September 15, 2017

Volume 11, Issue 37

Feature Article

RJO Futures PRO Online Trading Platform

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Exchange Info

E-mini Russell 2000 December Open Interest Surpasses 329K contracts

Volume and OI surge as clients move Russell 2000 positions to CME

E-mini Russell 2000® Index futures open interest continues to build, as market participants use the Sep-Dec roll to transition their Russell 2000 futures positions from ICE to CME.
December OI grew by 234K contracts as a result of Friday’s and Monday’s trading activity, driven by two successive ~200K contract days in roll volume and 420K+ contracts traded overall each day.

The roll period continues through Friday, September 15 – trade Russell 2000 at CME Group today and capitalize on fee waivers and $80 margin for calendar spreads.

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Metals - Gold

December Gold is Still in a Strong Uptrend

Nicholas DeGeorge

In the early morning trade, December gold is trading essentially unchanged for the session at $1,328.6, but is well off its overnight high of $1,338.2. Since North Korea launched another missile yesterday over Japan, the gold bulls must be a bit disappointed and confused with the price action. As of late, gold and interest rates have been getting a lift off news like that. The thing that makes yesterday’s launch especially interesting or concerning is that this is the first missile by N. Korea that can actually reach the American territory of Guam. If that news is actually processed by traders and investors alike, then I believe it’s very hard for them to want to go home this weekend short, which may give the bulls the upper hand again.

If we take a look at the daily December gold chart, you’ll clearly see that it’s in a very strong and long term uptrend. Gold is still trading above all of its major moving averages, and it’s not showing that it's over bought on the RSI indicator. With the overnight news out of N. Korea I believe this trend will continue.

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 - Copper

A Peak is in for Copper

Phillip Streible

Copper futures are up 17.86 % on the year after breaking through $3/lb and reaching a high of $3.15/lb earlier this month. It appears that prices may have peaked out. Copper is one of the most essential metals with uses ranging from medical purposes to industrial uses, and prices often fluctuate on the basis of supply and demand. When analyzing the demand side, you really want to keep and eye on the two largest economies in the world: China and the United States. China represents 15% of global GDP and the U.S. 24%. Chinese economic data showed the lowest reading for industrial production, which dampens the countries demand outlook. Also, while most likely storm related, U.S. industrial production unexpectedly declined today as well. On the supply side, the two major copper storage facilities are in London and Shanghai, with Shanghai stockpiles falling for the fifth week in a row which is generally a good sign of demand. This is more than offset by the fourth sizable daily increase at the LME. Chart patterns also suggest we may have peaked indicated below.

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.

Dec '17 Copper Daily Chart

Dec '17 Copper Daily Chart

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Energies - Crude Oil

The Battle Over $50.00 Crude

Dan Hussey

With the weather in the Gulf region returning to sunny skies and mild temperatures, a full assessment of weather damages is underway, and generally speaking the crisis is over.  Gasoline refineries in the Houston area wasted no time, with the futures market reflecting a textbook return of crack margins to pre hurricane levels.  Crude oil inventories were reported by the EIA Status Report to have increased by 5.9 million barrels, making the second week in a row of building stockpiles. Hurricane Harvey was a textbook example of how basic economics affects the energy markets.  Refineries offline = decreased crude consumption + decreased gasoline supply.  This directly translated into a rally in gasoline futures and sell off in crude in anticipation of Harvey (August 21 through September 1), and now that the storm has abated, that trend is unwinding and the “crack spread” is narrowing refiners margins.  The chart below shows the widening of crack spreads from pre Harvey levels of roughly 17.00 cents per barrel to a high of 27.79 cents per barrel.  By the time Harvey made landfall, the trade had returned to the futures market, and futures prices reflected a return of refinery operations.

The electronic futures market enabled oil refiners to protect their margins, capitalize on the higher gas prices, and lock in lower crude prices, all when their refining capabilities were incapacitated.  This is a prime example of how futures should be used to mitigate risk for commercial interests, and how the market provides liquidity as service.

From a technical perspective, front month crude oil futures have broken above trend line resistance at the 49.00 handle (as seen on the chart below), and have held technical 50% Fibonacci support (drawn from the June lows to August Highs) at 46.24.  This is constructive price action for bulls, as a clear big has returned to the market as US refineries first protect their margins (even before being able to turn their refineries back on) by buying crude oil futures, and second as real consumption of crude begins when those refineries get back to work.

The expiration of October options is sparking a short term fight over the 50.00 handle for front month (October) crude oil futures, and price action into this weeks close, in my opinion, is going to be very important to the near term direction of crude prices.  Option expiration often coincides with movement in the outright price of futures, so the risk of volatility is generally higher.

The true test for resistance will be on a sustained break and close above the 50.43, which will immediately put the 55 handle highs from the beginning of 2017, back into the scope for bulls.  Without a doubt, WTI crude futures are still in a range from 42.00 to 55.00 over the last year of price action, however, the current trade is taking the market higher in this range for the time being.  Every test of the range highs and lows are a chance for a break one way or the other, but until then, we will continue to track the dynamics which are governing the price of crude oil.

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.

