November 24, 2017

Volume 11, Issue 47

Feature Article

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Metals - Gold

Can Gold Get Back Above $1,300?

Nicholas DeGeorge

In the early Friday trade, February gold is slightly down $4 and currently trading at $1,288.0. After the dollar had a huge sell off on Tuesday and equities backed off their all-time high, the stars were aligned for gold to have a big day and closed at its second highest level in over a month at $1,294.6. As the stock market has regained its upward momentum, gold has lost a little of its steam. The US dollar has continued its sell off overnight, so after a big day on Wednesday for gold, watch for it to continue its rally today. However, Fed Chair Janet Yellen’s statement of concern about a lack of inflation has traders a little less optimistic of further rate hikes into 2018. 

If we take a look at the daily February gold chart, you’ll clearly see the trend line that gold needs to break above and hold in order to continue its rally. It roughly comes in at $1,299.0, so if it closes above the $1,300.0 an ounce handle and the US dollar continues to sell off along with some bullish news, then gold might be able to rally all the way back up to its high of $1365.8, which it reached back on September 8. 

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.

Gold Feb '18 Daily Chart

Feb '18 Gold Daily Chart

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Metals - Copper

The Next Bull Wave in Copper

Phillip Streible

After being one of the best performing commodities in all of 2017, up an astonishing 26%, it appears that copper is looking to make another run for the contract highs. Supported by strong fundamentals, a robust global economy and key technical indicators we should see this market well supported. Copper imports at key Chinese shipping ports have shown strong increases recently indicating that their demand has not slowed down. The LME copper stocks have continued to decline while Shanghai is building to meet current demand.

Looking at the technicals the key level of support is $3.07 which is the 50-day moving average and should be used for risk management purposes. The most attractive part of the chart pattern is the fact that ADX is starting to rise with stochastics coming out of oversold territory. Usually this type of pattern is one of the most consistent and predictable.

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.

Copper Dec '17 Daily Chart

Copper Dec '17 Daily Chart

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Energies - Crude Oil

Oil Trading Amidst Supply Crunch and Resistance

Michael O'Donnell

In observing the January crude oil chart below, we notice that the for the better part of the past three months the trade has been bullish, moving from the lower left to the upper right, testing the contract highs after making higher highs and higher lows. In light of the recent fundamentals, this is no surprise, given the factors below. 

Saudi Arabia’s crown prince has consolidated power and succession seems imminent, while the market continues to anticipate a continuation of the OPEC production quota limit. There was a disruption in the Keystone Pipeline, which has affected supply in the short term and may have possibly affected the approval of Keystone XL expansion. There is also news of Venezuela not exporting, displaying their dire situation and further supply shortages. Stock markets making all time highs and the highest holiday travel numbers in years also lend to the bull camp. Even this morning’s EIA number, which had a draw of 1.9 million barrels as opposed to previous week’s report’s build of the exact same amount, led to a brief 40 cent per barrel sell off. This has been completely recovered from as of Wednesday morning, less than 30 minutes after the report, with the contract trading near the day’s and contract’s highs.

In the interest of weighing both sides of the market, one may also consider the contrarian case given all of these bullish factors as well, especially considering holiday profit taking and possible mean reversion and retracement. There is also the chance that the $60 level may act as support as many believe this is where refineries and oil sands become more incentivized and profitable, possibly affecting OPEC quota.

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.

Crude Light Jan '18 Daily Chart

Jan '17 Crude Light Daily Chart

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Energies - Natural Gas

Natural Gas Futures Seeking a Value Range

Frank J. Cholly

After recently trading a swing high of $3.32 in the January futures contract, as of Wednesday natural gas is trading at just $3.07. The six to ten day weather forecast is calling for above normal temperatures and that is obviously weighing on price over the past few trading sessions. The market’s failure to find technical support after filling the gap Tuesday has turned into technical selling Wednesday. Also adding weakness to the trade right now is the expiration of the December futures contract on Tuesday, November 28.

I think that once we get through this holiday trade and next week’s expiration, that the January natural gas futures will have exhausted the sellers and attract a fresh round of buying support. This market is a good value at the $3.00 trading range. In fact, I believe that the prices will gravitate back to the trading range of $3.20 to $3.00. Technical buyers and value seekers will begin to ease their way in down here and then a change in the weather forecast for colder temperatures will be what is really needed to spike prices more sharply. Without a “polar vortex” I wouldn’t really expect prices to achieve levels above $3.30 to $3.40 for the January contract.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or fcholly@rjofutures.com.

Natural Gas Jan '18 Daily Chart

Jan '17 Natural Gas Daily Chart

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Softs - Cocoa

Cocoa Trade Heading into US Holiday

Peter Mooses

After a short-term rally in the March cocoa contract, we have seen pull back the past week of trading. The futures’ prices moved back around 2100 Wednesday and closed at some resistance on the chart. As of now, the demand outlook has strengthened. Funds continue to add to long-term positions. Asian demand has also continued to climb. Global supplies appear to be smaller than expected. Last year, Ivory Coast had issues with flooding and the market didn’t really know what their output would be until the end of Q4. If the crop comes in lower - look for prices in the May and September contracts to rise.

