June 23, 2017

Volume 11, Issue 25

Feature Article

Upcoming Webinar

Trading Volatility with Options

Trading Volatility with Options

Wednesday, June 28 at 11 a.m. CT

In this session you will learn:

  • What moves the price of an option
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Russell 2000 Webinar

E-mini Russell 2000 Index Webinar

Tuesday, June 27 at 10 a.m. CT

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  • Russell Index fundamentals, focusing on the small-cap Russell 2000 benchmark
  • E-mini Russell 2000 contract highlights, plus margin offsets with CME
  • Advantages of trading E-mini Russell 2000 futures in place of ETFs
  • How to use E-mini Russell 2000 to spread trade small-cap vs. large cap stocks
  • Exploring E-mini Russell 2000 options volatility – rich or cheap?

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Metals - Gold

Can Gold Reach $1,300 Again?

Nicholas DeGeorge

In the early morning trade, August gold is up roughly $8 and has rebounded nicely off this week’s low back on Wednesday of $1241.7. Yesterday, gold started off the rally in the face of adversity from the US dollar and positive stock market action. Furthermore, reports of one US fed member stating that the projected rate hikes are overly aggressive. Maybe this is a start of forward policies out of Washington that are set to temper a deflationary atmosphere, which should benefit gold to see higher prices.

If we take a quick look at the daily August gold chart, you’ll clearly see that buyers came in once gold fell just below its 200-day moving average which currently rest at $1,247.7. However, it still trades below its 20 and 50-day moving averages, which gold will have to get and stay above in order to get back to $1,300.0 an ounce. If gold can get back above $1,266.0 an ounce, then we could see some momentum buying up to $1,300 an ounce. Below is a daily August gold chart with the technical levels above. 

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.

Aug '17 Gold Daily Chart

Aug '17 Gold Daily Chart

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Metals - Silver

The Silver Channel Continues

Phillip Streible

The downward washout that occurred over the past 2 weeks looks like it may be coming to an end and a possible upward sloping double bottom has formed. Silver imports in China have stepped up significantly year over year and could be the start of a new move. I would expect commentary from FED speakers to become more dovish going forward with the economy weakening and the interest rate hikes 2/3 complete this year. If you take a look at the daily silver chart keep an eye on the ADX which measures the strength of the trend. Currently the downward trend is weakening which could mean sideways to higher action lays ahead. The other chart to keep an eye on is the Gold/Silver ratio. Currently trading at 75 ounces of silver to 1 ounce of gold. This is historically high could be set for a correction with silver gaining on gold. 

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

 

Jul '17 Silver vs. Aug '17 Gold>

Silver/Gold

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Energies - Crude Oil

Is There Any Hope for WTI Crude Oil Support from OPEC?

Dan Hussey

With August WTI crude oil futures holding below the 43.00 handle, the market has all but confirmed the bear’s short term control of price action. In last week’s article, I discussed how at that time, a break below the May contract lows would signal for a continued decline to the lower 40.00 handle. With that move well underway, crude has begun its game of “find the support” with bears on the hunt. This week’s EIA Petroleum status report saw yet another draw on crude oil inventories, estimating a 2.5 million barrel decline. This reading was an increase from last week’s draw of 1.7 million barrels, and neither has enticed the market to find a bottom and turn higher.

At this point, it would appear the market has also lost faith in OPEC’s ability to control supplies, as the cartels headlines are barely events anymore. As I have said before, talk is cheap, and while OPEC cuts have been made a reality, it’s clearly not enough of a consensus to empower the bulls. The continued talk and production of US shale has been out pacing the OPEC efforts to cut production, at least in the minds of traders and the market.

From a technical perspective, breaking below the May 43.76 lows from the continuous contract is massively significant. I discussed last week the same set of technical indicators that are driving the market lower, including two Fibonacci measurements, the lows from July of last year, and the channel the market has been holding the last 4 months. WTI crude futures should find 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.

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 Continuous Chart

Crude Light Continuous Chart

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Energies - Natural Gas

Trend in Natural Gas, Will it Close Down or Up?

Jeff Ratajczak

The trend in August natural gas is down. Support is at 2.900 with a triple bottom at or near that price on a daily chart. A close below the support lows could signal sell offs below 2.83 to the 2.75 mark. Any corrections in the current down trend will find it hard to fill the gap and go from Monday’s trade. It will require a close above 3.00-3.02 levels to negate the current trend.

