May 5, 2017

Volume 11, Issue 18

Feature Article

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Trading Opportunities for Busy People

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Exchange Info

CME Copper Webinar

Webinar: Get to Know COMEX Copper Futures

Join Dave Lerman of CME Group on Tuesday, May 9 as he takes a closer look at COMEX Copper Futures, including the key benefits you can leverage today.

The webinar will cover:

  • Brief history and overview of the Copper market, including the key participants and regions
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Metals - Gold

June Gold, Should You Buy In Just Yet?

Joshua Graves

June gold futures have seen quite the pullback since the mid April highs near 1300. It’s been quite shocking to see the collapse of gold given the amount of geopolitical uncertainty in the world. Much of this decline can be attributed to capital liquidation, easing of political tension in the French election, and a breakdown in the technical on the chart. Although the selling seems to have eased this morning, I do not believe a low has been put in just yet. There is some minor support around 1225, but the real support does not come in until the all-important technical and psychological level of 1200. The funds both spec and hedge are net long 211,000 contracts, and more long liquidation is still a real possibility. The fears of US rate hikes are still in the market, however, the trade does not appear to be focused on this. Indian gold demand also rose 15% in the first quarter. It’s something that is not to be focused on, but it is something that should help contain the $70 slide we have seen in gold.

If you look at this from a technical perspective the bears are firmly in control, and anyone who is bullish needs to know this. We are currently trading beneath the 50, 100, and 200 day moving averages. Your first sign to sell gold was a break below the 200 day on May 1. The MACD has crossed indicating a sell just days before the breach of the 200 day. The cross was on April 25. These are both strong signals in any market to watch for position traders. A Fibonacci retracement from contract lows of 1129 to the highs at 1297 shows a 50% support level at 1215. A 62% retracement comes in at just below 1200. Gold should continue to slide, and any support found near 1200 should be a buying opportunity.

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 

Gold Daily Chart

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Metals - Silver

Is silver is within range of near term low?

Eli Tesfaye

July silver is trading $16.285 down, about 26 cents on the day. My previous articles discussed the potential for a further pull back. The weakness in silver certainly exceeded my expectations. It now looks like it could potentially head to the December 2016 range. From these price actions, it appears that a close above $17.50 is needed to signal a potential near-term low.

The nonexistence of bullish factors continues to put pressure on the silver market. Although the Federal Open Market Committee (FOMC) did not raise rates yesterday, the communique suggests that June rate hike is likely. Another factor that isn't supportive to silver is the probability that the French election polls continue to favor the more predicable Macron. Those who follow the weekly Commitment of Traders with Options report should expect substantial reduction of the non-reportable and non-commercial traders. A few weeks back, these traders held a record 120K contract long. It is no surprise that most bulls probably abandoned silver for now.

Again, for now at least, silver is continuing to take a bit of breather. I’m getting less and less bearish as prices continue to decline into the weekly support lines.    

Last week I wrote, “Low to mid $17.00 range probably will provide some opportunities in my view.” Like I said, the market did exceed my expectation on the downside. For now a close above $17.50 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 Weekly Chart

Silver Weekly Chart

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Energies - Crude Oil

WTI Crude Futures Extend Decline, Are the Bears Back in Control?

Dan Hussey

WTI crude oil inventories fell by 900k barrels in the most recent EIA Petroleum Status Report released on 5/3/2017.  This draw on inventories was slightly smaller than expected, and marks the fourth consecutive draw on oil stockpiles.  The market seems to be discounting (albeit slightly) bullish news, and the trade may be pricing in the anticipation of increased oil production to replenish reserves.  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 the key trend line support, drawn against April ’16, August ’16, November ’16, and March ’17 lows in the continuous contract (see the magenta line in the chart below).  This trend line offered support four times in total, most recently this last March, and below it opens the door for WTI crude futures to test the low end of its two year trading range.  In the near term, the three wave pullback in crude futures has found the 100% Fibonacci extension and 61.8% Fibonacci retracement lines clustered at the 45.30 area.  The previously mentioned broken trend line will likely now be tested as resistance, and continuation lower would confirm the bears are in clear control.

In my opinion, there was 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 I mentioned in last week’s article, failure of this key area would open the door for continued declines and a pullback into the lower bounds of crude multiyear range.  That breakdown has now occurred, and while the selling could be getting a bit overdone, sellers can utilize failed bulls levels to keep their control in the near term.  The bulls had every opportunity to maintain the trend higher, but it now appears possession has change hands, and it’s the bear’s ball to loose.

