April 28, 2017

Volume 11, Issue 17

Feature Article

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Metals - Gold

Is Gold on the Edge?

Nicholas DeGeorge

In the early morning trade, June gold is up slightly and currently trading at $1,266.7. After gold held up earlier in the week and showed resilience, gold bulls have to be encouraged. In fact, the June gold market has only fallen 2.8% from its high it made 8 days ago. Also, gold probably found some new safe haven buyers as a US government shutdown due to budget deadlines returned to the headlines and now with this morning’s lower Q1 GDP numbers than originally estimated.

If you take a moment and look at the daily June gold chart, you’ll clearly see that gold is still in a shorter-term up trend or channel with it holding above its 200-day MA. If we keep things simple, a break above this week’s high 0f $1280.0 would leave gold prone to rally up to $1,300.0 to $1,325.0. If gold breaks below this week’s low of $1,260.7, then look for a possible sell off to $1,225.0 an ounce. Below is a daily June gold chart.

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.

Jun '17 Gold Daily Chart

Jun '17 Gold Daily Chart

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Metals - Silver

After Consecutive Lows, What’s Next for Silver?

Phillip Streible

After nine straight down days and the bottom seeming nowhere in sight, silver looks like it is trying to form a double bottom on the chart. If you are not familiar with double tops and double bottoms, here is a brief explanation. A double top resembles the letter “M” and is marked by a resistance point that the market hits and then falls, rises back to the same resistance point or close to it, and falls again. A double bottom is the opposite of the pattern, resembling the letter “W.” Often, double-tops and double bottoms lead to head-and-shoulders patterns. The head and shoulders top is represented by three prominent peaks, while the bottom, three prominent lows.

Technically, looking at ADX which measures strength of the trend shows this downward move gaining momentum and strengthening at 31.13. Stochastics are still declining which gives the market a bearish move. Look for silver to complete this pattern before making the next move higher. 

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.

Jul '17 Silver Daily Chart

Silver Daily Chart

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Energies - Crude Oil

When Will Crude Oil Futures Break Their Range?

Dan Hussey

WTI crude oil inventories fell by 3.6 million barrels in the most recent EIA Petroleum Status Report released on 4/26/2017.  This draw on inventories was over 3 times the anticipated consumption, however, June ’17 WTI crude futures clearly were not impressed as they continued to sell off after this news.  With that being said, there is a strong technical setup for a retracement to the latest decline to begin as selling may be overdone in the near-term.  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 broken below  50% Fibonacci support zone I mentioned in last week article, measured from the March 47.01 lows to April 53.76 highs on the continuous contract.  This inflection zone failed to find buyers at the 50.39 to 49.59 price band, and now is testing the trend line support, drawn against the series lows since last year (see chart below for the trend line in question). 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.  Today, the continuous contract found support at this area, and may be due for a move higher inside the 55.00 to 47.00 range.  With crude futures failing to respect 50% and 61.8% Fibonacci support on both sides of this marker, price action suggests sideways price action within this range for the near future.  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 47.00 handle, and above trend line support at 48.00.  As long as June ’17 crude futures can remain above this area, and the trade can find its way higher, and test trend line resistance drawn against highs.  A failure of support at 48.00, and the supportive trend line, would likely result in a subsequent drop to test the 45.32 level which is a 61.8% fib inflection zone.  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 good luck!

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 Light 480 min Chart

Crude Light 240 Chart

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Energies - Natural Gas

Bear Divergence, Stubborn Bulls Expose Potentially Steep Nat Gas Losses



In 18-Apr's Technical Blogfollowing that day's bearish divergence in momentum that reinforced our broader peak/reversal count, we warned of further and possibly steep losses.  Nearly a week on the 240-min chart below shows continued eroding price action in the now-prompt Jun contract with 17-Apr's 3.324 high and 05-Apr's 3.422 high considered our short- and longer-term risk parameters this market is required to recoup to threaten or negate our preferred bearish count calling for further and possibly steep losses.

