August 18, 2017

Volume 11, Issue 33

Feature Article

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Metals - Gold

Gold

Nicholas DeGeorge

In the early morning trade, December gold has extended its three day rally to about $30 and is currently up another $7 an ounce today. December gold has reached a high of $1,306.9 to day and is currently trading at $1,300.6, which now means gold is trading at its highest level since early June. The biggest factor on the rise of gold this week is the dovish Fed comments on Wednesday and the terrorist incident in Barcelona yesterday was another prominent force. Furthermore, there is fear in the markets that global equities might begin to deteriorate as they are at their all-time highs.

If we take a quick look at the daily December gold chart, you’ll clearly see that gold is in a strong up trend and now currently made a triple top if you take the April 17 and the June 6 highs. The shiny one might be do for a slight pull back, but the bull camp is definitely in charge, so we might even see a rally up to $1,325.0 first. Below I provided a daily chart of December gold. 

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.

Dec '17 Gold Daily Chart

Dec '17 Gold Daily Chart

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Metals - Silver

Here’s How to Play Fall Rally in Silver

Phillip Streible

Just when tensions in North Korea started to die down and Retails Sales showed a surprising uptick, it looked like that would be the one two punch needed to break this silver market. That’s when the FED minutes showed that the current participants of the FOMC committee was split over when to raise interest rates, breathing a new sign of life into silver.

Currently, the bulls have regained full control with silver trading back above $17/oz, and it will need to punch through $17.30 to put $18 in the cards. One of the key ratios to keep an eye on is the Gold/Silver ratio that measures the number of ounces of silver it takes to buy one ounce of gold. Knowing that the ratio is still trading at lofty levels and an extreme along with a low volatility environment, I have outlined a strategy to try and take advantage of a rally using options.

Weekly Focus

With the FED minutes behind us indicating expectations for another rate hike have diminished and further reduction of the balance sheet hasn’t yet been fully outlined, I believe that silver will see the next major rally on the heels of low inflation environment. 

Analysis and Outlook

The daily silver chart shows a sliding channel formation with small tops at $18.75, $17.75, and $16.75 where the breakthrough to the upside has created an all new chart pattern with $17.25 being a key level of resistance. I would expect a breakout about this level would trigger a rally back up to $18. While expecting the recent low point at $16.50 in price and volatility, I have designed a strategy that involves writing short dated put options while using longer dated call spreads to attempt to take advantage of a longer term price recovery. I would expect prices to recover to back to normalized levels back above $18/oz. by year end. 

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. 

Daily Chart Analysis and Price Outlook - Gold/Silver Ratio

Daily Chart Analysis and Price Outlook - Gold/Silver Ratio

 

 

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Energies - Crude Oil

Is WTI Crude in a Battle Over Trend?

Dan Hussey

In now the seventh straight week of crude inventory draws, Wednesdays EIA Petroleum status report estimated stockpiles had declined by 8.9 million barrels, keeping pace with the summer month demand on oil stocks.  Gasoline inventories did not show a draw, but rather remained unchanged on the week.  Crude being consumed by refiners to replenish the draws in gasoline stockpiles is to be expected, however no decrease in gasoline stockpiles may be an indication of refineries slowing production (and potentially their future demand on crude).

The same set of technical indicators that have been 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 are still very much in play.  The 44.00 support from equal legs and 50% fibs on the smaller timeframe charts, which I mentioned in last few week’s articles, is proving supportive and may be signaling the bulls are gaining back the ability to defend their ground on the larger time frame. However, now that front month crude prices have failed to break above the 50.00 handle, the bears have a line in the sand to defend, and a short term high that will keep the market suppressed.  Last week’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 (as was mentioned last week).

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.  Support is likely to be found into the 50% Fibonacci retracement area from the lows of July to the highs of August, measured at 46.24.  While WTI front month crude can remain solidly above 46.00 it’s likely that bulls will see this as an opportunity to defend the market from testing the summer time lows.  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).  The bears are in clear control this week, and it’s their possession of the markets price action to loose.  Bears defended their levels over the last week, while bulls have a line in the sand this week to fall back to.  In a real world game of thrones, WTI crude will be burned.

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 Continuous Chart

Crude Light Daily Continuous Chart

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Energies - Natural Gas

Natural Gas Stays in Bullish Territory, But for How Long?

Jeff Ratajczak

Today the trend in Natural Gas is neutral to slightly up. Last week's bull has sustained some technical damage, but still continues. October’s pivot is at 2.940 with resistance at 2.990 and 3.030. Support is at 2.91 and below at 2.850. Momentum studies are neutral and going sideways. RSI and MACD show no bias in either direction. A close below 2.830 would be sufficient to change the trend to neutral to slightly bearish. Above 2.990 may signal a run to 3.100 and above.    

Thursday’s storage number showed an above slightly above average injection of 53 bcf. Industry estimates were lower at 47 bcf. Storage numbers are still above the above the 5 yr average, but just barely. Weather forecasts are for normal temperatures decreasing the demand for cooling. We are in the midst of hurricane season. It should be active according to NOAA. There are a number of tropical depression forming of the coast of Africa that have the potential to become named storms in coming weeks. This may give some support to the market, and even encourage some short covering boosting  prices.  

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.

