September 1, 2017

Volume 11, Issue 35

Feature Article

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Critical Trading Mistakes and How to Avoid Them

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Metals - Gold

Gold Breaks Above $1,325 an Ounce

Nicholas DeGeorge

In the early morning trade, December gold has extended yet again its very impressive rally and is currently trading at $1,331.3. Yesterday, gold reversed its sell off and continued its rally today, and is currently up $9 a troy ounce and the technical condition definitely favors the bulls. With today’s disappointing non-Farm payroll number, the US dollar continued to sell off which gave more fuel to this already powerful gold rally. Furthermore, it will be impossible to predict what’s next out of North Korea, which in end should keep gold above $1,300.0 for a while.

If we take a close look at the daily gold chart, you’ll clearly see the strong bullish trend line and the strong buying off Thursday’s low of $1,302.30. Gold breaking above $1,325.0 overnight leaves the upside target now between $1,350-$1,375 and if N. Korea launches another missile over the weekend, it could get up there in a hurry. Furthermore, gold is trading above all its major moving averages, which are all sloping up.

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

Dollar Action and North Korean Jitters Fuel Silver Bull Market

Manon Lasserre

The dollar is showing some early strength, yet gold, silver, and platinum are still showing gains in a fashion that denies the influence of the currency index early on. While gold and silver are not seeing as much conclusively supportive board-based physical commodity market price gains this morning (most specifically from skyrocketing prices) grains, industrial metals, and natural gas enter the Friday session with a positive bid. As indicated previously this week it is impossible to predict the next significant iteration from the North Korean situation, but overnight some of the anxiety might have been deflated in the wake of comments from the Russian president that pressure on North Korea is both futile and a dead end. Perhaps gold garnered a significant portion of its gain yesterday from a massive jump in nearby/prompt gasoline prices as some players speculated that could result in a spark for inflation. Overall, in the ends the primary driving force of gold and silver will be the direction of the dollar, which in turn will see a major decision off the US monthly payroll readings. However, expectations for the US nonfarm payroll reading are mostly below last month’s 209,000-job addition and therefore the dollar is vulnerable to a slight downside miss in the numbers today.

DECEMBER COMEX SILVER:
Daily stochastics have risen into overbought territory which should support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-day moving average. The next upside target is 17.946 with a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 17.842 and 17.946, while first support hits today at 17.488 and below there at 17.237.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or mlasserre@rjofutures.com.

Dec '17 Silver Daily Chart

Dec '17 Silver Daily Chart

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Energies - Crude Oil

Hurricanes, Crack Spreads, and Crude

Dan Hussey

In now the ninth straight week of crude inventory draws, Wednesdays EIA Petroleum status report estimated stockpiles had declined by 5.4 million barrels.  This week’s energy products (gasoline futures in particular) has been entirely driven by first the anticipation of Hurricane Harvey, and now by the anticipation of its retreat.  The fundamental play was to buy gasoline futures and sell crude oil futures (also known as the crack spread).  This dynamic is a simple lesson in basic economics, with oil refineries being shut down, it cut gasoline supplies as well as the demand for US oil.  With the storm moving on, and the clean-up beginning, it can now be expected to see a reversal in both of those plans.

The same set of technical indicators that have been driving 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).  Even though hurricane Harvey blasted the energy sector, the moves in energy futures were right in line with expectations.  I expect normal conditions to return, refineries getting back to FULL capacity in no time and correcting the weather trends from the last week.

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

Crude Light Daily Continuation Chart

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Energies - Natural Gas

Hurricane Harvey Puts Pressure on Natural Gas

Jeff Ratajczak

Natural gas is currently in a sideways to downtrend. The October contract is being supported by Hurricane Harvey in the gulf. All the natural gas hubs are concerned with weather. Another named storm is headed toward the US off Africa’s west coast. The gas storage number came in at a slightly lower build at 30 bcf. 33 bcf was expected by the trade. Last week’s build was 43 bcf. 

Resistance is seen near $3.02 and above around $3.054. Close in support is at 2.90, then below about $2.80. A close above $3.00 could spark rallies to $3.10 and possibly above. Below $2.80 can technically clear the way for sell offs to lows that haven’t been seen since January of 2016. 

There has been a drop in demand and consumption because the storm has cut power to hundreds of thousands of people. When the power comes back online we should see a significant jump in price. Weather is forecast at normal to below average temperatures for the next 6-10 day period which should offset some of demand increase from the restoration of the electric. Until Harvey moves out of the gulf, the sidelines maybe the safest place. Iron Condors and strangles might be just the thing in a non trending market.

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

Cocoa and the Soft Markets Reacting to Hurricane Harvey

Peter Mooses

In the front-month cocoa contract, the large supply is reflected in prices and coming to fruition. These large supplies are leading to a sell-off by funds. On the currency side of the trade – the Dollar rebounded, Euro dropped, Pound is weak – risk on is back across the global commodity markets. Gold is trading about $1,300, safe haven trade is on temporarily.

Banks are anticipating a range between 1800-2000 for the rest of the year in cocoa – looking at the technical indicators and the fundamentals (between the abundance of supply and lack of demand) this range looks to be accurate.

