January 5, 2018

Volume 12, Issue 1

Feature Article

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Metals - Gold

Can the gold rally continue?

Nicholas DeGeorge

In the early morning trade, February gold is currently off its overnight highs and well off yesterday’s high, currently trading at $1315.9. Yesterday, gold finally traded with significant volume compared to the last three weeks, which was the start of a $90 rally that started back on December 12. Unfortunately for the Bulls the March US dollar is showing signs of life which might cause a selloff in the shiny one back down to at least $1,300.0 an ounce. Most of this rally has been off very low volume over the holiday season and the fear over Iranian protest have probably already been priced in. Furthermore, the higher prices have dampened demand out of Asia which might also be another sign of a short-term top in the gold market.

If we take a quick look at the February daily gold chart, you can clearly see the massive short-term rally that took out all downtrend lines and also see how the volume was much lower than the average. Even with the golden cross that has formed in the February gold chart, you can still look for a selloff and a price retest back to $1,290.0 or so. However, look for the bulls to come back in strongly around that price level.

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

gold_feb18_daily_chart

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Metals - Palladium

Palladium Futures Rally Continues into 2018

Phillip Streible

It’s no secret that palladium was the best performing commodity in the past year rising by 48% with lumber as its only  close competitor up 38%. The main catalyst for the rally is that palladium is used primarily in catalytic converters. Now with global auto sales approaching 90 million per year and significant growth in electric cars still five years away we can expect the war over air pollution to be front and center. Besides auto sales another indicator to watch is rhodium prices. Similar to palladium, rhodium’s main use is the application to clean vehicle emissions and due to the rarity prices have become volatile. Rhodium prices moved over 122% last year and have reached the highest level since 2011.

Below is a daily chart of March palladium. The latest trend started on December 14 when the breakout over $1020 occurred and with current prices near $1090 your red flag is at $1030. At this point the upward trend would be technically broken. Watch for a new wave of strength on a breakout above $1100.

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.

Palladium Mar '18 Daily Chart

palladium_mar18_daily_chart

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Energies - Crude Oil

Will new highs in oil continue?

Michael O'Donnell

This week was full of data and developments in the oil markets with Thursday’s EIA Petroleum Status Report, the announcement of drilling leases in the Atlantic, Pacific and Arctic as well as Friday’s Jobs number.

The EIA report showed crude oil inventories falling 7.4 million barrels in yet another draw, leading oil to trade above $62/barrel for the first time since May 2015.  This was then followed by the reports of leases for offshore drilling in the United States being expanded to the largest level ever.  Since then oil prices have paused with little effect from the jobs number after its release earlier this morning.

For many, these levels not seen in some time for crude oil are a time to monitor the market closely.  Traders have also noted spreads between front and further out calendar months and between Brent and WTI crude affected by this week’s developments.

Technically, while traders will note the $62/barrel level, many may also note a potential key reversal on the daily timeframe.  While trading to the downside as of Friday morning as of this writing may be long profit taking or flattening prior to the weekend, if continued could mean something more.  That is not to say that for the time being, oil continues to be demanded, drawn out of inventory and bid.

To discuss your oil trading and different ways to trade recent price action, such as through futures, option on futures, calendar spreads, inter-market spreads, please contact us at your convenience.

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 Oil Daily Continuation Chart

crude_oil_daily_chart

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Energies - Natural Gas

Natural Gas Continues Uptrend with Subzero Temperatures

Jeff Ratajczak

Natural gas for February delivery is still in an uptrend.  Prices just below the 3.000 handle are seen as the first level of resistance.  If the 3.000 is rejected today, we may see either a consolidation or sell off going into tomorrow’s storage report.  A close above yesterday’s high 3.097 will signal a move to a higher trading range (3.100- 3.300).  A close below 2.900 support should be sufficient to stop advances and turn the trend negative.  The crossover of the 9 and 18-day averages suggest the continuation of the short-term uptrend.  Momentum indicators are turning lower, possibly signaling a move lower in prices.

Weather forecasts still show well below normal temperatures until the weekend. Chicago’s forecast calls for lows in the single digits to subzero temps until Sunday.  Sunday is forecast to be above freezing for the first time in weeks.  Sunday’s warmer temperatures may slow the heating demand and with it the current uptrend.  The recent uptrend may be due to the recent cold spell, but I suspect it might be short covering from the recent slide in natural gas prices.  A draw of -220 bcf is expected tomorrow.  I’m cautiously bullish below 3.300.

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.

