June 2, 2017

Volume 11, Issue 22

Feature Article

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Metals - Gold

August Gold About to Breakout?

Joshua Graves

Gold has been quite strong over the past few weeks given the firm US economic data that has come out. There have obviously been several very unfortunate external events that have helped put a bid into gold as well, such as the Manchester attack. Today, we have seen gold find much needed support as some very weak US Non-Farm Payroll data has been reported this morning. This is confirms unemployment is at a 17 year low. Right now the unemployment rate sits at 4.3%, down from 4.4%. This is suggesting a number below 4% over the coming months. Still, if core inflation remains below the Fed’s target we will continue to see interest rates rise, again putting fundamental pressure on gold. US Equities are at all-time highs, and today’s non-farm payroll number is giving everyone a reason to start guessing if this is the top and a chance for gold to shine. August gold is currently trading up $6.50 at $1276. It’s at a level we have not seen since the end of April. Gold still has the potential to have an explosive upside move with a North Korea threat still looming as Japan and the US conduct large scale drills with 2 US aircraft carriers now operating in the region.

If we look at gold from a technical standpoint, everything points to higher prices. The only caveat is that with the last few trading sessions, volume has not been strong on the moves. It’s a concern as any move up or down should be accompanied by strong volume for confirmation. We are, however, trading above all three main moving averages, not in overbought territory (yet) and continue to trend upward since the May 9 low. Look for a break below 1260 as the first sign of weakness in gold, followed by a much stronger confirmation with a close beneath 1248. 

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.

Aug '17 Gold Daily Chart

Aug '17 Gold Daily Chart

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Metals - Silver

Is Silver Heading to April Highs of $18.70?

Eli Tesfaye

July silver is trading $17.280, down about 12 cents on the day. Last week, we looked at the long term silver chart to get a long term perspective. If the lows of today hold, we could see a resumption in price from this level per the chart below. The long term support remains around $15.00. So long as the market manages to hold off this support on the long term basis and hold above today's low, an April high in the $18.60 range could be tested in the coming days and months.

Equities continue on their parabolic rise as Nasdaq contract enters its eighth months in a row. Based on historical look backs, equities will probably pull back this month. If so, it will likely fuel the metals. Silver will almost surely benefit from that. The economic data points to a possible June rate hike in the US. One other thing to note, the commitment of traders with options report (COT) indicates that the non-commercial and non-reportable positions have increased their holding from a combined 58,631 on May 16 to 64,382 on the May 23 reading. As clearly stated, these traders are moving back to silver. Keep in mind, back in the April 18 reading the same group held 11,943 contracts.

In previous articles, I discussed the possibility of a near-term low off the $16.00 lows. My view today is that weakness has provided market holds today low, momentum price action probably favors the upside. From a technical perspective, nothing changes in that I am getting less and less bearish as prices continue to decline into weekly support lines. Frankly, $16.00 had better hold or else more price pressure to the downside will happen as the result of discouraged bulls abandoning the market. However, any sustained close above lows at $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.

Jul '17 Silver Daily Chart

Jul '17 Silver Daily Chart

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Energies - Crude Oil

Are Declining Crude Stockpiles a New Hope for Bulls?

Joshua Graves

With WTI Crude futures trading up $1.00 from its recent low in the July contract, trade is beginning to benefit from eighth straight decline in crude oil inventories, as estimated by the EIA Petroleum status report. The EIA status report, which estimated a 6.4 million barrel draw on inventories, only added to the bull’s argument, which began the night before when the API estimate released an 8.67 million barrel draw for the same period. While these two news items certainly stand to support the rhetoric out of OPEC nations for continued supply cuts, the market will likely need to see some key price levels hold to confirm the fundamental bias with a technical foundation.

OPEC continues to make headlines, reiterating their rhetoric for continued production cuts, and it is safe to assume the recent draws in inventories will help their cause. WTI Crude prices still remain in “no man’s land” hovering above key support but below key resistance, so there is clearly no victory for either bears or bulls for the moment. What will be important to watch for the time being, are the May lows (43.76 from June contract, and 44.13 for July), as well as the May highs (52.00 for July). While inside these levels, expect to see a fight over trend and continued range bound price action.

From a technical perspective, July crude futures have traded into their 50% retracement from May lows to May highs. This supportive inflection zone is created by both the 50% to 61.8% as well as the 100% equal legs, that all come between 47.88 and 46.60. This $1.20 range is a supportive price band which while above, could call for a rally to test 53.94.  If trade can press below 46.60, I expect a retest of the 43.76 May lows (from June contract), and below there, a move to test the 40.65 inflection zone and 40.00 psychological handle. It will be important to keep some ammo dry in this storm, and ready to fire when the firing solution becomes more apparent. These are choppy and tough markets, but every day is one day closer to a resolution.

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.