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 480 min Chart

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Softs - Sugar

Shrinking fund long, reduced open interest in sugar. Fuel for a rally fire?

Joe Nikruto

This week’s comment on the now prompt July sugar contract finds our market dealing with selling pressure yet again. The inability to close or even trade much above the 18-day moving average is a hallmark of a down trending market. Today’s Hightower group letter mentioned that a large bank known for following commodities believes that the downtrend in sugar could be coming to an end, and higher prices could be on the horizon. The fund trader position has been whittled down to a mere 15k contracts and open interest has been contracting as well. Tea leaves that could be signaling the time is close for a technical rally if not a sea change in the fundamental picture. Since February, the downtrend has punished those who have dabbled on the long side early. Huge volume on the down move on April 26 could signal a near term low. Recent lows in July, 15.35 and Monday’s high, 16.49 have the July Sugar futures contract neatly hemmed in.  Technically, it is hard to see how much lower this market can go without going higher first. The 15k contracts that remain are likely of the Jim Rogers, Investment Biker category. These folks hold commodity futures from the long side as long term investments or hedges against inflation. They likely won’t be chased out by something as unimportant as lower prices. China has been buying sugar hand over fist as the price has dropped but at the same time they are ramping up export of corn based sweetener to the rest of Asia. This could be the quietly dominant fundamental conspiring with plentiful supplies to keep prices depressed. Don’t rule out a short covering rally. The 50-day moving average comes in at 17.45. But in order for a short covering rally to take hold the July contract has some work to do. It will be hard to make a case for funds to cover shorts until July sugar can at least post a few closes over 16.32.

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

May '17 Sugar Daily Chart

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Softs - Cocoa

Late-Apr Cocoa Pop First Approached as Corrective; New Risk Parameters Drawn



Against the backdrop of the secular bear market Fri's relapse is enough to expose last Wed's 1900 high as the end or upper boundary of a 3-wave and thus corrective affair up from 20-Apr's 1756 low as labeled in the 240-min chart below.  Per such that 1900 high is considered our new key risk parameter to a still-advised bearish policy calling for a resumption of the major bear to new lows below 1756.

Last Wed's rally above 24-Apr's 1877 initial counter-trend high confirmed a bullish divergence in short-term momentum that defined 20-Apr's 1756 low as one of developing importance and a short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can still be objectively based and managed as long as that low holds.

Cocoa Daily Chart

Taking a step back we believe that the late-Apr recovery attempt is merely the 4th-Wave correction of an eventual 5-wave sequence down from 21-Mar's 2187 high to at least one more new low below 20-Apr's 1756 low shown in the daily log scale chart above.  Longer-term traders are warned however of the factors that could contribute to a major BASE/reversal-threat environment in the weeks ahead.  These factors include:

  • the prospect that the secular bear market from Dec'15's 3429 high may be completing a textbook 5-wave Elliott sequence as labeled in the weekly log scale chart below
  • waning downside momentum and
  • historically bearish sentiment not seen in at least five years.

NONE of these factors/threats mean anything as long as the simple but major downtrend of lower lows and lower highs remains intact.  Herein lies the critical issue of identifying prior corrective highs like last week's 1900 high and, on a broader scale, 21-Mar's 2187 major corrective high.

A final factor that could come into play with respect to a major base/reversal threat is the Fibonacci fact that the resumed bear from Dec'15's 3429 high has spanned a length virtually identical (i.e. 1.000 progression) to 2011's initial counter-trend decline from 3775 to 1983.  Combined with the base/reversal threats listed above, it is imperative that the market sustain levels below at least 1900 to maintain a broader bearish count and policy.

These issues considered and while acknowledging 20-Apr's 1756 low as support on at least an intermediate-term basis, a bearish policy and exposure remain with strength above 1900 required to not only negate this call and warrant its cover, but also reinforce a base/reversal-threat environment that could be major in scope.

RJO Futures clients may login here to the client portal and access all RJO Market Insights.

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 5/5/2017

Stephen Davis

Weather patterns are creating volatility in the market. Keep an eye on the sky to see where current planting will lead.