The daily log scale chart above shows the bearish divergence in the rate-of-change measure of momentum that, in fact, breaks Feb-Apr's uptrend and exposes the new longer-term trend as down.  It's also important to note that our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC actually WENT UP last week to 73% from the prior week's 71% reading.  This is owed to short-covers rather than additional longs, but nonetheless the whopping 296K long positions to just 108.5K shorts is fuel for downside vulnerability that, combined with the bearish divergence in momentum, we believe exposes further and possibly steep, relentless losses straight away.

These issues considered, a bearish policy remains advised with strength above at least 3.25 and preferably 3.347 required to threaten or negate this call.  A sharp and violent run at and possibly through 28-Feb's 2.827 low in the Jun contract should not come as a surprise, or even new 6-month lows below 2.55 on a weekly log active-continuation chart basis below.

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Jun '17 Natural Gas 240 min Chart

 Jun '17 Nat Gas Daily Chart

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Softs - Cotton

Cotton Strength Could Be Coming to an End

Cotton futures have been trending higher since last March; however, concerning technical action on the cotton daily chart is certainly cause for concern as many participants are now contemplating whether cotton strength could be coming to an end.

The 4/7 low earlier this month marked a relatively lower swing on the daily chart, surpassing the previous swing low on Feb 17.  This highlights a near-term breach in positive structure and could be an early indication that the cotton rally may be approaching a climax.  Adding to this scenario is the noteworthy bearish divergence between price and RSI in the recent peak on March 6.  Prices mad a new high for the year while the RSI was unable to produce this strength with a simultaneous new peak.  Instead, the new high in price corresponded with a relatively lower peak in the RSI, which could be an early indication of underlying weakness to come.

The fundamental side of the equation seems to play nicely to this argument as US planted acreage is expected to increase at least 21% year over year.  While US planting, and likely production, are gearing up for an uptick, traders note a 12% decline in Chinese imports from February to March this year.  Increasing supply and notable decline in demand from some of the World’s largest consumers does not bode well for a bullish argument for prices.  That being said, cotton prices have remained strong despite “cracks” in the technical foundation of the chart and fundamental shifts that may indicate a higher supply of cotton on the months ahead.  Traders would be wise to monitor prices closely up around these levels as a confirmed close below the 4/7 low could confirm a near-term trend shift from positive to more of a neutral/negative tone.  

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.

Jul ’17 Cotton Daily Chart

Jul ’17 Cotton Daily Chart

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Softs - Cocoa

Cocoa - Bean Issues and an Election Equal Volatility

Peter Mooses

There are four areas to monitor in cocoa over the next few weeks.

First, supply. Will we get numbers in line with estimates that have helped prices move lower? At this point, it is anyone’s guess after the latest news that West Africa could have some bean issues. The affect El Nino had on the crop is not completely known yet. If beans come in small or damaged, this will hurt export data. Ghana also needs to borrow around $400 million to get through the season, which could turn the supply side of the equation bullish if any issues surface.

Second, demand. With the recent move in the Euro currency, is Europe’s demand for cocoa making a comeback? Traders have been waiting for this answer but there hasn’t been any real carryover to prices.

Third, the French Election. This will affect the currencies and the overall market tone. We will know more after May 7…

Lastly, the technicals. The July contract is showing support around 1835, resistance at 1900. The contract couldn’t break and hold below 1800. The long liquidating may be coming to an end. Now what? 

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

Jul '17 Cocoa Daily Chart

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Softs - Coffee

May Coffee Violation

Adam Tuiaana

Despite a “risk-on” mood, traders still continue to act bearishly upon May coffee prices. Very large supplies, coupled with favorable weather over Brazil’s Arabica growing region, are fundamental factors that are keeping pressure on May coffee prices. Although many are reporting that May coffee is oversold and due for bounce back up, we will continue to stay in the way of the trend as we await the start of the Brazilian harvest next month.