Jul '17 Crude Light Daily Chart

Jul '17 Crude Light Daily Chart

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Softs - Sugar

Sugar Rally Stopped, Market Races to New Lows

Joe Nikruto

This week’s comment finds the July sugar futures contract with no bottom in sight. In a nutshell, increased supply in the face of decreased demand is manifesting on the chart as thwarted rallies and new lows. The rally to the 50-day moving average, on decreasing open interest, had technicians looking at the possibility that sugar had bottomed. The July sugar futures contract traded to the 50-day, 16.58, and found no acceptance at that price level. 6 days later, July sugar is almost 2 full points removed and trading to new lows for the move. Wire services abound with commodity trading banks, and other commodity related concerns, calling for even greater surplus of sugar coming down the pipe courtesy of increased production in the major producing nations. The Hightower group highlighted this week that without some weather disruption there is little chance for a sustained rally. One caveat, COT traders are seeing that the commercial category of trader is getting rather long. The commercial trader doesn’t always signal an immediate turn in a market that is trending, but it can be a signal that should not be ignored. 14.70 is a previous swing low on the chart from way back in April, 2016. From there, the next support comes in near 13.00.  

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

Coffee Reaffirms Major Bear Trends



The market's not unexpected break overnight below 25-May's 127.15 low reaffirms once again the major bear trend and leaves 31-May's 133.40 high in its wake as the latest smaller-degree corrective high it's now minimally required to recoup to threaten the longer-term downtrend.  In this regard 133.40 becomes our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

Only a glance at the daily (above) and weekly log scale (below) charts is needed to see that the trend is down on all scales with EVERY pertinent technical level now existing ONLY ABOVE the market in the form of prior corrective highs like 133.40 and 03-May's pivotal 137.75 next larger-degree corrective high we've been discussing since 12-May's Technical Blog.  It is clear by the rate-of-change momentum indicator that the RATE of decline has slowed since late-Apr.  this remains a threat to the broader bear trend.  BUT ONLY PROOF of "non-weakness" above levels like 133.40 and especially 137.75 will be objective cause to veer from a bearish policy.  ALL "derived" technical levels below the market are TOTALLY USELESS without such a confirmed bullish divergence in momentum needed to, in fact, threaten or break the simple downtrend pattern of lower lows and lower highs.  And until such proof materializes, the market's downside potential remains indeterminable and potentially steep.

In sum, a bearish policy remains advised with strength above at least 133.40 required to threaten this call.

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

Coffee Daily Chart

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Softs - Cocoa

Cocoa: Is the Bubble About to Burst?

Hector Galvan

The cocoa market has continued to prove that risk outweighs most other circumstances in front of any given situation. It has pushed forward over 130 points during this short trading week. Fear that significant rains have caused harm to cocoa fields and additionally opened the door to the loss of cocoa in storage has caused a flight to risk premium. Therefore, even news yesterday from the International Cocoa Organization revising cocoa stocks higher, by about 382,000 tons, was not enough to keep people from covering long positions. Furthermore, Commerzbank and Rabobank have also called for larger surpluses at the end of the next two seasons. Now, it is important to note that certain market risk is not set to last forever. The trade is actively watching for signs that news will turn sunnier in the days and weeks to come which could easily lead to a significant sell off. Yet, until that day it would be wise to keep an eye on the 2100 level. Until we break and close above 2100 in the futures, a likely drop exists. I would recommend that in the long term traders continue to look for long options positions on large sell off in the market. Short term I recommend that one keep in mind the range in between 1800 and 2100. We have been trading the range since the end of February and may continue to do so until we catch a catalyst to break the markets indecisive range.  

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.

Sep '17 Cocoa Daily Chart

Sep '17 Cocoa Daily Chart

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Agriculture - Grains

Video - Daily Market Update - Grain Futures - 6/2/2017

Stephen Davis

Weather still takes over the markets in grain, early June is a time for big decisions in corn. What will you trade? 

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

Tight Near-Term Supplies Still Supporting Fed Cattle

Last weekend, I walked right past the meat cooler at our local warehouse grocer because the steak prices were higher than I wanted to pay. This weekend I looked for the oversize package of choice meat, and the case was empty. Supply is still tight and weights are still low, though steadily increasing. Last week’s COT report reflected a large percentage of cattle being placed over 700 lbs which continues to support the idea weights will continue to increase in the over 120 days category in the feedlots. This supply is expected to weigh down the market come August and through October and the spreads reflect it. This morning’s Daily Livestock Report (DailyLivestockReport.com) stated:

“…head placed into U.S. monthly reported feedlots during the first four months of this year was the largest since January-April of 2000.”

Last week cash traded 132-133 and June futures averaged about $10 lower. The wide basis still favors the bulls into the end of June and seasonally bull spreads have a good track record of success from early June into the end of July although these spreads have been trading at lofty levels since the beginning of May. Look for June futures and the cash market to find a happy medium in the upper 120s.

