October 6, 2017

Volume 11, Issue 40

Feature Article

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Exchange Info

More Choices in FX Options

CME Group is adding Wednesday FX Options so you can better trade event-risk, with the granularity you need and the efficiencies you want.

Why? Because in a recent Options product review, 70% of all respondents said they would value additional short-dated, Wednesday expiries – in addition to the Friday Weeklies we already offer.

Wednesday Weekly FX Options will be available in Premium-Quoted and Volatility-Quoted formats.

It’s what you asked for.

Get Ready to Trade the FOMC: Go live on October 29

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Metals - Gold

December Gold, A Good Buy Down Here?

Joshua Graves

December Gold futures have been absolutely crushed over the past month. Much of this can be attributed to a cooling off of North Korean tensions, along with quite positive economic data. The non-farm payroll number that was posted this morning has shown a loss of 33,000 jobs compared to a consensus of 100,000 jobs added. The fed did however, show a quite positive unemployment number of 4.2% compared to a consensus of 4.3% to 4.4%. At this point the fed is forecasting an 86% chance of a rate hike at the December FOMC meeting, which in theory should pressure safe haven investments like gold. Recent comments from President Trump have the market a bit spooked, as he said in front a group of pentagon military officials that this seemed to be “the calm before the storm” and you are seeing a bid come into gold this morning. Mainly from a mixed non-farm payroll report, and again talk of military responses to North Korea’s nuclear program.

If you look at gold from a technical perspective we need the brakes to be put on at current levels of 1263, which represents the 200 day moving average. December gold is clearly oversold at these levels, and in a very weak trending market. If 1263 can gold, we can expect at the very least a dead cat bounce back to 1285, and a possible run back to 1300. To turn the longer term trend we need a close above 1325 to confirm the change in trend.

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

Is Silver Near Oversell Levels?

Eli Tesfaye

On October 5, December silver is trading at 16.62, up about 1 cent on the day with the daily low of 16.59. The US dollar index once again is putting pressure on the metals. Silver is getting into interesting price levels. Although the overall trend has been down since it made a high of 18.205 on September 8 2017, I’m looking at levels now that I expect a bit of strength. No doubt that the market is approaching oversold levels. The commitment of traders with options report (COT) will be released Friday, and it will be an indication of what the fund's positions are as of Aug 3, 2017. I suspect that if the dollar correction to the upside ends in near term, silver will likely stabilize and probably head higher.

I expect the COT report to provide some clue as to what the net short fund positions are from previous weeks. Are they getting less short? Or are they getting more aggressive in relative to previous weeks? Also, the chart shows some bottoming price action. Those who would like to get long silver would probably be better served if they come in on strength rather than weakness. That said, a close above 16.90 should provide that near-term lows are possibly in.

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.

Dec '17 Silver 240-min Chart

Dec '17 Silver 240 min Chart

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Metals - Copper

Copper Spike Reaffirms Interim Rebound Count, Longs

Thursday's impressive, impulsive spike above 29-Sep's 2.9925 high reaffirms the developing recovery from 22-Sep's 2.8940 low and our bullish recommendation from 2.9500 OB in 29-Sep's Trading Strategies Blog.  As a direct result of this resumed and accelerated rally, the 240-min chart below shows that the market has identified today's 2.9540 low as the latest smaller-degree corrective low it now needs to sustain gains above to maintain the impulsive integrity of a more immediate bullish count.  Per such 2.9540 is considered our new short-term risk parameter from which such a bullish policy and exposure can be objectively rebased and managed.

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

Copper 240 min Chart

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Energies - Crude Oil

Conflicting Oil Reports Look for Balance

Michael O'Donnell

The oil market has dealt with a number of conflicting reports this week, although unemployment and Fed speak are having the last word as of Friday morning’s trading. Earlier in the week, Russia’s Energy Minister mentioned no urgency to restructure the current OPEC quota, while OPEC’s secretary mentioned that the current quota compliance was very high. The market also dealt with the fact that refining capacity and demand would be skewed post hurricanes.

Technically, prior to this morning, oil had hardly been able to trade below $50, $49.80s to be exact, since September 13. In Thursday’s trading, the market traded above the 50 and 100 period moving averages and trend line originating from the August 30 low. As of Friday morning, the skewed unemployment number and the Fed’s Kaplan mentioning a high probability of rate hike, oil has blown through the previously mentioned averages, trend line, and levels. It should be interesting to see if this continues much further past the $49 level or rebounds back to the mid $50s and higher.

It would seem that the hawkish comments following the jobs report have affected the dollar and oil prices.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or modonnell@rjofutures.com.

Nov '17 Crude Oil 60-min Chart

Nov '17 Crude Light 60 min Chart

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Softs - Sugar

Sugar fully sideways but setting the stage for directional breakout?

Joe Nikruto

This week’s comment finds sugar futures marking time. The March contract is almost smack dab in the middle of the range sugar has carved out since the lows in late June. 13.42 and the swing high posted on August 1, 15.84. Sugar fundamentals continue to weigh on the market. Technicals which were looking constructive a few weeks ago have since eroded. One look at the chart shows sugar has been treading this ground for some time. Funds continue to add to their short position of about 82k contracts as of the September 26 COT reading, an increase of about 10k contracts. Hightower group research this morning pointed out that European production forecasts have increased as much as 25% as European Union output quotas have ended. As this news has been digested, sugar has found support. The last few days of higher prices have helped March sugar alleviate the oversold technical condition present on the chart. With the 18-day moving average looming overhead at 14.46, we could well have an answer to whether new lows may be in the offing. An inability of March sugar to take out the 18-day moving average could signal an imminent move lower. With only 86k contracts short the funds have ammo to press the downside should sugar continue to look heavy.

