August 11, 2017

Volume 11, Issue 32

Feature Article

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Metals - Gold

December gold rally to continue?

Joshua Graves

December gold has seen quite the run up over the past few weeks, due mainly to the looming crisis on the Korean Peninsula. Even as we speak, December gold is making attempts to push the envelope to break out of the all-important and psychological $1,300 level. Looking at other fundamentals, we have seen mixed economic data in the US, with the Fed now discounting a potential rate hike in December at just 34%. If the US economy can stay on track and see a continued push toward 2500 on the ES and 23000 on the YM, we could see a jump in the chances of a rate hike. The Fed is unlikely to force anything through without a clear and direct strategy in raising interest rates. Four rate hikes next year now seem unlikely given the current circumstances. The biggest driver for gold at this point is clearly the North Korean issue. Massive change and uncertainty almost always leads to a rally in gold. If you look at this from a technical perspective, December gold is clearly in overbought territory. Having said that, this could be just the beginning. Plenty of buy stops are looming just above $1,300. Along with this potential ammo is the chart pattern clearly showing a classic cup and handle pattern. A clear “U” shaped bottom, coupled with a slight pullback forming the handle. Look for a break above $1,300 to decide your next move.

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.

Dec '17 Gold Daily Chart

Dec '17 Gold Daily Chart

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Metals - Silver

“Outside Week” Technical for Silver

Eli Tesfaye

September silver is trading $17.09 UP about 23 cents on the day. Again, metals are strong across the board since they hit lows early this month. September US Dollar futures is trading 93.30. Geopolitical risk is on the rise once again. With China and India keeping a very close eye on each other. And of course not to ignore the Korean peninsula.  President Trump would probably rather focus on DPRK than the ongoing Russia collusion investigation. The economy is growing, and as noted in JOLTS report this week, employers are having hard time finding qualified employees. This lack of skilled workers trend is here to stay. Fed is still expected to raise rate in December 2017. 

From the technical prospective, silver has an “outside week” in price action. This type of setup needs to be confirmed next week. As I have stated in past FuturesCasts, “Silver is poised for further gain." I put up a very long term chart showing a formidable long term support around 15.00. I did state, “DO NOT expect silver to take out 15.00 level anytime soon. Given current price action, silver needs to continue to climb above 17.00 to attract more momentum in buying.”

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

Crude Fails at $50, Are the Bulls Done?

Dan Hussey

It’s been six weeks of straight crude inventory draws, with Wednesdays EIA Petroleum status report estimated stockpiles had declined by 6.5 million barrels, keeping pace with the anticipated summer month demand.  Gasoline inventories, however, did not keep pace and it was estimated that gasoline inventories grew by 3.4 million barrels.  Crude being consumed by refiners to replenish the draws in gasoline stockpiles is to be expected, however seeing a decrease in gasoline consumption (via a build in stockpiles) could be an early indicator for a future drop in crude demand.

The same set of technical indicators that were diving the market price over the last few weeks, including two Fibonacci measurements, the lows from July of last year, and the channel the market has been holding the last 4 months.  The 44.00 support from equal legs and 50% fibs on the smaller timeframe charts, which I mentioned in last two week’s article, is proving supportive and may be signaling the bulls are gaining back the ability to defend their ground.  Now that front month crude prices have tested but are continuing to close below the 50.00 handle, the bears have a line in the sand to defend.  Today’s rejection of the 50 handle, and the subsequent decline to test the lows of August (48.37 September contract) could be the key reversal and outside day the market is looking for to confirm a short term top.

Resistance for this week is being tested into channel and Fibonacci confluence zone into the 49.00 to 50.00 handle.  There is an equal legs measurement at 48.80 (which extends to the 123.6% line at 50.00), and this level aligns with channel trend line resistance.  This short term line in the sand may keep the market under pressure in the near term, and the bulls will need to overtake 50.00 again to maintain short term control.  Price has begun to pull back, and while still too early to call a reversal, a break down below 48.00 could confirm bears are back in control.  In the medium to long term, 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).  In the near-term, the prior highs into 48.00 will be the next level of support to watch, followed by the prior lows of 42.05 for the September contract.  The reversal off today’s high may be the start the bears need to take back control, but a close below the August lows is necessary to confirm.

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 Oil Daily Continuation Chart

Sep '17 Crude Light Daily Chart

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Softs - Sugar

Unable to hold upper range, sugar to press for new lows in October contract?

Joe Nikruto

This week’s comment finds the October sugar futures demolishing a rather well defined upward sloping channel and answering all technical questions we had in our last visit.  Is the market bottoming? Is this the beginning of a longer term uptrend?  Will October sugar futures be able to hold and advance above the 50-day moving average? No, no and no.  Global surplus and lackluster demand have conspired to trump short term technical factors and fund trader short covering.  Brazilian harvest is chugging along and globally supplies of sugar should remain ample.  The chart shows a sugar market fully rolling over and taking out two previous levels of support in what appears to be a bid to take out the June low, 12.74.  The fund trader, who recently was on the buy side of the ledger, has decreased their net short positions by about 50k contracts in the last 30 days. As of the last reporting period that short position has been trimmed from about 112k contracts down to about 73k.   My guess is the new COT report will show funds puking up those recently bought contracts and back on the short side again, likely near the 100k level. Traders with more intestinal fortitude and risk capital can continue to view the chart as a cup with handle bottom, albeit one with a very large handle, for about 49 more points until October makes new lows.  As of now the oversold technical condition could lead to a bounce.  The 50-day moving average, 13.95 should now be resistance. I want to be mindful of the possibility that sugar could continue to churn, moving the funds into and out of positions, but for now the chart points lower.

