June 16, 2017

Volume 11, Issue 24

Feature Article

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Metals - Gold

August Gold, Have We Found a Bottom?

Joshua Graves

August gold futures have seen quite the selloff over the past few weeks. Much of the recent washout can be attributed to the FOMC meeting in which the Fed gave unexpected guidance that two additional rate hikes this year was on the table. They had also given guidance that they were going to wind down their balance sheet. Additional reasons for the selloff would be the end of the recent washout in equities more specifically the NASDAQ. The market also seemed to be discounting favorable economic data from India which happens to be the world’s largest gold buyer. There are still reasons to be bullish, but at this point a real driver for a rally in gold needs to be something the trade does not see. A selloff in equities, geopolitical uncertainty, and unfavorable economic data in the US that might justify the Fed reconsidering two rate hikes this year. There is always a reason to own gold, but at this point August Gold needs to be holding above the $1245-1250 area from a technical and fundamental perspective.

Technically, August gold is hovering right above the 100-day moving average. The MACD has recently crossed to the downside indicating a longer term sell on a daily chart. It’s not a chart that looks friendly if you are a Gold bull, however, consider that almost every session since the June 6th high of $1,298.80 has been a down session on the trade. August Gold is likely to find its footing soon and if nothing more than a short term rally, there is a possibility for one.

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

Silver May Head to $16.00 to Flush Out Stops

Eli Tesfaye

July silver is trading $16.73, down 40 cents on the day. Silver weakness is credited to FOMC minutes. The weakness in silver wasn’t so much from the 25 bp rate hike, but rather from the language communicated. To summarize, the Fed's take on inflation so far is rather “weak” in that they will not back down from further rate hikes. With that in mind, it will be wise to pay attention inflation data going forward to see if the Fed will be derailed from their intent upon tightening monitory policies. The Fed is poised to do three rate hikes by end of 2017. As I stated in previous articles, the long term support is still around $15.00 and near term support sits around $16.00. Bulls need to exercise caution in light of technical damage wrought upon the silver charter in the last two sessions. One can’t rule out liquidation below $16.00 for a short term. As see the chart below, a sustained close above 17.05 could switch the momentum back to the bulls camp.  

The Commitment of Traders with Options report (COT) reading from May 30 vs June 6 was up about 4877 contracts to net 75,997. However, weakness in the past two sessions would probably show net reduction from the June 13 reading that gets released tomorrow. In the past, I have discussed the possibility of a near-term low off the $16.00 lows. Clearly, the severe chart damages has been done on silver market. 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 (as shown on the chart below) 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.

Silver Weekly Chart

Silver Weekly Chart


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Energies - Crude Oil

Can WTI Crude Oil Take Out Its 2017 Lows?

WTI crude oil futures are trading lower on the day for the July contract as we come to the final weeks of its lifecycle. With the roll into the August contract in swing, the lows in price made in the month of May are quickly coming into question for oil as bears maintain firm control of this market. The July low for May came in at 44.13, while the August contract low for May was made at 44.45. Both of those contracts are closing in and testing this prior support, and below opens the door on the continuous contract to a test of the 40.00 handle (as seen below).  From the perspective of the larger time frames, it's clear that crude oil is still in a range while below 60 and above 40, however, while inside this range there is plenty of room for this market to stretch its legs.

Qatar has quickly replaced OPEC in the headlines, which were constantly reiterating rhetoric for continued production cuts and their attempts to support this market with talk is proving too cheap. Qatar and other destabilizing occurrences in the region run the risk of OPEC losing its foothold, and more importantly, losing control of global oil supplies (giving that control back to western producers). This week’s EIA inventory report saw a 1.7 million barrel draw, compared to last week’s report of a 3.3 million barrel build. This was generally in line with expectations, and the recent decline in the price of oil is likely due to the breakdown in OPEC’s member nation’s agreements on Qatar. While inside these levels, expect to see a fight over trend and continued range bound price action.

From a technical perspective, July crude futures are still very much under the firm control of the bears. Within hours, I expect WTI crude to take out its May lows (the 2017 lows as well) and test towards the lows of 2016.  There, crude should fine a support level where there is a confluence of Fibonacci support bands (retracements and extensions) between 40.65 and 37.20 (daily continuous chart below). There is also a declining price channel, formed from the trend line against the 53.76 and 52.00 highs, and the trend line against the 47.09 and 43.76 lows. I expect the extension of this trend line support, which crosses the 50% Fibonacci retracement and 100% Fibonacci extension at the 40.65 area, to be tested and support the market in the near to medium term. The bears have possession at this time, and it’s their ball to fumble.

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.

Continuous Crude Light Daily Chart

Aug '17 Crude Light Daily Chart

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Softs - Sugar

Sugar Looking Sweeter? Open Interest is Up. Price is Down.