Natural Gas Feb '18 Daily Chart

natural_gas_feb18_daily_chart

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Softs - Cocoa

Export News and Global Demand Lead News for Cocoa to Start 2018

Peter Mooses

So far we have seen some volatile trading in cocoa. We saw a slight move higher than a sell-off earlier this week – now some consolidation should be seen in the March contract next week. Global demand is strengthening, providing support for the further out contracts. With the help of Asia, it is projected that the global supply and demand should be closer in balance this calendar year. The market hasn’t taken off yet due to the news that exports out of Ivory Coast are ahead of last year’s pace – although some analysts don’t believe this is an accurate reading. Ivory coast saw late arrivals last year that affected the export data which skews the information. ICE reported cocoa stocks dropped for the seventh month. A drop in stocks like this, about 40% since May, could be bullish and help the North American demand outlook. The currencies have provided support to cocoa futures – euro and the pound specifically. A technical move higher, above 1960 is needed to reaffirm the news we are given for the anticipated outlook in 2018.

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

cocoa_mar18_daily_chart

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Softs - Coffee

Fundamentals have March Coffee Consolidating

Adam Tuiaana

The intermediate trend in coffee has been up, likely supported by a weak US dollar, strong Brazilian Real, and a strong crude market. Spotty rains throughout Vietnam, weighed against solid production numbers from Columbia, should have March coffee prices consolidating in a game of tug of war for a while. The 132 – 125 range is no stranger to coffee prices, as they remained in this range from October through December of last year. I would expect to see quite a bit more consolidation but closely monitor the upside 132 level for any potential breakout, as coffee prices need very little fresh fundamental news to revisit the highs from last year.

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

coffee_mar18_daily_chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 01/05/2018

Stephen Davis

Senior Market Strategist, Steve Davis discusses the grain futures markets. 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

Extreme Cold Weather Helps to Support Feb Lean Hog Bulls

The bitter cold weather has slowed producer marketing’s, and this has supported higher trade in pork products and a firm tone for the cash market. USDA pork cutout values, released after the close Wednesday, came in at $77.61, up 16 cents from Tuesday and up from $75.66 the previous week. This was the highest the cutout had been since December 12. The CME Lean Hog Index as of December 29 came in at 62.23, up 51 cents from the previous session and up from 61.76 the previous week. Furthermore, the USDA estimated hog slaughter came in at 462,000 head Wednesday. This brings the total for the week so far to 907,000 head, up from 821,000 last week at this time and up from 885,000 a year ago.

Overall, cold weather continues to provide underlying and temporary support on ideas that the movement of hogs will be somewhat slower, but if they back up in the country, a warmer day could bring heavier weight hogs and higher production than expected.

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 Feb '18 Daily Chart

lean_hogs_feb18_daily_chart

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Currencies

Euro Trend Faces an Early Test Today

Tony Cholly

Dollar: On the plus side, the dollar has managed to respect consolidation low support this week, but the bear camp has to be cheered by the fact that mostly positive jobs data yesterday failed to result in a positive close. In fact, the dollar finished yesterday within ticks of a fresh downside breakout and it could take above average US data today to avoid a downside breakout and the lowest dollar print since late September. On the other hand, one should not rule out the potential for a temporary rise above 92.00 before the temporary dollar bullishness subsides.

dollar_mar18_daily_chart

Euro: While the headlines are trumpeting the prospect of the ECB getting closer to removing some stimulus, the euro is obviously undermined slightly as a result of an avalanche of euro zone inflation and confidence readings. However, a tow point uptick in French consumer confidence, combined with an above expectation euro zone producer price reading does give the currency some fundamental underpin. However, the euro is certainly poised to see expanded volatility in the wake of the US data window and that could make uptrend channel support at 1.2045 and consolidation low support at 1.1988 key pivot points. In the end, a temporary setback in the euro would appear to be a buying opportunity for aggressive traders.

euro_mar18_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

Jobs Data Comes in Weaker than Expected

Bill Dixon

The surge higher in stocks continued into the release of this month’s Nonfarm Payrolls data.  The Nasdaq, Dow, and S&P all printed new all-time highs overnight.  The mini Russell is pressing up against yesterday’s new all-time high but hasn’t overtaken it just yet.  Consensus for the Nonfarm data was 191,000, but it came in at only 148,000.  Countering that disappointing data was an upward revision in November’s data by a total of 24,000, taking it from 228,000 up to 252,000.  Average hourly earnings (M/M) came in at 0.3%, which is an improvement on the 0.1% (revised lower from 0.2%) that we saw in last month’s release.  The year over year average hourly earnings remained unchanged at 2.5%.  While we just saw our lowest reading since July, the market (thus far at least) doesn’t seem too deterred by the data and continues its ascent.  Goldman Sachs suggested the number would more than likely be a bit underwhelming due to winter storms.  It appears market participants agree, as a miss like this would generally put the brakes on such a rally.  Factory orders and the ISM Non-Mfg Index data are set to be released later on today.

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 Mar '18 Daily Chart

e-mini_s&p_mar18_daily_chart

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