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.

Mar '18 Sugar Daily Chart

Mar '18 Sugar Daily Chart

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Softs - Cocoa

Has Cocoa Reached its Tipping Point?

The cocoa market closed strongly Wednesday on the heels of news that we are just steps away from an important breakout level. Finally, a market that has been strangled by a relentless sideways trading range gives us a renewed vision for higher prices.

We closed at 2088 yesterday with a high of 2092 and a previous day’s high of 2102 basis December. I would argue that the chart is leading us to a breakout above 2100. Should the market break above 2100 and close above 2114, we are likely looking at a major turnaround in the contract. A turnaround that the bulls will likely use to press the market up to the March and April highs of 2160 and 2200. Now, let it not be said that we don’t take both sides into consideration. Should the markets fail to press above 2100 we would likely fail, and once again, sell off to 2030 and then the 1980. Fortunately, the cocoa grind numbers have been coming out slightly better and illustrating that demand for the sweet confection is on the rise. In the end, I would also caution traders to keep weather in West Africa on their minds. We are approaching a time when weather can play a very important role on how fast the market moves in one direction or the other.

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 - 10/6/2017

Stephen Davis

What can we expect from grains through the last quarter of the 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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Is King Dollar Back?

John Caruso

The USD has staged a multi-week recovery to 94.10, a more than 300pt rally off of its September lows and for good reason.  With 3.1% headline GDP for Q3, and on pace for 2.5% for the year, the Fed has recently put a December interest rate hike back on the table which has probably been the main catalyst for the USD. The 10-yr yield has climbed more than 30bps in the past month in light of the FEDs hawkish tilt, and the dollar has been in full pursuit. Furthermore, we’ve seen an epic climb in US stocks to all-time highs on the President’s tax reform policy. At the moment, there’s no end in sight to the bullish catalysts for the USD. Conversely, the Euro has struggled with sluggish growth and inflation data. We’re keeping a close watch on the most recent developments surrounding Catalonia’s quest for independence from Spain. Catalonian economic activity makes up 25% of Spanish GDP, hardly small potatoes. Taking all of this into account, and barring any unforeseen changes to the growth picture and tax reform policy, the dollar looks to retake control into year end.

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.

US Dollar Index Weekly Chart

Dollar Index Weekly Chart

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Interest Rates

Bonds calm before the storm?

30-yr treasury bonds have been in a consolidation phase over the past week, taking a break from the September sell off, in which 7 full points were shaved off the December 30-yr futures price. Currently, the Dec future is trading 152’08, with the recent high coming in at 159’16 on September 7.  The impetus for the selloff has been the Fed indicating that a reduction of balance sheet will commence in October, Feds speak that inflation may pick up suddenly entailing a more hawkish posture and a lessening of global tensions, particularly in the Korean peninsula. 

Friday morning at 7:30 central, the Employment Situation (we called it the Unemployment Report on the floor) will be released. Consensus estimates call for an increase of 100K Nonfarm Payroll jobs, with the unemployment rate staying steady at 4.4%. Average Hourly Earnings bears watching with the prior month being 0.1% month over month, and September consensus being 0.3%. This report will be the first to register effects from Hurricane Harvey and Hurricane Irma. 

If the report handily beats consensus, I’d say north of 200K, I would expect bonds to break out of this week’s consolidation to the downside. This would be a continuation of September’s bearish move, and could portend much deeper weakness in the coming weeks. If the report is a dud, and comes in below expectations, bonds should have a bounce and possibly move to the 154-155 handle. I would take any strength as an opportunity to establish short exposure. 

Something to keep in mind is that a JPMorgan Chase survey for the week through Oct 2 found that clients as a whole soured on Treasuries, with 44% holding a short position relative to their benchmark. That’s the most since 2006 and up from 30% the prior period. Speculative accounts show a record 70% were short! It is a crowded trade. Thus any bounce in bonds could spark a short covering rally sending bonds temporarily higher. Again, I believe the intermediate term prospect for bonds is down, it’s a matter of getting the right timing and placement of the trade, and taking advantage of any short term bounce to establish the position.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-672-0664 or thusseini@rjofutures.com.

30-Yr T-Bond Weekly Chart

30yr T-Bond Weekly Chart

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The bulls control the S&P, but be on the lookout for job sector volatility

Jeff Yasak

Global markets were mixed again with little in the way of geographical patterns. It would appear as if US equities are poised for yet another record high pulse. While the theme of low inflation and low rates for a long period of time remains a key component of the upward track in equities, it would also appear as if recent gains in equities have been the result of rotation and other mechanically healthy developments. However, the bulls need to be on the lookout for any further confirmation of a controlling loss in job sector growth, as growth over the past five months has been sluggish. The trend is up and the stock market appears to have the capacity to embrace positives, and discount most of the negative headline stories. With the slight increase in job sector fears raised over the last 24 hours, investors might take a long look at earnings from Constellation Brands as a fresh reading on the cyclical condition. Uptrend channel support early today is seen at 253150 and resistance is at the latest all time high of 253800. Uptrend channel support into the nonfarm payroll result on Friday morning raised to 253600, and we would suggest that longs tighten up their profit stops.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-1656 or jyasak@rjofutures.com.

Dec '17 E-mini S&P Daily Chart

Dec '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.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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