Joe Nikruto

This week’s comment finds the October sugar futures contract making new lows for the move. Technically, the October contract has support near 13.00 and then again near 12.00. The selling trend of the fund trader continues and on the other side of the ledger the commercial trader is increasing their long position. How much shorter/longer each category can get remains to be seen. There have been periods where price continued to erode while the positions of the larger traders simply oscillated back and forth. Fundamentally more sugar is coming down the pipe.  Brazil does a great job of producing sugar and exporting it, this we know. The stabilization of the Chinese economy can be viewed as ultimately friendly toward the price of sugar but the Chinese continue to work off their corn surplus by exporting corn based sweetener to their regional trading partners which is markedly bearish. If you can put the fact that sugar futures have traded lower almost every week since February out of your mind, there could be an opportunity for aggressive traders to own put spreads in anticipation of a move to 11.00. Many traders, uncomfortable being profitable on the short side, might ‘feel’ that sugar has traded low enough and could be entering an area of support once harvest is complete in Brazil. I understand the argument and agree, but it is premature to call for a bottom in sugar until it at least stops posting new lows every week.

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.

Oct '17 Sugar Daily Chart

Oct '17 Sugar Daily Chart

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Softs - Cocoa

The Tide Turns Quickly in Cocoa

This week has been a solid one for the cocoa market. News from Ivory Coast and a market set on trying to test new technical levels has given us a good volatile week. The tough question now is will this volatility continue into next week? As I pen this story, cocoa is already down 40 points as we finish up the week in what I would describe as general profit taking. News out of Ivory Coast this week describes a scene of chaos in the nations cocoa infrastructure after heavy rains washed away the main arteries leading to shipping ports. This significantly lead to worries that one would catch a log jam of cocoa and helped push the price of cocoa up to the highs of May. Furthermore, the thought that cocoa may spoil while waiting to go out of storage due to poor holding conditions have also help support prices. Next, the market needs to good solid push and close above 2100. If we cannot get that close it is going to be very difficult for the bulls to maintain control of the market. We have seen this both in May and now in June where the market gets close, but just is unable to make it past that crucial level. I would argue that in time we will make it, but until then we all live with the insecurity of potential large drops in the market. In the end, I would point to the swings the market has continued to have and ask that one imagine the opportunities in buying and selling those swings. Furthermore, there are many long options strategies that can give one piece of mind in being a long term holder of cocoa.

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

Daily Market Update - Grain Futures - 6/16/2017

Stephen Davis

Steve discusses weather's effect on corn, NOPA news in soybeans, and Egypt's buying power in wheat.

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

Placements and Slaughter Weighing Down Live Cattle Market

The double top and weekly reversal may signal a move-back to LT value areas in front month fed cattle between 118-127. As of Wednesday, June 14, June futures closed down 300 at 124.50. I mentioned last blog as futures go off the board look for cash and futures to converge in the upper 120's and I still believe this.

The recent pop offered producers good opportunity for some fall protection at prices that seemed a long way away just 2 months ago.

Other analysts have identified Tuesday’s high and June highs in August live cattle futures as key levels needed to be broken to reverse bearish bias. Key technical factors include a confirmed bearish divergence in momentum, historically bearish sentiment and an arguably completed 5 wave EW sequence. Last blog, I mentioned another EW analysts predicting a potential wave 5 targeting new highs which is what happened. One current projection is a retest of 116-117 area in August LC which would work the lower end of my LT value range mentioned above.

Moving forward there appears to be more room to washout weak longs and test LT support areas. There is still opportunity to consider put protection in the feeders for producers, while bulls might consider different contract options. Bulls should let the market come to you. Supply continues to build.

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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Daily Market Update - Currency Futures - 6/16/2017

John Caruso

John discusses the market changes due to the recent FOMC meetings. How does the USD's rally move other currencies?

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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Bulls Have the Nod in the Equity Markets

Jeff Yasak

Global equity markets were mostly mixed this week. All things considered the ability to claw up and away from last week’s lows and shake off the sudden turn in sentiment against the high tech/high priced Bellwether issues is impressive.  It would appear as if the market is poised to draw in fresh bargain hunting buying off the idea that US rates will remain low for an extended period of time and that growth will remain positive even if growth rates are expected to be less than stellar.  In general, geopolitical anxiety is running much lower than last week and that might also be encouraging investors to pick up FANG stocks at a discount to their recent highs.  In general, the September E mini S&P remains mired within an eight day trading range with close-in pivot point support today seen at 2421.75 and resistance seen up at 243700.  The index seems to have garnered some spillover lift from generally positive international equity market action overnight and also from a favorable NFIB survey of small business optimism.  Uptrend channel support off the May and June lows is seen at 2421 and support level rises to 2426 this week.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-1656 or jyasak@rjofutures.com.

Sep '17 E-mini S&P Daily Chart

Sep '17 Emini S&P Daily Chart

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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.


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