In the March futures contract, technically there is support at 2075 and 2100 – buyers have reentered the market at these levels. Resistance was met at 2125 and 2160. With a break in trading Thursday and lower volume, look for choppy trading the remainder of the week into the last week of November. The December trade should bring volatility has production estimates and numbers lead the way into the end of 2017.

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.

Cocoa Mar '18 Daily Chart

Mar '18 Cocoa Daily Chart

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Softs - Coffee

March Coffee Violates Support

Adam Tuiaana

A steady, continued violation of solid support levels in March coffee proves that the news required to boost bullish perspective is quite thin. It has been reported by The Hightower Group that “precipitation is likely to improve prospects for Brazil’s 2018/19 production”. This supply news has the bears taking full control over the price of March coffee.  

Solid support looked formidable at 12800, but was dealt with swiftly in October, and has seen quite the follow through selloff into November. It is likely that March coffee will looks to test the next area of critical support, which will be 12268 from June 22. If this area is violated, we will likely plunge in to the abyss for the foreseeable future. Collecting premium for call options should be considered on a rally back to 130.

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.

Coffee Mar '18 Daily Chart

Mar '18 Coffee Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 11/24/2017

Stephen Davis

RJO Futures Senior Market Strategist Stephen Davis discusses the grain futures markets. Steve comments on the lowest grain prices in recent years for consumers. China is expanding ethanol production. 

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

Will Recovery Action in December Lean Hogs Withstand Supply Builds?

With the exception of Tuesday morning’s pullback, the December Lean Hogs market continues to push higher as slaughter continues to come in below trade expectations. Traders should monitor the weekly weight data closely for signs that hogs are backing up in the country. If not, the recent USDA Hogs and Pigs report may have overestimated the pig supply. Loins hit a one week high, and fresh belly prices reached $136.37, up from $128.10 a week ago. The stiff discount of futures to the cash market helped to spark some short-covering for December hogs, and the market was also supported by active fund spreaders buying hogs and selling cattle. USDA estimated hog slaughter came in at 465,000 head yesterday, which was up from 464,000 last week and up from 444,000 a year ago at this time.

MARKET IDEAS: Overall, smaller than expected slaughter pace over the past few weeks is seen as the reason for the contra-seasonal pork strength. If the Hogs and Pigs report is correct, however, than producers are most likely holding back and feeding to a higher weight. This is a potential bearish force if slaughter picks up steam. Resistance is seen up at 68.97 and 69.77, with 67.30 and 66.92 as support.

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.

Lean Hogs Dec '17 Daily Chart

Dec '17 Lean Hogs Daily Chart

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Currencies

Possible rallies after US data/FOMC in USD: opportunity to sell?

Tony Cholly

Dollar: The short term technical vibe in the dollar to start today favors the downside but the dollar might be supported by Wednesday's rather active scheduled data flow. Unfortunately for dollar bulls on Wednesday, scheduled data will mostly be in positive territory but estimates call for the data to be less robust than prior readings. However, the dollar might be hemmed into a range in the Wednesday morning trade because of the early afternoon release of the Federal open market committee meeting minutes. We would suggest trader’s looks to sell a minor bounce off the early US data window looking to implement tight profit stops ahead of the meeting minutes release. Initial support in the USD is seen at 9372.

US Dollar Dec '17 Daily Chart

Dec '17 Dollar Daily Chart

Euro: While the headline coverage early Wednesday morning favors the long side of the euro, the trade has yet to completely let go of the internal political problems in Germany. With the prospect of decent US scheduled data, more risk on gains in US equities and political anticipation of the FOMC news later today, the path of least resistance looks to remain lower in the December Euro. Critical pivot points support early on is seen at 1.1728 and then not until 1.1709. To throw off the bearish tilt from the last five trading session, it will probably require a rally back above 1.1795.

Euro Dec '17 Daily Chart

Dec '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 Quiet Heading into the Holiday

Bill Dixon

Traders seem to have already getting started on their holiday meals as stocks indices are all hovering at or around unchanged on Wednesday. The big mover on is the Dow, which is down approximately 50 ticks or .21%. The mini S&P is down 1 (0.04%) and the mini Nasdaq is actually up 6 (.09%). The Federal Open Market Committee just released the minutes of the previous meeting. The biggest takeaway, for me at least, was that they continue to feel that asset valuations are high, volatility is low, and that is creating imbalances in the market place. They fear that these imbalances could cause some pretty chaotic reversals, and it appears that they are not quite as certain about the three rate hikes that they’ve penciled in for 2018. That said, the Fed Chairs all seem to be happy with the growth of the economy. Where they do seem to differ a bit is on inflation. Some feel large increases would hamper the progress the economy has been making, while others fear we’re not ramping inflation up fast enough. Others seem to be in a holding pattern, waiting to see how the data comes out in the coming months before making a final decision.

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

E-mini S&P 500 Dec '17 Daily Chart

Dec '17 E-Mini S&P 500 Daily Chart

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