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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Agriculture - Livestock

Cattle Futures Storm Higher in Continued Bull Trend

Jeff Gilfillan

Cash is king, and if you own un-contracted or un-hedged cattle, you are in the drivers seat. Buyers have been caught under-bought, and shorts and hedgers have been squeezed as new longs have poured into a relatively small market as commodity futures go.

Last blog I discussed how high live and feeders may go. My charts pointed to 145 in feeder cattle and 133 in live cattle. The feeder futures touched 143 in May and sold down to just under 137 and April live cattle showed a few days of resistance at 131 area and settled sharply higher at 138. Thus, trying to pick a top or bottom is pointless without signs of technical reversals and we saw none.

Dave Toth of RJO Market Insights technical blog, commented on April 27 to maintain a LT bullish policy over 114.425 and 108.675. Prior to this blog, on April 25 Dave identified the 117.575 as the key level needed to be breached to increase bullish exposure. To quote on April 27 the “market’s upside potential should be considered indeterminable and potentially severe.” RJO Market Insights is accessible to RJO clients at no charge.

COT report last Friday showed a record net long in live cattle futures in the non-commercials and a near record in feeder cattle futures (record was met the week prior and likely to be met this week).

Moving forward, we are clearly still in the middle of a very tight cash market as retailers struggle to meet obligations, and front-end supply is extremely current and much of it already sold forward. Just about everything is bullish in meats. What felt like a squeeze last week clearly has evolved into a real under-bought cash trade.

The large discount to cash and recent Winter storm should encourage June live cattle futures to work towards the daily chart gap created by the April expiration at 136.275. The gap is feeders is up at 160.80.  Above the 160.80 is a 50% level on a weekly feeder cattle futures continuation chart around 165.50 area. The 165 level has been a second price target traders have been discussing once the 152 level did not hold just recently.

The premium I paid for an August 134 put for protection in feeders 3 ½ weeks ago in feeders now can be used to buy a 153 put. Our trigger to initiate puts started at 135 then 152 and possibly next at 165 basis August FC futures. Hard to believe.

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 Weekly Chart

Live Cattle Weekly Chart

Aug '17 Live Cattle Daily Chart

Live Cattle Daily Chart

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Currencies

Daily Market Update - Currencies - 5/4/2017

John Caruso

Watch for correction coming for a climbing Euro. The US Crop Report will be telling for the strength of the USD.

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

Stocks Strong After Jobs Report in April, Will Trends Continue?

Greg Perlin

U.S. stock futures perked up slightly on Friday as investors welcomed a stronger than expected April employment report, showing 211,000 new jobs created last month. Gains, however, were limited by volatility in oil prices.  Dow Jones Industrial Average futures edged 8 points higher to 20,878, while S&P 500 futures rose 4 point to 2,390. Nasdaq-100 futures added 11 points to 5,637. This jobs report indicates that the job market remains healthy, underlining that the economy continues to grow at a solid, but not spectacular rate.

On Thursday, the Dow industrials pared a 110-point loss to finish down just 6.34 points at 20,951.47. The S&P 500 index ended 1.39 points higher at 2,389.52, while the Nasdaq Composite Index closed up 2.79 points at 6,075.34.  With one trading session left in the week, the NASDAQ is poised to gain nearly 0.5%, while the S&P 500 is up 0.2% and the DJIA is barely higher. Losses for the energy sector weighed on stocks Thursday, as U.S. crude and Brent oil prices both crashed 4.8% due to global supply worries. This morning, WTI crude bounced around, off 42 cents $45.08 a barrel, pulling back from a 3% dive in Asian trading, and analysts said prices were likely to remain volatile. Brent was up 5 cents to $48.45a barrel. The next clue to the direction of oil prices could come from Baker Hughes (BHI), which will report on the number of active U.S. rigs drilling for oil later on Friday. The count has risen for 15 weeks in a row, adding to concerns over the global oil glut.

Fed speakers, six federal reserve officials, are scheduled to speak on Friday. The speakers start with Vice Chairman Stanley Fischer at the Hoover Institution monetary policy conference at Stanford University at 11:30 a.m. Eastern. Chicago Fed President Charles Evans, Boston Fed President Eric Rosengren, and St. Louis Fed President James Bullard are expected to take part in a panel discussion at the conference at 1:30 p.m. Eastern.

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.

Jun '17 E-mini S&P Daily Chart

Emini Daily Chart

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