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

Cocoa

Hector Galvan

The cocoa market is trading lower this morning as we come to the end of the week. It has been a tough week for many investors who believed that we had finally seen the end of a range bound market. However, I would argue we are still in a period of opportunity when it comes to cocoa. It is an opportunity to take advantage not only of the range, but the idea that eventually the market may finally find a long term up trend on a change in supply and demand. First, the market has been trapped in a range for some time now. Looking at the chart one can set up strategies that take advantage of buying the market should it fall back to the 1850 level and sell it should it go and not break the 2080 level. This has been the range since mid-April and may continue until we catch a solid catalyst to aid in the markets breakout. Secondly, I would point to the argument that as we move forward producers in the cocoa growing nations of Ivory Coast and Ghana will grow tired of cheap cocoa and move on to other marketable crops. In time, as we see less growing interest, this should be supportive for prices on a product that still continues to show consistent demand. We have seen that demand for cocoa liquor and powder continue to grow in all three measurable sectors. The cocoa grinds in Europe, North America, and Asia have illustrated that people have not turned their back and that we may continue to see better grind numbers going forward.

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.

Dec '17 Cocoa Daily Chart

Dec '17 Cocoa Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 8/11/2017

Stephen Davis

The USDA report reveals some surprising information on the current grain markets. How will you respond in your trades?

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

Are funds long and wrong in Cattle?

Cattle futures collapsed following the most recent COF report and after a brief technical bounce resumed the bearish trend started in early June. Futures has experienced failing momentum alongside lower highs and as of today lower lows.

Cash in fed cattle recently traded around 115 so the basis is attractive for feedlots to keep marketings flowing. August LC futures is currently trading sub 110.

The current weakness is not surprising given the historically large number of placements this spring through June, but what is surprising was and is the funds stubborn longs that leave cattle futures vulnerable for a potentially severe washout.

I have noted the 135-145 levels in Feeder Cattle were good lines in the sand or strike levels for those still holding product to use to hedge below. You are chasing it a bit now, so after today’s break of new lows you may see a bounce in 2-4 days back up to 144 to use as a resistance level.

Funds are still stubbornly long, and my guess is that this will continue unless we see a sustained trade below July lows or a repeat break of the transitional zone (108-112) to the downside in fed cattle futures front month. If the LC does washout consider a long from 104-106 area. We may not see this until September, but it maybe a good time to set some alerts.

Repeatedly, this is a good market for hedgers on both sides of the trade. Have a plan and keep an eye on 135 in feeder cattle futures as key underlying support.

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.

Oct '17 Live Cattle Daily Chart

Oct '17 Live Cattle Daily Chart

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Currencies

Daily Market Update - Currency Futures - 8/11/2017

John Caruso

Inflation concerns in the USD and Euro are affecting the markets. Where will this put your portfolio?

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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Equities

S&P, Stocks on the Move

Greg Perlin

U.S. stocks opened with tepid gains on Friday, as Wall Street attempted to claw back from a sharp decline in the previous session, underlining a downbeat week for assets perceived as risky amid ongoing geopolitical uncertainty. 
The Dow Jones Industrial Average rose 22 points, or 0.1%, to 21,867, while the S&P 500 was up 3 points to 2,440, a rise of 0.1%. The Nasdaq Composite Index rose 10 points to 6,225, a rise of 0.2%. 

On Thursday, the three major U.S. indexes logged their worst performances since mid-May in a session dogged by escalating tension between the U.S. and North Korea. Late in the session, U.S. President Donald Trump said perhaps his threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough".  For the week, the Dow is on track for a decline of 0.9%, its biggest one-week drop since April. The S&P is looking at a drop of 1.4%, its worst week since March. The NASDAQ is on track for a weekly decline of 1.8%, its worst since June. Still, all three gauges are within 5 percentage points of record levels.  Meanwhile, the Russell 2000 index of small-cap stocks looked poised for a weekly drop of 2.8%, its biggest one-week decline since February 2016. Both the NASDAQ and the Russell are set for their third straight weekly decline. 

Wall Street's so-called "fear gauge," the CBOE Volatility Index, meanwhile, hit the highest levels since Election Day on Friday after a spike on Thursday. But was retreating in recent trade. 

And while risks remain elevated from a geopolitical perspective, valuations are not necessarily excessive, though full. But we're in a low inflationary environment, which can help valuations remain elevated for longer than they would otherwise.  In the latest economic data, the consumer-price index a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target.

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.

Sep '17 E-mini S&P Daily Chart

Sep '17 Emini S&P Daily Chart

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