Oct '17 RBOB WTI Crack Spread Chart

Oct '17 RBOB WTI Crack Spread Chart

Crude Light Daily Continuous Chart

Crude Light Daily Continuous Chart

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Energies - Natural Gas

Drop in Natural Gas Demand from Storms Should Resurge

Jeff Ratajczak

Natural gas is currently in a sideways to downtrend. The October contract is being supported by Hurricane Harvey in the gulf, and all of the natural gas hubs are concerned with weather. Another named storm is headed toward the US off of 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 forecasted 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

What the cocoa market has been waiting for: Higher demand, lower production

Peter Mooses

European cocoa demand is on the rise. The British pound made a new one-year high. These two factors will help cocoa move higher and could lead to the market to trade back in the 2000-2100 range. There is growing concern that production levels in West Africa may be lower than anticipated all season. Wet weather may have damaged crops and have caused concerns that black pod disease may be on the rise. West Africa saw a damper summer and some analysts are anticipating a drop in production for the last quarter of the year by almost 20%. As we head into the final quarter of 2017 and move into holiday season, chocolate companies’ demand outlook could affect prices in the futures.

Technically, in the short-term, the close below the 9-day moving is a positive indicator. The close below the 60-day moving average is also a positive long-term signal. 1995 in the December contract will be resistance, above that 2015. The market continues to find support around 1950.

In the near-term, watch weather patterns in Ivory Coast, European demand, and Indonesia’s import patterns.

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

December Coffee Looking Strong

Adam Tuiaana

December coffee has rebounded from the summer lows, bottoming out around the 120 level. There is news out of key growing areas in Brazil that rainfall will be very light, which has likely prompted a strong surge in the December coffee prices. In addition, we’re seeing a fast rising stock market which should lead to a more “risk-on” appetite for commodity traders. On top of all of this, The Hightower Group has reported that “coffee exports in Brazil’s busiest port have been stacking up due to dredging issues”. This should lend continued support to December coffee prices.

The near term resistance area of 13290 was quickly surpassed this week, as December coffee prices now look to challenge the highs from August. We’ve now seen five straight days of strong, positive, price action, which looks very bullish. Look for December coffee prices to make a run up to the 14750 level over the next few days

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 - 9/15/2017

Stephen Davis

Surprises in the crop report adjust the charts. All of agriculture is ramping up this time of year, where will it lead?

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

Oct Hog Bear Dominant Below Minimum $0.6110



Tue's break below 29-Aug's 59.82 low reaffirms our longer-term bearish count and clearly leaves 05-Sep's 64.45 high in its wake as THE corrective high and key risk parameter this market has got to recover above to, in fact, break the major downtrend. From a shorter-term perspective detailed in the hourly chart below, 08-Sep's 61.07 low looks to be a very minor 1st-Wave low of a developing wave sequence down from 64.45 and a level that should contain any corrective recovery attempts within this slide. In this regard we're considering 61.10 as our new short-term risk parameter to a still-advised bearish count.

Former 59.82-to-61.07-range support would be expected to hold as new resistance ahead of further losses...

To read the full article RJO Futures clients may login here to the client portal and access all RJO Market Insights.

Lean Hogs 60 min Chart

 

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Currencies

A Soaring Pound is Vulnerable to End-of-Week Pullback

Manon Lasserre

Dollar: The dollar will come into this morning’s trading under moderate pressure as it follows through on yesterday’s pullback from a new weekly high. Some comments made recently by Treasury Secretary Mnuchin of being less concerned with inflation were not received well by the market, and have kept the dollar in the defensive in spite of a rebound in risk appetites early today. Although a better than expected CPI result has modestly increased the chance for a December Fed rate hike, the dollar may have to wait on next week’s FOMC meeting results before it can sustain a recovery move. Near-term resistance is around 92.00 as the dollar may have to wait on the Fed next week before lifting clear of these current price levels.

Dec '17 Dollar Index Daily Chart

Dec '17 Dollar Index Daily Chart

 

Euro: The euro seems to have found moderate strength this morning and has climbed back above the key 1.2000 level near the end of a volatile trading week. Comments by an ECB official early today have underscored ideas that the ECB will announce QE tapering measures at next month’s policy meeting, while a better than expected Euro zone trade surplus has provided fresh evidence of the region’s growth prospects. As long as global markets avoid shifting back into a “risk off” mode, the euro has a good chance at extending this rebound. Near-term support is at 1.1960 as the euro may finish the week on a positive note.

Dec '17 Euro Index Daily Chart

Dec '17 Euro Index Daily Chart

 

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.

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Equities

Stocks Mixed Heading into Opening Bell

Bill Dixon

Stock indices appear poised to open at or near unchanged this morning. Considering the overnight turmoil we saw in London and North Korea and the miss on the retail sales number, this is actually somewhat encouraging for the bulls. While one could make the case that Hurricane Harvey was probably at least in part responsible for the weak number, this data reflects only the very beginning of the Hurricane. That said, it is pretty safe to say it will factor more heavily into the data moving forward.

The Dow, S&P, and Nasdaq head into next week’s FOMC meeting near all-time highs. Not many believe we’ll see any meaningful changes, but we’ll have to pay close attention to the dialogue for clues as to future rate hike decisions. After last week’s debt ceiling agreement, tax reform seems to have moved a bit closer to the forefront in Washington. Perhaps the recent agreement will prove to be a path towards a bit more progress there, but I’m not going to get too optimistic just yet. The two sides seem to be pretty far apart on this issue, but we’ll see if some kind of compromise can be agreed upon.

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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This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

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