Momentum indicators are at oversold levels, and are showing no signs of divergence on a daily chart. Today’s storage numbers are an expected 55 bcf infusion. Although this less than the 5-year average of 86 bcf, storage is almost 10% above the 5-year average at over 2700 bcf. Less than the expected infusion may of 55 bcf may cause a bounce in prices.

Below normal temps are giving way to weather forecasts calling for a minor heat wave which could support prices. Tropical Storm Cindy hasn’t caused any shut downs in the gulf yet. I believe that exposure to the short side of the market may still be warranted.  

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.

Aug '17 Natural Gas Daily Chart

Aug '17 Natural Gas Daily Chart

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Softs - Cotton

Cotton Continues Its Free-fall

The proverbial rug appears to have been pulled out from under the cotton market as prices close in the red again today. Despite some dry spots in parts of West Texas, the cotton crop remains well above the 20-year average for good/excellent rating and with much higher planted acreage this year relative to last, market participants continue to press the short side of the cotton trade. However, cotton is not alone in its fall from grace as commodity prices across the board have been unusually weak over the past week or so, particularly the soft commodities. Sugar closed down over 4% today, cocoa down 3.86%, coffee down over 2% and cotton, the strongest of the bunch, closed down just 1.16% on the session.

Prospects of potential flooding could help support the cotton market in the near term as US crops near the East coast are susceptible to flooding damage stemming from tropical storms. As tropical storm Cindy continues to gain momentum, the threat of flood damage around the Gulf of Mexico region is ever-present and certainly should be taken into account.

Technically, the market remains weak as a downside break from the prior trend line, along with a confirmed breakout below the 72.15 range lows set the stage for the recent move lower. An argument could be made for potential support to be seen around 67.58 – 68.37; however, the previous swing low at roughly 65.50 coincides with a 61.8% Fibonacci retracement, making this area one to watch in the coming days. 

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.

Dec '17 Cotton Daily Chart

Dec '17 Cotton Daily Chart

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Softs - Cocoa

Cocoa Heading Towards Year-Lows

Peter Mooses

European and North American demand continues to be monotone. Supply levels remain bearish, and weather has not had an effect on production – will El Nino change that? Cocoa’s story line this year is on repeat. Will demand give prices a boost? Will there be a large surplus in production? These thoughts and lack of fundamental news have forced the September contract down below 1850; heading towards year-lows put in back in May. Earlier this year, financial issues in key growing regions were affecting price levels, and new talks have reopened, possibly creating future volatility. If 1825 is tested, 1800 is in sight – buyers may be then tempted to re-establish positions. After five sessions of lower trading, COT data on June 23 may give us a better idea of what traders are thinking. Traders could look at buying calls in the December contract to gain exposure to the market if a recovery is building.

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.

Sep '17 Cocoa Daily Chart

Sep '17 Cocoa Daily Chart

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Softs - Coffee

September Coffee Dives Deeper

Adam Tuiaana

Clear and steady violations of critical lows (which should have been strong support) seem to continue as September coffee prices paint a very bleak story. As the stock market is on the rise, we can see the price action of the September S&P 500 shows quite the negative correlation to that of September coffee prices. Many traders might make logical sense of the fact that a strong stock market should equate to stronger demand, but we must keep in mind that coffee prices will need to see some significant depletion of our existing abundance of coffee stocks in order to lift prices higher. Not likely in the near future.

On the daily chart of September coffee below, we can see the aforementioned violations of the 13106 and 12765 critical lows. Both of these levels should have posed some support, but coffee prices have destroyed these levels with some volatility. Until we see some very big supply numbers dwindle, traders who believe that “the trend is your friend” should continue to be bearish.

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.

Sep '17 Coffee Daily Chart

Sep '17 Coffee Daily Chart

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Agriculture - Grains

Key Technical Toggle Points to Help Navigate Bean Meal Base/Reversal Threat



We're going to begin this analysis from the very long-term and work our way down to finer technical levels we believe will prove important before, during and after next Fri's key crop report.  Reiterating, we believe the unique and compelling combination of:

  • Apr'16's confirmed bullish divergence in momentum amidst
  • historically bearish market sentiment and
  • a complete Elliott sequence down from Sep'12's 541.7 all-time high

defines Feb'16's 258.9 low as THE END of the secular bear market and start of a major base/reversal PROCESS.  The relapse from last year's 432.5 high is considered the (B- or 2nd-Wave) correction of early-2016's initial (A- or 1st-Wave) rally TYPICAL of such base/reversal processes.  Indeed, the price action from Feb'16's 258.9 low is virtually identical to the two prior major base/reversal processes from Dec'08's 235.5 low and Nov'04's 146.6 low circled in blue in the monthly log scale chart below.

