July 7, 2017

Volume 11, Issue 27

Feature Article

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Metals - Gold

August Gold to Retest $1,200

Joshua Graves

August gold has been in a slow grind lower ever since the June 6 high of 1298.80. It’s no secret that the stock market has been pushing higher since the Trump election. The economic data has been neutral to positive at best, and in reality it’s been quite mixed until this morning’s non-farm payroll data. We saw the jobs data come out at a very positive 222,000 jobs added with a general consensus of 170,000 jobs added. To note, the manufacturing jobs added came in well below the month to month change of just 1,000 jobs compared with the consensus of 6,000. 222,000 jobs added also came above the consensus range with a high estimate of 200,000. As we take a look at gold’s initial reaction we are seeing gold touch the lowest levels since March. The big question that we have to answer is what is going to stop the gold free fall? Right now the looming crisis in North Korea could be the one thing to turn gold around. It’s a long shot, but obviously any sort of military strike on the country even surgically could have dramatic implications for gold, and the world economy. Any weakening of US economic data, as well as a more dovish tone from the fed could also get the gold bulls excited again.

If we take a look at August gold from a technical perspective, it appears that support has been broken and a test of the technically and psychologically important 1200 level is now in order. We are also testing the 50% retracement level of 1216, and not holding it well. If we break this we are most likely heading to 1200, where the 62% retracement level also coincides. 

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

Would rallies in silver be a selling opportunity?

Eli Tesfaye

September Silver is trading $15.50 down about 50 cents on the day. Metals are in heavy selling mode this morning. Silver is continuing to absorb all bullish news without responding positively. A lot of bearish factors are operating in silver as well. The Fed will continue to raise rates well into 2019, and the probability of raising rates in the December meeting is very high. From technical prospective, I have been harping about the need for silver to hold above a critical 16.00 level. A breach below that level sets up a long term bearish outlook. Any rally in silver will serve as selling opportunity rather than buying, unless silver closes above $16.75 to negate negative momentum. The commitment of traders with options report will be release later today. It will probably show a further reduction in long positions from the measurement done June 27, where it shows that the non-commercial and non-reportable traders had a combined net long 50,527 contract. The report that will be released today will probably show a reduction in long positions that doesn’t even take account today's weakness. All in all, it is bad news for bulls. Silver was unable to benefit from North Korean geo-political situations, as well as any minor development in south China sea. As I write, President Trump is meeting with Russian President Putin. 

From a technical prospective, the long term chart below shows that yet again, the 15.00 level should hold. Silver will not violate the 15.00 level without a hell of a fight. DO NOT expect silver to take out 15.00 level any time soon.

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 Monthly Continuation Chart

Silver Monthly Continuation Chart

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Energies - Crude Oil

WTI Crude Oil: What Goes Up Must Come Down… Or Does It?

Dan Hussey

WTI crude oil futures have held above the 45.00 price handle in Thursday’s trading, and likely now being supported by a stunning EIA petroleum status report that is considered bullish for the trade. This week’s EIA report estimated a 6.3 million barrel draw on inventories, and price action began to rally off the 42.05 July lows yesterday to highs testing 47.32 to start the week. While prices remain above the 45.00 line in the sand I noted in last week’s article, it becomes increasingly unlikely there will be a move lower towards a test of the 40.50 Fibonacci and technical confluence area in the continuous daily contract.

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. The recent rally off the 42.00 level appears to be more profit taking than longs initiating long term positions, and it’s possible that there will be more participation from lower prices. Support today above 45.00 handle also helps aide this consensus, and seasonal calendar spreads suggest there may be a tightening in supply and increased demand for crude in the near term.

From a technical perspective, breaking below the May 43.76 lows from the continuous contract is massively significant from last week. 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. In the near term, look out for the 44.00 support from equal legs and 50% fibs on the smaller time-frame charts. Resistance for this week is expected into channel and Fibonacci confluence zone from 47.00 to 48.20. If the market continues to break down below 45.00 then below the lows of July at 41.05 for the August contract, 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). 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. Now that the market is above the 45.00 area, this opens the door for a test to channel resistance into the 47.20’s to 48.20’s. The only question we have to answer with crude: will it come back down?