On the daily chart of May coffee below, we can see the violation of the 13518 critical low, which shortly after, was followed up by some sideways consolidation. This violation is indeed bearish, despite the oversold condition of May coffee prices. We can now see a coiling pattern formation that should produce a sizable move, but that move is likely to be further down to continue this trend. It is likely that May coffee prices will revisit those not seen since a year ago. Barring any substantial geopolitical issues that may occur, look for a visit down to the 127 area over the next week or so.  

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 '17 Coffee Daily Chart

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 4/28/2017

Stephen Davis

Grains are in good support, they should remain consistent throughout the early stages of planting season.

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

Only Leadership Found in the British Pound

Tony Cholly

June Dollar:  French and Japanese economic data overnight should provide the dollar with an added measure of support from the fundamental perspective. It also appears as if the June dollar index has built modestly impressive consolidation pattern support zone with this week’s trade.  However the dollar will face a potentially undermining US GDP and Chicago PMI data window later today.  From a big picture perspective, dollar bulls will probably be disappointed as a result of the rate of growth in the US in the first quarter, but that disappointment might be counter veiled by a reading that comes in better than the anemic forecast.  On the other hand competition for the dollar on the growth angle is muted in the wake of overnight data.  Through the US schedule data we cant rule out a temporary dip back below a critical pivot point of 98.90, but a move above 99.20 could result in a follow through extension up.  To maintain a generally upbeat vibe to end the trading week probably requires respect for 98.69.

Jun 17' Dollar Index Daily Chart

Jun 17' Dollar Index Daily Chart

 

June Euro: French economic readings overnight were discouraging but there were components within the data that showed some promise.  However, traders and economist might fear additional headwinds in the period following the growth period covered by this morning’s data set and that could portend even weaker data ahead (French election influences).  With the next and final stage of the French election looming ahead on May 7th it could be difficult to avoid further declines in the euro directly ahead.  Therefore the bias appears to be down with an initial pivot below the market at 10877 and an even more critical pivot point support level of 108485.  In order to turn the tide away from the bear tilt, probably requires a trade back above 109250.

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

Overbought and Reversal Action Adds Uncertainty for Stocks

Manon Lasserre

Traders remain skeptical over the possibility of a significant tax cut and the S&P challenged the high and failed yesterday to close slightly lower on the day. Asian stocks posted mixed results overnight as the Shanghai Composite finished the day with a moderate gain. Both the German Gfk consumer survey and a set of Euro zone sentiment readings saw better than expected results. The latest European Central Bank monetary policy meeting is expected to have no change in rates or policy, but a post-meeting press conference by ECB President Draghi may hint at upcoming policy changes. The North American session will start out with a weekly reading in initial jobless claims that are forecast to see a modest down-tick from the previous 243,000 reading. March durable goods are expected to see a moderate down-tick from February’s 1.8% reading. March pending home sales are forecast to see a sizable decline from February’s 5.5% reading.

Global markets may have shaken off early pressure, but sentiment turned lukewarm following events in Washington as market attention focused on events at the White House. When the actual details came out, however, risk sentiment deteriorated and was further rattled by reports that the White House was considering an executive order to withdraw from NAFTA. While the NASDAQ reached another new record high and the S&P and Dow Jones were within striking distance of new high ground, US stocks eventually turned lower as all three major indices finished lower on the day.

S&P 500: The three-day surge leaves the market overbought and traders see a lack of details on the proposal as a reason to suspect that it will take time for a consensus. Longer-term, a 15% corporate tax rate would be extremely bullish for stocks but short-term, the market may not be ready for another leg up. Uncertainty could spark some light selling pressures short-term unless economic news come in reasonably strong. Breaks are buying opportunities, however we cannot rule out a short-term correction. June E-Mini S&P close-in resistance is at 2389.65 with 2365.75 and maybe 2356.25 as short-term downside targets. 

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 E-mini Daily Chart

Jun '17 Emini Daily Chart

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