On this major scale Feb'16's 258.9 low serves as the secular risk parameter the market needs to break to negate this count.  In lieu of such sub-258 weakness long-term traders are advised to acknowledge what could be extraordinary risk/reward merits of a bullish policy from current and genera; 300-area prices.

IF this long-term bullish count is correct, then by definition the relapse from last year's 432 high on an active-continuation chart basis shown in the weekly log scale chart above would be expected to 1) unfold in a 3-wave and thus corrective manner and 2) bottom at a level higher than the 258 start of the move.  Given the magnitude of the secular bear trend from 2012 t0 2016, such an "extensive" correction in terms of both price and time is not unusual.  With the lower-quarter of a range a sort of fish-or-cut-bait time and condition with respect to this suspected correction ending, it should not be a surprise that the bear is having difficulty making any headway into the lower-quarter of the range...

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Soybean Meal Monthly Chart

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Currencies

The Dollar Looks to be Poised to Slip Lower

Tony Cholly

Dollar:  With fresh damage in the dollar chart this morning and generally upbeat action in all actively traded non-dollar currencies it would appear as if the bias in the dollar has returned to the downside.  We suspect today’s second and third tier scheduled US data will provide only a temporary and very limited support to the dollar and that a slide below 97.00 is due and a possible low for the day today is seen down at 96.82.  For the dollar to throw off a three day pattern of weakness probably requires something surprisingly positive from the Washington news cycle.

Sep '17 Dollar Index Daily Chart

Sep '17 Dollar Index Daily Chart

 

Euro: While part of the strength in the euro early today is the offshoot of unfolding dollar weakness we also get the sense that the political and economic environment in Europe continues to improve.  In fact, the grains in the euro this morning are impressive when one considers that German June manufacturing PMI readings came in below the prior month.  In fact, German June services PMI readings came in significantly weaker than the May readings and yet the euro is showing no ill effects of the data flow.  In short, the pattern of higher lows and higher highs has extended and that could leave little in the way of resistance in the September euro until the 1.1298 level.  Support in the euro this morning moves higher to the 1.1203 level.

Sep '17 Euro Daily Chart

Sep '17 Euro 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

S&P Looks to Break Out of Recent Range

Bill Dixon

Just after the open, the S&P is still stuck in the middle of the last few days’ range. We’re seeing a pattern of higher lows and lower highs at a level we’ve been trading at for the majority of the month. Looking back, the pattern we’re seeing reminds me of what we saw beginning around the last week of January and into the first week of February. The second half of December was a range bound trade, with a strong, short-lived selloff around the new year. The majority of January was also range bound right around the same level that we saw in the second half of December. The market then attempted to break out to the upside, but quickly gave up all those gains and returning to levels near the previous range. Then next few days of trading were spent reestablishing a range with a slightly higher low.  Then the market proceeded to go on an absolute tear, as you’ll see in the chart below.  

Sep '17 Emini S&P Daily Chart

Emini S&P Daily Chart

 

Breaking down the recent pattern on a shorter time frame, you’ll notice some similarities.  A range bound trade is followed by a big selloff. The selloff is quickly forgotten, and the market attempts to breakout to the upside, which fails. The market then establishes a new range, slightly above the previous one. We’ll see where we go from here.  

Sep '17 Emini S&P 240 min Chart

Sep '17 Emini S&P 240 min Chart

To expect another move of that magnitude would probably be a bit optimistic as the S&P is approximately +170 from where it broke out in February, but stranger things have happened. I would also take into account the fact that the pattern the two charts vary greatly in time frame as one pattern shows what developed over a period about twice as long as the other. That said, I think there may be some significance to the similarities. Keep an eye on the energy markets as well. I think if we can get a bit of a lift in that sector, it will open the door for the next leg up in the market.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5342 or bdixon@rjofutures.com

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