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 Daily Continuation Chart

Crude Light Daily Continuation Chart

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Energies - Natural Gas

Late Turnaround on Wednesday Needs EIA Stocks Data to Confirm

Tony Cholly

Natural gas prices are finding mild support this morning, but they remain near the bottom end of yesterday’s range.  August natural gas traded to a low of 2.832 yesterday, which was the lowest it has been since November 9. A very weak crude oil market pulled prices lower, as did forecasts for normal temps in the eastern third of the US through July 19.  The early estimates for the inventory report on Friday call for an increase of 59 bcf last week versus the 5-year average increase of 66 bcf. Stockpiles totaled 2,816 bcf as of June 23, 6.9% above the five year average. August natural gas made lower lows for four sessions in a row, and yesterday it took out the June low of 2.875. With managed money category adding 25,824 contracts of speculative length to a total long position on 80,966 contracts as of June 27, some further liquidation may be seen. A trade below the November low of 2.815 leaves the May 2016 low of 2.772 as the next level of support and below that a swing objective of 2.722.

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.

Aug '17 Natural Gas Daily Chart

Aug '17 Natural Gas Daily Chart

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Softs - Cotton

Cotton Consolidates as USDA Report Confirms Acreage

The recent USDA Acreage report pegs 2017 cotton planted area at an estimated 12.1 million acres, up roughly 20% year over year.  Interestingly enough, cotton prices for the December contract saw a decent upside move immediately following the report, which leads some traders to believe that the 20% increase was largely priced into the market.  Following the temporary pop in price action, cotton made a sharp correction and closes today’s trading day largely in neutral territory.  Curious that the 50% Fibonacci retracement of the previous run up in prices (from approx. April ’16 – April ’17) comes in right around 67.58, which is where current price action finds itself oscillating around.

A technical band of structure can be seen from roughly 68.37 – 68.70, which takes into account the recent peak following Friday’s report.  Look to this area as the initial upside resistance area with 65.50 – 65.70 serving as near-term technical support on the downside.  Price action was resoundingly weak throughout June as participants began looking forward to the new crop prospects.  How much of the 20% increase in acreage is priced into the market remains to be seen; however, it does appear that cotton is attracting some renewed buying interest down at these levels.  In the event that the near-term negative momentum continue to weigh in on prices, look to the 65.50 – 65.70 as the next level of potential support in the cotton market.

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

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.

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Softs - Cocoa

Holiday Trading and Cocoa

Peter Mooses

September cocoa is trying to break and hold above 1950 – but hasn’t had any luck. With the US holiday mid-week, traders are trying to position themselves for the longer-term trade while keeping the lower volume and abbreviated schedules in mind. A large net spec short position in cocoa helped the market rebound. Higher Ivory Coast production has already been priced in the market so any “new” news is what the market play off of now. London weakness and a stronger dollar along with lower energy prices have pressured cocoa. The arrival data is playing a part in cocoa’s current state – numbers are in-line with last year’s data that was affected by El Nino. Heavy rain in San Pedro has affected paths to ports which has also helped move the market. This rain has damaged bridges and could affect exporting but the rain will be beneficial for the 17/18 new crop. With resistance at 1960 and 1995 we will need more demand news to break above 2000. Look for volatility and choppier trading over the next week.

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 Finds Strength

Adam Tuiaana

We’ve seen some good strength in September coffee prices over the last few trading sessions, but the fundamentals are still quite uncertain. Mixed import and export numbers seem to have September coffee prices in a perpetual range-bound swing. Over the past month, we witnessed convincing violations of critical lows of September coffee prices, which should have been strong support. Continuing strength in the US stock market, had seen some negative correlation to that of September coffee prices. As we mentioned in our last article, traders need to see some significant depletion of our existing abundance of coffee stocks in order to lift prices higher. Lately, larger producers in Brazil and Costa Rica are witnessing lighter exports, not likely to hold this intermediate uptrend in place.

On the daily chart of September coffee below, we can see that September coffee prices were able to garner enough support to break above the 12765 resistance level, which prompted a quick run up to the 12975. However, bulls should be cautious around the 131 level, as this should be solid resistance. Until we see some very big supply numbers dwindle, traders who believe that “the trend is your friend” should continue to be bearish. This could be a decent time for a selling opportunity.

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

Daily Market Update - Grain Futures - 7/7/2017

Stephen Davis

Grain markets are making big moves! See where they stand and where they could go.

