May 12, 2017

Volume 11, Issue 19

Feature Article

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Metals - Gold

June Gold, Due for a Bounce?

Joshua Graves

June gold has seen quite the selloff since the highs Seen on April 17 and it appears we’ve put the brakes on a continuation of the slide. Recent economic data in the US has been mixed. Jobless claims came in less than expectations last week, but this is also coupled with lackluster retail sales numbers posted this morning. The stock market seems to be in a very tight range and wanting to leg higher, but the data needs to continue to improve. June gold broke 1220 level recently, and flushed out longs who had stops just beneath. The firing of the FBI director was seen by traders as uncertainty in the Trump Administration, and a reason to flock to safe haven assets. Another reason gold has been supported around the 1220 area has been the moderate strength in oil, however short lived it may be. A real reason for gold to rally which should be in the minds of all gold bears is a potential military conflict following a North Korean nuclear test, which would come at any time.

The technical seem to support a the theory that 1250 is going to be new hard resistance overhead, while the 1200 physiological level as an area of solid support. I will reiterate the most important level to watch for a break in the trend and a continuation of the selloff is 1214. A break below 1214 would do a few things, break long term support on a trend going back to mid-December, and also break the most recent lows on May 9. A rally to 1240 needs to be sold into in the short term as this is the high end of the range we saw at the beginning of June. 

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

Too Early to Call Silver at Near Term Lows

Eli Tesfaye

July silver is trading $16.41 up, about 15 cents on the day. My previous articles discussed the potential for a near-term bottom around $16.00 from technical analysis on the weekly chart. Although it has been a relief for the bulls to see a bit of rally in the past two days, I think it is too early to assume the bottoms are in near-term silver. From the fundamental perspective, several factors have been given credit for pop in the silver market, the main one being technical near term oversold type of price action. Another factor in my view is that the shakeup in Washington over the firing of the FBI director, and the ongoing investigation of the current administration and the alleged Russian ties. Massive recovery in crude oil, as well as a bit of a breather in equities, also gave Silver bulls a minor edge. The commitment of traders with options report for the week ending May 2 shows a reduction of continuous reduction of the non-reportable and non-commercials combined position. With the absence of real geopolitical risk, I’m not sure the bulls can substance this pop in silver price.

From a technical perspective, last week I mentioned that “I’m getting less and less bearish as prices continue to decline into weekly support lines.” Frankly, $16.00 better hold or else more price pressure to the downside will happen as the result of discouraged bulls abandoning the market. But then again, any sustained close above lows $17.00 will probably start a momentum run to the upside. It will set up a higher low against the December 2016 low signaling near-term lows. 

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

Oil Inventory Draw Supports Laboring Prices

Crude oil markets have been under pressure since mid-April amid rising US production and talk of OPEC’s inability to extend production cuts. The recent sell-off thus far in May has many participants on edge as the oil market is flirting with a technical breakout from the extreme range low of 44.56 made on August 2, 2016. Despite an intra-day break below this figure, the market was unable to produce a close below 44.56, and has since found renewed buying interest down at these levels. This morning’s EIA report showed a draw in crude oil inventories to the tune of 5.2 million barrels. Distillates and Gasoline inventories also showed a draw, temporarily assisting crude oil prices which have been laboring over the past few weeks. Today’s action produced a corrective bounce into an area of structural significance from 46.69 – 47.71 and, if prices are able to produce a close above 47.71, a case could be made for continuation of the range-bound trading stage for crude. However, in light of recent downside momentum and increasing US production, many traders are beginning to question whether or not the recent trading range in oil is going to hold, or if oil is gearing up for a sustained move lower.  It seems as though this theory has been temporarily put on “hold” as today’s strength helped oil priced rebound back into its current consolidation range.  

The RSI indicator recently put in a swing low close to the 20 level, which is typically indicative of an oversold condition in a bearish market environment. The recent bounce has encouraged optimism of further gains; however, additional technical resistance can be seen initially around 51.34, where a 50% fibo retracement currently aligns with the 200-day SMA, both coming into play right around the 51.34 - 51.56 area. Above here, the recent peak around 53.80 will likely be the next upside target for traders. If today’s bounce proves to be short-lived, a confirmed close below 44.56 could set the stage for further declines as there is not much technical structure to support prices until roughly 41.50, and below there, the 36.20 swing low from early 2016.