The past few weeks the soft markets have been moving directionally off each other due to Hurricane Harvey.

Coffee has mainly been following cocoa. The big question is, will coffee supplies or facilities in the US be affected by the current weather front? Houston, Miami, and New Orleans are reporting no damage to the materials in the facilities, but the facilities cannot be accessed for the time being. There are reports that Vietnam’s exports are moving higher due to this in the short-term. More bags are being estimated from Brazil in Robusta production, up almost 20%. If output is also increased by 20%, this will leave markets to trade in the current range. Technically, coffee is seeing bearish indicators hit. Daily stochastics and closes below the 9-day moving average are negative for the short-term.

Sugar has traded in a tight range, almost unchanged during some trading sessions this week – short cover is most likely the reason. The original move higher on Wednesday was due to largest producing nations providing bullish news, but then the largest consuming nations made the market reverse by providing bearish demand news. Support was given to sugar by carryover from the move higher in gasoline, ethanol, and currencies. The lower tone in crude oil made that news short-lived though, adding to the price range in sugar. Supplies in the coming months appear to be fairly tight according to mill reports, but that news goes towards nothing if we can’t get some bullish demand news.

Cotton continued to move higher as its key growing regions have been affected the most by Hurricane Harvey. October cotton is also following technical trends and broke key resistance as it has moved higher. Fundamental risk and weather premium is leading cotton.

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

Is this a December Coffee Selling Opportunity?

Adam Tuiaana

The recent selloff has been a true signal that the strong supply and weak demand fundamentals of coffee continue offer a brittle floor for prices to stand on. December coffee prices are now approaching a sensitive and critical support area of 12715. This is an area that should find solid support, but if violated may result in an aggressive (and possibly massive) selloff back down to the 120 range lows of June. From an intermediate trend perspective, this technical trader believes that those who are interested in catching a large potential move should consider using sell stops to enter the short side below the aforementioned 12715 area. If the dragon is going down in flames, might as well ride it. Don’t just consider futures as your only option, a wise trader will also use options to manage risk and gain exposure.

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.

Dec '17 Coffee Daily Chart

Dec '17 Coffee Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 9/1/2017

Stephen Davis

Steve analyzes the corn, soy, and wheat markets and discusses the impact NAFTA has had on the grains this year.

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

The Dollar bulls need a lot of payroll help today

Tony Cholly

Dollar: After viewing the three day recovery in the dollar earlier this week, and seeing the failure from the Thursday high, highlights the fact that the dollar remains within a definitive 2017 downtrend pattern.  Just as it may take a much stronger than expected nonfarm payroll reading to undermine equities today, it could also take much stronger than expected US payroll result to evoke even modest gains in the dollar.  In other words, the trend is down unless there is a definitive catalyst to alter that sentiment.  It is possible that some pressure on the dollar will dissipate now that the storm situation is becoming less uncertain.  Downtrend channel resistance today in the September dollar index is seen at 93.23 and a failure to hold 92.19 probably signals a fresh contract low.  In conclusion the bias is down and we must be presented with very strong data to alter their opinion.

Sep '17 Dollar Index Daily Chart

Sep '17 Dollar Index Daily Chart

Euro; While the euro is higher to start today, it should probably have forged even more gains considering the favorable sweep of euro zone manufacturing PMI data released overnight.  In fact, Italy, France, Germany, and the euro zone overall readings posted gains in a private manufacturing PMI report sweep.  Holding back the euro are building beliefs that the ECB is poised to intervene against the currency strength in an effort to protect European exports and therefore the euro zone recovery.  However, in the past the threat of intervention in a currency has evoked action that seems to force the central bank in question to act.  In other words, the euro might be expected to streak back above 1.20 to draw out the intervention.  As we suggested in the dollar coverage, it could take a very strong payroll reading to result in more gains in the dollar and therefore it could take a very strong data to prevent more gains in the euro.  Uptrend channel support in the euro today is seen at 1.1847 and resistance isn’t seen until 1.1958.

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

Stocks Higher After Sluggish Jobs Report

Bill Dixon

Earlier this morning, Nonfarm Payrolls came out showing an increase of only 156,000 jobs.  We were expecting to see a number closer to 180,000.  In addition to the weaker than expected number, we saw the July number revised lower by 20,000 and the unemployment rate tick up from 4.3% to 4.4%.  While that isn’t great by any means, there was a bit of a surprise in the uptick in manufacturing jobs.  We saw a gain of 36,000 manufacturing jobs and also so upward revisions for June and July.  Reactions to the number have been pretty quiet, but the three major indices are all a bit higher at the time of this report.  Heading into the holiday weekend, this upward action has to be encouraging.  The Nasdaq printed a new high before backing off, and the S&P and Dow appear poised to make a run at their highs made on August 8.  Labor Day is Monday and markets will be closed, or have abbreviated trading hours.  Next week will be light on news, so traders will be monitoring the current geopolitical risks as well as any progress towards tax reform out of Washington D.C.

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 Emini S&P Daily Chart

Sep '17 Emini S&P Daily Chart

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