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

Dollar Finds Footing in Front of US Jobs Data

Tony Cholly

Dollar: The dollar has found its footing after yesterday’s pullback, but it will clearly take direction from the tone of today’s critical US jobs data.  There is some potential for a negative surprise in non-farm payrolls given the sluggish ADP reading yesterday, but the dollar may be more interested in whether average hourly earnings can see a better than expected increase.  With other major safe-haven assets on the defensive this morning, the dollar could put together a sizable rebound “if” there are strong across the board readings in today’s jobs report.  However, a weak set of US jobs data could lead to a re-test of last month’s low for the move fairly quickly.  Near term support is at 9555 as the dollar needs to see good data this morning to lift decisively clear of its recent lows.

Sep '17 Dollar Index Daily Chart

Sep '17 Dollar Index Daily Chart

 

Euro: The euro has kept within a tight trading range early today that is in contrast to its volatile price action over the past few sessions.  While there have been mixed messages from ECB officials, recent strength in Euro zone data points has been underscored by today’s positive readings on German and French industrial output.  A strong US jobs report could lead to end of week long liquidation and profit taking, but the Euro looks to have further upside to go before longer-term upmove runs out of steam.  Near term support is at 11438 as the euro would likely be the major beneficiary of a sluggish US jobs report.

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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Interest Rates

Steeper 10-Yr T-Note Erosion Identifies Broader Corrective High



The extent and impulsiveness of the market's decline following 27-Jun's short-term mo failure discussed in that day's Technical Blogis impressive and defines 14-Jun's 127.08 high as one of major importance and possibly the end or upper boundary of a major correction within a new secular bear market in T-note prices.  From a very short-term perspective overnight's continuation of this slide leaves yesterday's 125.16 high in its wake as the latest smaller-degree corrective high the market now has to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm a bullish divergence in short-term momentum, stem the slide and expose what we'd believe to be is just a slightly larger-degree and interim correction ahead of eventual resumed losses.  In this regard 125.16 is considered our new short-term risk parameter to recent non-bullish decisions like long-covers and cautious bearish punts.

On a daily close-only basis below, the market's gross failure to sustain Jun's gains above former key 126.06-area resistance-turned-support and subsequent break below 23-May's 125.18 larger-degree corrective low breaks AT LEAST the uptrend from 10-May's 124.15 low.  But given the 3-wave structure of the broader recovery attempt from 13-Mar's 122.07 low however, it's quite possible that 14-Jun's 126.295 high defined the END of upper boundary to a major bear market correction.  We anticipate further trendy, impulsive price action lower with 19-Jun's 126.145 initial (1st-Wave) counter-trend low the level this market needs to recoup to negate such a count.  In this regard 126.15 is considered our new long-term risk parameter to a new bearish policy.

Arguably underscoring a broader bearish count in the contract is the fact that Mar-Jun's relapse attempt in actual 10-yr yields below failed to retrace even a Fibonacci minimum 38.2% of the entire 5-wave rise in rates from 08Jul16's 1.356% low to 13Mar17's 2.626% high.  This chart shows a nice bullish divergence in momentum that defines 14-Jun's 2.122% low as one of importance and potentially the END of a 3-wave and thus corrective decline from the market high that warns of an eventual resumption of 2016-17's rate rise that preceded it.  A failure below 19-Jun's 2.19% initial counter-trend high is minimally required to threaten this call for higher rates...

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10 yr Treasury Daily Chart

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Equities

Weakness Continued into Jobs Number

Bill Dixon

With just under a half hour to go until Thursday's closing bell, the S&P 500 finds itself down 20.00 (.82%) at 2412.00. We kicked off with a fairly weak ADP Employment Report that showed private payrolls rising only 158,000 vs. the expected 180,000. The market was able to rebound following the selloff, but traders sold into the recovery and brought the market to new lows for the day. Tomorrow’s payroll number is looking for approximately 170,000, which would be a nice improvement from the 138,000 we saw in June. The unemployment rate is expected to remain the same at 4.3%. Also weighing on the market are concerns about escalated tensions with North Korea. While this isn’t the first time that has come up, it seems to be in the news with increasing frequency, and some national security experts seem to think war barring some preemptive actions. We’ll continue to keep a close eye on that, but we’ll also be paying attention to news out of Warsaw where the G20 Summit begins tomorrow.  

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

Sep '17 E-mini S&P Daily Chart

Sep '17 Emini S&P Daily Chart

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