In light of the recent supply draw in oil, I expect oil prices may continue to “churn” sideways between 46.69 and 51.50 in the near term.  Market participants are encourage to continue monitoring key S/R levels and expect sideways, choppy trading conditions until a confirmed directional breakout is produced.

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 Crude Oil Daily Chart

Jun '17 Crude Oil Daily Chart

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Energies - Natural Gas

Sideways Natural Gas Starts to Right Itself

Jeff Ratajczak

The trend in June is putting natural gas in a sideways channel until yesterday’s upward push. Today’s price action may be starting another leg higher. Resistance above 3.31, if broken may signal rallies to 3.380 and above that to 3.45. A close under 3.31 will continue the sideways to slightly up trade action, while a close below 3.20 is needed to reverse the upward trend and trade to a lower range. Momentum indicators are all up from mid levels and heading North, supporting a move higher.

Today’s storage numbers showed an infusion of 45bcf. V. an expected build of 52bcf. This usually means less gas at a higher price.

China is leaning toward more natural gas usage. They have been making coal prohibitively more expensive compared to gas by restricting imports. If Chinese gas imports become reality instead of rumor, we may see natural gas trade in the next higher range consistently.  

Weather is between heating and cooling seasons. This keeps demand low. The forecast going into the weekend is for slightly below normal temperatures. Next week, the temps turn up and we may see some readings in the low 80’s.   Cautiously bullish plays are recommended for the upcoming week.

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.

Jun '17 Natural Gas Daily Chart

Jun '17 Natural Gas Daily Chart

 

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Softs - Cotton

Cotton Bull Reasserts, Identifies New L-T Risk



Following the market's failure yesterday to sustain Wed's losses below our 77.82 short-term risk parameter discussed in yesterday morning's Technical Blog, the 240-min chart below shows that it took little time for the secular bull trend to reassert its dominance.  As a direct result of this resumption of the major uptrend, the market has identified yesterday's 76.17 low as THE new larger-degree corrective low and key long-term risk parameter it is now minimally required to fail below to break the bull and expose a major correction or reversal lower.

Jul '17 Cotton 240 min Chart

Cotton 240 min Chart

The trend is clearly up on all scales and should not surprise by its continuance or acceleration with former resistance from the 80.25-to-79.75-range considered new key support.  The rally from 01Sep16's 65.96 low looks to be a textbook 5-wave Elliott sequence with the resumed rally from 10-Apr's 75.35 4th-Wave low and exact 38.2% retrace of Oct-Mar's 68.00 - 80.27 3rd-Wave considered the 5th- and completing-wave to the sequence.  This said however, until and unless the market proves any weakness with a confirmed bearish divergence in momentum needed to stem the clear and present uptrend, there's really no way to forecast the scope of this stage of the bull.

Since the 3rd-Wave "extended" we can "derive" a 5th-Wave 1.000 progression of last Sep's 65.96 - 72.62 1st-Wave at 82.89, but as always such merely derived technical levels are considered useless without an accompanying and confirmed bearish divergence in momentum needed to stem the uptrend.  These issues considered, a bullish policy remains advised for long-term players with a failure below 76.17 required to negate this call.  Shorter-term traders with tighter risk profiles are advised to wait for a bullish divergence in short-term mo following a relapse attempt to 80.25-to-79.75-range support to re-establish bullish exposure.

Cotton Weekly Chart

Cotton Weekly Chart

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Softs - Cocoa

Quality vs Quantity is Pulling Cocoa

Peter Mooses

We continue to hear that cocoa production numbers are up from recent years causing the market to find a new, lower trading range – but now there are concerns about the quality of the crop. Black pod disease is being reported in southwestern Nigeria. Weather patterns have damaged key growing regions and output. Although there was an abundance of cocoa to start the year; weather, port shutdowns – bottlenecking at output areas and black pod are giving traders a new market to look at. In the past 3 trading days, July cocoa has comeback about 10%. The market had seen oversold levels and buyers attempted to find a bottom. 1775 held and the market is deciding what to do at 1950 now. There is resistance here so the market will need more fundamental bullish news to break and hold above this area. In the short-term, look at weather patterns, supply and demand data and Cocobod borrowing issues to guide 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.

