February 2, 2018

Volume 12, Issue 5

Feature Article

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Metals - Gold

Gold Selling Off Back Down to $1,300

Nicholas DeGeorge

In the early morning trade, April gold has sold off significantly from its overnight high of $1,353.3 and is currently trading at $1,338.5. The selloff is due to a better than expected non-farm payroll number from this morning, which January added a better than expected 200,000 jobs. Furthermore, the year over year hourly earnings were very impressive and came in up 2.9% which was the highest reading since 2009. The great jobs numbers from this morning gave a lift to the US dollar which is another factor why April gold has sold off as well.

If we take a quick look at the daily April gold chart, you’ll clearly see how the shiny one broke below its trend line earlier in the week and has since stayed below it. Also, if gold can break below this week’s low of $1,335.5, then it is prone to a further sell off and will probably sell off down to its 50-day or 200-day moving averages, which it should find some support. I highlighted all these level below on our RJOF PRO daily April gold charts.

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 Apr '18 Daily Chart

gold_apr18_daily_chart

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Metals - Silver

Rising US Rates to Help USD; Might Hurt Precious Metals

Tony Cholly

Global equity markets were largely under pressure last night.  Shanghai and Australian markets managed modest gains, while the Asian session was fairly quiet data wise.  The European session features the January UK construction PMI, January Italian CPI and December Euro Zone PPI.  United Kingdom construction PMI readings came in weak and down from last month. 

While March Silver has spent the morning trade in the upper end of the range, building strength in the USD into nonfarm payroll reading could serve to knock silver back into negative territory.  However, the USD remains stuck within the last two weeks trading range and that could cancel out the negative impact of early USD gains on silver to start the morning.  We expect silver and other physical commodities to benefit from the recent Goldman comments talking about commodities being on the rise this year.  They expressed long-term bullishness due to the likelihood of reflation.  The recent weakness is equities should also provide some support to the metals because they will be seen as a safe haven.  Support comes in today at 1710-1700 with resistance at 1735-1745.  We would like to see a pop over 1755 to rekindle bullish forces.

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.

Silver Mar '18 Daily Chart

silver_mar18_daily_chart

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Energies - Crude Oil

Crude Comes Back to Continued Strength

Michael O'Donnell

As of Thursday afternoon’s trading, the April contract of WTI Crude traded $65.74 per barrel as the market was strong and quite different from the first half of the week.  As the market looks to re-test recent tops in the low $66 per barrel range, it is interesting to see the third test of this level which some would say formed a double top from late last week to early this week.

As the market traded accordingly below the base of this double top, this also coincided with the anticipation of the State of the Union, Fed decision and the first EIA inventory build in nearly three months.  While a build in inventories is fundamentally bearish, draws in inventories in product markets such as gasoline and distillates.  There have also been reports concerning the global demand and supply stories for oil.  RJO Market Insights via Hightower note the following:

  • US crude oil output surpassed 10 million barrel per day level for the first time since 1970
  • China’s independent refineries increased imports by 40% on a year-over-year basis last year
  • Japanese Saudi imports hit 35 year highs
  • Dubai April cargoes were completely sold out for delivery to Asia

While there are still healthy longs in the Commitment of Traders and record US production, it will be interesting to see if recent highs remain recent highs or become new support, such as the $64 per barrel level since the 16th of this month. Failures here could lead to a re-test of this level.

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 Apr '18 240min Chart

crude_oil_apr18_240min_chart

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Energies - Natural Gas

The Wild Rollercoaster Ride Continues in Natural Gas

Jeff Ratajczak

Until yesterday the trend in natural gas was up.  Yesterday’s 234 point range down has turned the tide once again.  The trend in the market is now clearly down.  In the six days prior, the prices increased from 2.944 to a high of 3.259.   A large draw of -288 bcf last week was met with lukewarm price gains.  This week’s draw is expected to be right around -102 bcf.   It seems to me that the market is anticipating the storage number and trading it a few days prior.   I think we may see a smaller draw than expected, but that was part of yesterday’s sell-off.  Momentum studies are down, and should help falling price action.  Support around 2.900 may hold beneath that with 2.700 as the next level down on a daily chart.    Yesterday’s close above 2.900 might stem further sell-offs.   A close above January 18’s 3.070 is needed to turn the trend up again.  

Milder weather is predicted for the coming week.  Although storage numbers are below the five year averages, production seems to be increasing.  Any bullish news doesn’t seem to be influencing traders yet.  Expect a slide between 2.900 and 2.850.

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 Mar '18 Daily Chart

natural_gas_mar18_daily_chart

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Softs - Cocoa

Technical Consolidation, Currencies and Supply Concerns for Cocoa Futures

Peter Mooses

As we look at the March futures chart, the market appears to have found a range between 1880 and 2000. Although the contract has not been able to hold and move higher from 2000 of late – global currencies have provided support. Recently, the move lower in the dollar, a move higher in the euro and pound have given cocoa a positive underlying tone.