COT data last week showed non-commercials at a record long and non-reportables short a relatively large percentage short relecting a large stubborn long by funds and active hedging by small to medium size operators.

The live cattle futures charts remain bullish, but short-term levels are in a whip-saw trade between the 119-127 weekly value range (see chart below). RJO Market Insight’s Dave Toth identifies the 116.775 in August and 118.625 end of day for LT bulls to use as a line in the sand.

Several EW analysts interpret the current formation in a potential wave 5 targeting new highs. This would support a futures/cash convergence into the end of June and wave 5 completion.

Moving forward, cash is still favoring the bulls but the product market and the charts appear to be fairly priced, so the path of least resistance maybe two sided. Take advantage of overbought/oversold 3-day advances for entry or exits. 

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

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Currencies

S-T Cable Divergence Could Re-expose Major Bull in Pound



The market's recovery above the 1.2889 corrective high confirms a bullish divergence in short-term momentum that defines today's 1.2769 low as the END of the decline from 18-May's 1.3049 high.  Per such this 1.2769 low serves as our new micro risk parameter from which any non-bearish decisions like short-covers and bullish punts can be objectively rebased and managed.

While the market has only returned to the middle of the past couple weeks' range and while 18-May's 1.3049 high remains intact as a resistant cap and short-term risk parameter, the risk/reward merits of initiating bullish exposure around current 1.2900-area prices is questionable.  As discussed in Fri's Technical Blog however, we cited the 1.2800-area as one of prospective support per our long-term bullish count to eventual new highs above 1.3050.  Today's admittedly minor mo failure identifies today's 1.2769 low as a tight but objective one from which even longer-term players can use as a gauge of the broader bull.

The daily chart below clearly shows the upper-1.27-handle as one of key former resistance dating back to Dec'16 that would be expected to hold per a broader bullish count.  Today's low is also just 20 pips away from the Fibonacci minimum (1.2788) 38.2% retrace of a suspected 3rd-Wave rally from 07-Apr's 1.2365 low to 18-May's 1.3049.  And if that weren't enough, the market is working on an "outside day" up (lower low, higher high and higher close than yesterday's range and close).

These technical facts follow a bullish divergence in WEEKLY momentum below amidst historically bearish sentiment that, in the case of the Bullish Consensus (marketvane.net) hasn't been seen since Jul 2001!  Such a combination is a unique and compelling one that's typical of major BASE/reversal environments...

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

Pound Index Daily Chart

 

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Equities

US Stock Futures Trim Gains After Jobs Report

Greg Perlin

U.S. stock futures trimmed modest gains Friday, after official monthly jobs data showed the economy added 138,000 jobs last month, coming in below Wall Street economists' forecasts. Oil prices slide to three-week lows on worries about U.S. output after Trump withdraws from Paris Agreement. The details of the jobs report were also weaker than expected. The number of job gains for April was 138,000k and March's numbers were revised lower. The unemployment rate slipped to 4.3% but the decline was largely due to shrinking labor force. Average wages rose 0.2% to $26.22an hour, in line with expectations. Dow Jones Industrial Average futures were up 20 points, or less than 0.1%, to 21,153, while S&P 500 futures pared gains to trade flat at 2,428. Nasdaq-100 futures advanced 11.50 points, or 0.2%, to 5,833. Opening with gains, however small, would send the main indexes further into record territory. Still, the weekly move for the benchmarks would be modest. Both the NASDAQ and the S&P 500 were set to rise 0.6% with one session left to go, and the DJIA was poised to gain 0.3%. On Thursday, The S&P 500 index closed up 0.8% at 2,430.06, the Dow industrial surged 0.7% to end at 21,144.18, and the Nasdaq Composite Index climbed 48.31 points to finish at 6,245.83. The disappointing reading on the non-farm payrolls is unlikely to stop the Federal Reserve's from raising interest rates, however. The Fed is widely expected to raise interest rates at its two-day policy meeting ending June 14, with the CME Fed Watch tool pointing to a 91.2% chance of such an increase. Other markets: Oil prices fell to three-week on Friday, partly driven by concerns that President Donald Trump's decision to withdraw the U.S. from the Paris Climate Accord will lead to an increase in U.S. oil output. Wall Street's optimism spread across the globe Friday. The Nikkei 225 index closed above the key 20,000 level, adding 1.6% as the Japanese yen eased against the dollar. European stocks were headed for a two-week high  and the FTSE 100 was on track for a record Gold prices continued to fall in the wake of Thursday's labor market data, which provided support for the dollar, but soured investor appetite for the precious metal.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or gperlin@rjofutures.com.

E-mini S&P 500 Daily Chart

Emini Daily Chart

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