Jul '17 Cocoa Daily Chart

Jul '17 Cocoa Daily Chart

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Softs - Coffee

July Coffee Drips On

Adam Tuiaana

Much of the price action in July coffee has been sideways, consolidating. However, we can clearly see that July coffee prices are pretty comfortable in the consolidation zone, and have been since rallying on May 1. News from Brazil is that they will allow imports of small Robusta quantities from Vietnam. This comes on the heels of a short-term tight supply, which very well may end upon when upcoming harvest is underway. A slowly falling US Dollar, coupled with the potential for less supply may be the forces that earlier sparked a rally to support to coffee prices. However, the aforementioned sideways price action tells us that the market is now waiting for news. Any news.

On the daily chart of July coffee below, we can see the violation of the 13750 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 sub 130 levels, and are now in the midst of consolidation. Note that the top of the consolidation range is ironically the 50% retracement from this last major selloff that started on April 17. In the July coffee futures contract, the key area to monitor is 12865. A violation of this area spells a continuation of the downtrend, 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.

Jul '17 Coffee Daily Chart

Jul '17 Coffee Daily Chart

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 5/12/2017

Stephen Davis

Weather will be the determinant for farmers in terms of planting numbers. Will this week's forecast help or hurt?

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

The USD Wins by Default Today

Tony Cholly

June US Dollar: Given the gains in the dollar index this week, it is clear that some measure of improved economic expectation is being factored into the greenback.  In fact, expectations for a slightly hotter than expected CPI and noted strength in retail sales is more than likely going to offset a modest dip in the University of Michigan survey of consumer sentiment that will be released later today.  Given the 150 point rally in the dollar index this week and the prospect of an extension following the first set of US scheduled data today, we wouldn’t be surprised to see a test of the 50 day moving average up at parity (1.00).  However with the dollar closing in on a significant downtrend channel resistance line we will probably be recommending long dollar index put plays at some point next week.

Jun 17' Dollar Index Daily Chart

Dollar Index Daily Chart

 

June Euro: The market all but discounted improved EU economic forecasts earlier this week and it has also discounted a series of better than expected economic forecasts over the last week.  Unfortunately, for the bull camp in the euro, the euro zone March industrial output showed a contraction this morning off of estimates calling for a +.4% gain and that could leave the euro vulnerable to any fresh strength in the dollar.  While we doubt today’s US scheduled data will result in a pummeling of the euro, we continue to see a critical pivot point support level down at 10840, which is the top of an old gap forged back in late April.  We can’t rule out a possible re-test of the 50 day moving average next week which should come in around the 10825 level.

Jun '17 Euro Index Daily Chart

Euro Index 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

A Slow, Erosive Pattern Remains in Place Today

Manon Lasserre

The general erosion in equity prices looks to be extended today as the overnight news flow failed to definitively improve sentiment. Surprisingly, an uptick in German GDP results this morning failed to shift the market’s away from a choppy to lower track, as that data points to a continued recovery in Europe. Clearly, ongoing carnage in the US retail sector is resulting in a risk off vibe that risk off vibe is being accentuated by the political sniping in Washington. Fortunately, however, the high tech sector is providing a cushion to the market but technical action overnight (even in the leading mini NASDAQ) is negative and the path of least resistance is pointing down to start today. Earning announcements will include ArcelorMittal before the Wall Street opening.

S&P 500: As previously indicated, an extending pattern of lower highs on the charts and the inability to embrace positive economic results (because good data prompts chatter of a June hike by the Fed) leaves the path of least resistance today pointing downward. A downtrend channel resistance in the June E-mini S&P is seen this morning at 2392.40 and a critical pivot point support zone is seen at 2379.00. Traders should watch the reaction in stocks to US retail sales closely to see if positive data results in a dip in prices as that will signal a trade focused trade focused on next month’s Fed rate decision instead of a trade focused on growth and earnings. If good data has become bad for stock prices then equities might be expected to bounce later this morning off the University of Michigan consumer sentiment readings.  The next downside target is 2372.82 while the next area of resistance is around 2399.12 and 24399.12 and 2405.31. First support hits today at 2382.88 and below there at 2372.82.

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 S&P 500 Daily Chart

Jun '17 Emini S&P 500 Daily Chart

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