Supply concerns have surfaced after the ICC and CCC have said that disease and the removal of illegal farms could hurt supply levels and give market prices a boost. The Cocoa Farmers Association of Nigeria also reported disease seen on a large number of trees, adding pressure to supply numbers and providing support for further price growth.

Technically, a hold and close above 2005 is needed to have the March contract have a significant move higher. With first notice day in the futures for the March contract approaching mid-February, traders may have to look to the May contract to establish longer-term bullish strategies.

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

Coffee Sits Comfortably in Consolidation Range

Adam Tuiaana

Consolidation continues to weigh heavy on March coffee prices, as traders struggle with fundamentals that force nothing but major sideways price action. It’s the same old coffee story, an extremely large upcoming supply weighed against the promise of a potentially unfavorable weather outlook ahead. In the meantime, a falling US dollar still hasn’t been enough to swing inverse coffee prices above key resistance levels, nor force them below key support levels.  All eyes will be on any break that takes place above the upside consolidation range resistance of 13142, or the downside violation of critical support at 11832. Coffee prices appear to be fairly comfortable in this range, as we’ve been swing-bound here since December of last year. While we all wait around for a definitive break in any one direction, expect a rally up to the 128 level, followed by a prompt return back to the 122 level. These swings are worthwhile enough for traders to participate and find some good volatility and opportunities, as long as you know how to play them.

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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Softs - Cotton

S-T Mo Failure Stems Cotton Break, But Suspected Rebound Approach as Corrective



The market's failure yesterday to sustain late-Jan's losses below 30-Jan's 78.93 corrective high and short-term risk parameter discussed in Wed's Technical Blog confirms a bullish divergence in short-term momentum that defines Wed's 76.52 low as the END of a 5-wave decline from 22-Jan's 83.95 low. This combination of factors identifies that 76.52 low as our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish scalps can be objectively based and managed ahead of what we suspect will be only an interim correction of the late-Jan's slide within a broader PEAK/reversal process.

After such a strong Oct-Jan rally, the fundamental and technical drivers of which are unlikely to evaporate quickly, it is not uncommon for such (b- or 2nd-wave or right-shoulder) corrective rebuttals to be extensive in terms of price and/or time. Per such, we'd estimate a 61.8%ish retracement to the lower-81-handle or above to be watchful for the requisite bearish divergence in momentum required to stem what would be a shorter-term uptrend and next reinforcing factor to a broader peak/reversal process.

Needless to say a recovery above 22-Jan's 83.95 high and long-term risk parameter is needed to negate this peak/reversal threat and reinstate the major bull while a relapse below our short-term risk parameter at 76.52 will mitigate this call for a corrective rebound and leave the market vulnerable to sharp losses

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

cotton_mar18_240min_chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 02/02/2018

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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Currencies

The Greenback is Getting Walloped

Phillip Streible

The dollar index had its worst January since 1987, down 3 percent and going through several wild price swings.With the dollar index trading below the 90 mark, near levels last seen in 2014, we've had several conflicting political messages and economic data that have really launched a two-sided trading affair that I'm watching closely here.

Treasury Secretary Steve Mnuchin commented last week that he is not too concerned about a weak U.S. dollar, then said one day later that a stronger dollar is in the best interest of the country. President Donald Trump, meanwhile, reiterated that he ultimately wants to see a stronger dollar relative to foreign currencies. At the same time, economic data for the first quarter of 2018 should reflect strong quarter-over-quarter growth, which should theoretically boost the value of the dollar.

The long-term picture
While a 3 percent decline since the beginning of the year doesn't sound ll that bad, the bigger picture speaks to the true weakness we have seen for the greenback. The dollar index has tumbled 11 percent in the course of the last year and has played a part in boosting commodities across the board like palladium and lumber.

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.

US Dollar Index Daily Chart

dollar_daily_Chart

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Equities

Jobs Data Comes in Better Than Expected

Bill Dixon

This morning’s employment data came out at 200,000 versus an expected 175,000 and a previous reading of 148,000.  We also saw a small revision of the December reading from 148,000 up to 160,000.  The unemployment rate, which was expected to remain steady at 4.1%, came in right in line.  The data follows one of the more significant selloffs we’ve seen in quite some time.  For the week, the E-mini S&P is off almost 3% from the all-time highs on 1/29. 

In the wake of the data, stocks have not moved a whole lot.  The dollar is rallying, and market participants are growing increasingly worried that better data will clear the way for rate hikes.  The Fed still anticipates at least three hikes this year, but they’re not ruling out the possibility of four.  That said, two days removed from the most recent FOMC meeting, we’re still waiting to see the first one of the year. While there is little reason to believe it isn’t coming fairly soon, some are wondering how aggressively they’ll want to raise without being able to see how each hike affects the overall economy over a period of time.

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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