mar's relapse and now the pending resumption of that slide reinforces 16-Feb's 3.94 high as the END of a textbook 3-wave correction from 31Aug16's 3.40 low.  The daily log scale chart above shows that Aug-Feb's entire 5-1/2-MONTH recovery attempt stalled at the exact (3.94) 50% retrace of Jun-Aug'16's 4.57 - 3.40 meltdown, reinforcing the bear market correction count.

On a weekly log scale active-continuation chart basis below, Aug-Feb's recovery stalled at the exact (3.87) 61.8% retracement of last year's plunge.  Combined with a bearish divergence in WEEKLY momentum, it's not hard to see the prospect for a sharp, trendy, impulsive resumption of 2016's collapse.  And such a resumed slide could become much more obvious and even relentless if/when the market breaks 27-Mar's 3.62 low.

To read the rest of the article, click here.

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Agriculture - Livestock

Where to Sell The Cattle?

Jeff Gilfillan

Your guess may be as good as mine as far as where the top will be in live and feeder cattle futures. My guess is that the front month hits 145 in feeder cattle, and 133 in live cattle futures. Downside support for live cattle is just above 116 and 135 in the feeder cattle futures. I can see the feeder cattle futures form a blow off top around 152 if momentum holds.

Technically, RJO Market Insight identifies 111.95 and 108.675 in June live cattle futures as key S-T Risk and Risk points respectively to maintain a bullish stance.

COF is on Friday and the fundamentals continue to look strong from all ends of the production chain. I believe demand has and will continue to remain strong, and that producers have learned from the recent past to push product and take what the market is going to give you to prevent backlogs. Hedgers should do the same.

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 Monthly Chart

Cattle Monthly Chart

 

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Currencies

RJO FuturesCast 4/21/2017 - Currencies

John Caruso

US stocks opened higher this morning, but can this upward trend last? Despite a bumpy start, the UK seems to be planning a smooth exit from the Eurozone. 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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Equities

Stock Market Set to Open Higher, On Track for Weekly Gain. NASDAQ Set to Open in Record Territory

Greg Perlin

U.S. stocks were set for a slightly higher open on Friday, though investors remained cautious ahead of the closely watched presidential election in France. Futures for the Dow Jones Industrial Average inched 12 points higher, or 0.1%, to 20,540, while those for the S&P 500 index added 2.65 points, or 0.1%, to 2,354.75. Futures for the Nasdaq-100 index climbed 6.75 points, or 0.1%, to 5,449.50. The indications of a positive open come after U.S. stocks ended higher on Thursday buoyed by a deluge of stronger-than-expected corporate earnings reports and economic data. Comments by Treasury Secretary Steven Mnuchin, who said that President Donald Trump's tax overhaul will be unveiled in the near future, also bolstered sentiment. A move by Trump to challenge steel imports and positive tax reform rhetoric from Treasury Secretary Mnuchin revived hopes for the fabled Trump 'reflation trade,  Markets have also taken in their stride another terror attack in the French capital just days before Sunday's first round of the Presidential election.

The S&P 500 index on Thursday ended 0.8% higher, while the Dow average gained 0.9%. The Nasdaq Composite Index added 0.9% to end at a record close. As of Thursday's close, the benchmarks were set for weekly gains in the range of 0.6% to 1.9%. Late Thursday, a gunman opened fire on the Champs-Élysées Boulevard in Paris, killing a police officer and wounding two others. European stocks were mixed, with France's CAC 40 index down 0.2%. The euro was trading at $1.0699, down from $1.0718 late Thursday in New York. The attack could give a late-campaign surge in support for anti-immigration, far-right candidate Marine Le Pen in the tight presidential race, analysts said. Le Pen has vowed to hold a referendum on France's membership of the European Union, fueling fears of a breakup of the bloc. One of her three key rivals, far-left euroskeptic Jean Luc Melenchon, has also pledged to renegotiate EU treaties and hold a referendum.

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.

Emini Daily Chart

Emini 240 min Chart

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