Oct '17 Natural Gas Daily Chart

Oct '17 Natural Gas Daily Chart

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Softs - Cocoa

Big Production Numbers and Activity in the Currencies Leading Cocoa Trade

Peter Mooses

Anticipation of a large crop is back into the picture for cocoa futures’ prices. Cocoa has given back 10% of its value in August thus far. Will these lower prices entice buyers again? Will demand for cocoa in Europe and North America rise? - Those questions have been looming all year but haven’t moved the market. Weather conditions in key growing regions have been good for crop development at this time of the season. Port arrivals in Ivory Coast are close to 1.925 million tonnes compared to last year’s 1.44 tonnes. The recent strength in the Dollar has weighed on most commodities – creating small selloffs. The Euro and Pound have added pressure to cocoa futures too. Look to see if the rally back in the Dollar carries over to the overall commodity market. Will global fears also pressure commodities and equities? There are a lot of unknowns and guessing taking place currently. Look for technical levels to lead the market at times like this. December cocoa is hitting support levels, a reversal may be forming. 

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.

Dec '17 Cocoa Daily Chart

Dec '17 Cocoa Daily Chart

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Softs - Coffee

September Coffee Violates Trendline

Adam Tuiaana

September coffee prices are seeing some good, long liquidation, to the point of an intermediate trend violation. Failure to hold support at the 140 level has left coffee prices spiraling downward to the 130 level, and in a hurry. A healthy outlook in Brazilian production numbers for next season seems to be the reason. These bearishly-revised production numbers, along with a strong US Dollar seem to be the fundamental forces that are keeping prices under pressure. In addition, it looks like more rain is on the way for the Arabica growing areas, which will also add to the bearish side.

On the daily chart of September coffee below, we can see a clear violation of the trendline that has been in place since June 22. Although trendlines do not provide perfect entry and exit levels, they do provide a valid and honest glimpse of threshold violations, which should never be taken lightly. From a risk-reward perspective, a short position would be advised with a violation of the 12932 critical support area. Be patient, wait for this violation to take place, then jump in. 

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 - 8/18/2017

Stephen Davis

Weather has been the biggest catalyst in the grain markets this year. Will we continue into good weather? Have an early frost? What will happen in either case?

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

We expect a temporary bounce in the USD before a weak close

Tony Cholly

Dollar: With the US president holding back on damaging tweets over the last 12 hours sentiment toward the dollar has been restricted to modest losses.  It is possible that University of Michigan sentiment readings could give the dollar a temporary lift, but we suspect the dollar action today will be correlated tightly with US equities.  Initial support today in the September dollar index is seen down at 93.21 and then not until an old double high down at 92.97.  In order to put the bear camp back on its heels today probably requires a rally back above 93.99.

Sep '17 Dollar Index Daily Chart

Sep '17 Dollar Index Daily Chart

Euro:  The events in Spain certainly leave a negative element in place for the euro currency.  Strength in gold, treasuries and the Japanese yen overnight suggest that the environment for the euro favors the bear camp.  An issue adding to the bearish tilt in the euro is the fact that the euro zone current account surplus declined as that could give rise to further headlines of the negative economic influence from the massive rally in the euro over the last five months.  The concern of the negative impact of the high euro exchange rate was put in place by comments from the ECB earlier this week and that leaves a general fundamental negative sitting on top of the euro.  Initial support today is seen at 1.1725 and then again down at 1.1708.  In order to alter the negative technical picture in the euro today probably requires a rally back above a downtrend channel resistance line of 1.1792.

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.

Sep '17 Euro Index Daily Chart

Sep '17 Euro Index Daily Chart

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Equities

Geopolitical Climate Twists Stock Markets

Tim Haberkorn

U.S. stock-index benchmarks opened lower on Friday, extending the prior session’s selloff that was partially fueled by a terrorist attack in Barcelona and renewed tensions between the US / South Korean and North Korea with planned war games starting on Monday. 

The Dow Jones Industrial Average, traded 13 points, or less than 0.1%, lower to 21,735, while those for the S&P 500 index slipped 2 points, or less than 0.1%, to 2,428. The NASDAQ Composite Index retreated 3 points, or 0.1%, at 6,218. 

Sep '17 Emini S&P Daily Chart

Sep '17 Emini S&P Daily Chart

The retrenchment for stocks comes after one of the sharpest downturns of 2017, when the S&P 500 index slumped 1.5% for its biggest one-day percentage drop in three months. The Dow average and Nasdaq Composite Index ended down 1.2% and 1.9%, respectively.

European markets were lower today, with the Spanish Ibex Index falling 1.01 percent, STOXX Europe 600 Index declining 0.88 percent and German DAX 30 index dropping 0.57 percent. The UK's FTSE index was trading lower by 0.92 percent, while French CAC 40 Index slipped 1.12 percent.

In Asian markets, Japan’s Nikkei Stock Average fell 1.18 percent, Hong Kong’s Hang Seng Index dropped 1.08 percent, China’s Shanghai Composite Index gained 0.01 percent and India’s BSE Sensex fell 0.85 percent.

The benchmarks are now on track for weekly losses around 0.5%. The Dow is on pace for its largest two-week percentage decline since mid-September last year, while the Nasdaq is flirting with its longest weekly losing streak since May 2016, as it has fallen for four weeks in a row.

Market participants are still focused on the terror attack in Spain, which happened on Thursday, with a van plowing into crowds in one of Barcelona’s busiest venues, killing at least 14 people and injuring scores. TheIslamic State has claimed responsibility for the terror attack. A few hours after the Barcelona incident, police killed five alleged terrorists following a separate attack that hurt seven people in Cambrils, a Spanish town southwest of Barcelona.

Also spooking investors were rumors on Thursday that Gary Cohn was planning to resign as an economic adviser to the president. The White House has countered those rumors.

As bad as things look ending the week, traders should be ready to buy early next week.  The main driver in the massive bull market is the interest rates around the world.  The FOMC minutes that came out on Wednesday gave no indication of letting up anytime soon.  This is a great opportunity for traders to buy in the rally if you can catch the market before it moves higher.  

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8558 or thaberkorn@rjofutures.com

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