February 16, 2018

Volume 12, Issue 7

Feature Article

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Futures Trading Strategies

Wednesday, February 21 at 11 a.m. CT

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Dave Hightower (of the Hightower Report) outlines his expectations in 2018 for the top grains and energies futures markets. Additionally, Tom Hart, Director of CME Group Metals, speaks on the dynamic CME Group metals futures markets, which comprises the most liquid Metals market in the world.
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Metals - Gold

Gold to Retest Yearly High

Nicholas DeGeorge

In the early morning trade, April gold has slightly extended its five-day rally that began back on February 12 and is currently trading at $1,356.5 an ounce. April gold is now currently trading at its highest level since January 25 and it’s the yearly high for the shiny one. Furthermore, April gold has the potential today for the biggest weekly gain in nearly two years as the bulls take complete control of this market. Wednesday’s Consumer Price Index (CPI) number came in better than expected with a reading of 0.5% against projections of 0.3%, which sparked inflation fears and sparked nearly a $40 rally in gold.

Let’s keep it simple and take a quick look at the daily April gold chart. Gold now looks prone to retest and possibly break out above the January 25 high of $1,370.5 and yesterday’s low of $1,350.0 will now be support, so a break below that will lead to a possible selloff to $1,340.0-$1,325.0 an ounce. I highlighted these levels below on my daily April gold chart. 

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


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Metals - Silver

Pressure is on for Silver

Michael O'Donnell

As of Thursday morning’s trade, the March silver contract is trading near the $16.60 level, which coincides with the two hourly bottoms on the second and sixth of this month as well as hourly tops from Tuesday.  One may also note the significant downward price action from this level in late November and rise above this level from the day after Christmas up until the January 25 high.

Should this level hold, the February 9 lows may put in a short-term bottom, especially amid yesterday’s CPI report with a 0.5% month over month increase.  Today’s PPI report also showed inflation near the top range of expectations at 0.4% month over month and 2.7% year over year, 0.1% above the 2.6% consensus estimate.  While inflation is typically bullish for metals, the forecasted increase in yields, which metals do not pay, should be considered as well.  This is especially so given the 10-year yield reaching a four year high of 2.92%.  Of course, dollar weakness and strength should be monitored as well given their effect on commodities and metals prices.

Going forward, silver traders and the market as a whole will continue to monitor such inflationary pressures as well as the dollar, Fed speak and the like.

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.

Silver May '18 60min Chart


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Energies - Crude Oil

Next Target for Oil - $55

Phillip Streible

Crude oil is in correction territory, down a little more than 10 percent since its most recent high in late January. And while it did catch a bit of relief on Monday, settling modestly higher on the session, I wouldn't buy any short-term strength here. In fact, I think we have further to fall. My downside target is $55 per barrel; I believe at that level the supply/demand equilibrium would be optimal.

Temporary strength
Crude was trading just below $60 per barrel on Monday and now has seen a 3 day rally back above the 50 DMA. The main drivers for this strength are the weakening dollar, a rebound in equities and OPEC’s compliance in maintaining its 1.8 million-barrel-per-day production cut. However, I believe this is nothing more than a temporary recovery. Anticipated interest rate hikes this year will help provide underlying support to the dollar, which will in turn place pressure on oil. Furthermore, the recent weakness in stocks is concerning, and OPEC's output cut compliance is a wild card at this point.

The bigger picture
Here's the big problem with oil. The commodity's fundamentals simply have too many cracks in the foundation to support higher prices. U.S. production continues to grow, surpassing 10.25 million barrels, and I expect another jump in rig counts this week. Last week, we saw an increase of 26 oil rigs, to 791 — the highest level since 2015. One result from increased production could be a series of weekly inventory builds from the Department of Energy, and we could see a massive unwinding in speculative positioning, currently near the highest levels since 2006.

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.

Crude Oil Apr '18 Daily Chart


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Energies - Natural Gas

Keep an Eye on Natural Gas Double Bottom

Jeff Ratajczak

The trend in March natural gas is clearly down.  However, it seems that we have a temporary low with a double bottom around 2.532.  This may be used as a number to base further bearish decisions upon.  A close beneath this low may signal further selloffs to new contract lows.   If this support number holds, and the market bounces off and rejects further lows we may see a correction of the current trend.  A close above 2.700 may be necessary for the bulls to regain control.  Momentum studies are at oversold levels and starting to show signs of turning.  Moving averages are all trending lower and caution should be used when initiating new bullish positions.

Weather is forecast to be warmer in the near term with temperatures expected to be seasonal to above average until the end of February.   Today’s storage number is expected at -193 bcf.  Average draws for the past 5 years run around -150 bcf.   Even with the larger draw the bears seem fully in control.  To see a return to higher prices we would need an extreme number on the draw, or a big surprise in the weather forecast to colder weather.   I’m cautiously bearish, keeping an eye on prices near the bottom of the range.

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


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Softs - Cocoa

Volatility Carries Over into Cocoa Futures

Peter Mooses

Futures, equities, bonds, cryptocurrencies – you name it, they all have been volatile over the past few weeks. Uncertainty about inflation and a wide trading range in the US equities has carried large moves into most commodities. Cocoa is entering a new range and may finally be breaking above the 2100 mark in the May contract. Demand has strengthened, supply concerns are present. Dry weather in key growing regions may damage future crops. The euro and pound have gained momentum helping the demand side of the cocoa equation. In the short-term look for the technicals to guide the trade. 2115 is resistance, 2085 is support. As we head into the US holiday weekend ICE cocoa has closed above the 9-day moving average turning this market bullish. Look for outside markets to give the cocoa some additional guidance.

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 May '18 Daily Chart


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Softs - Coffee

March Coffee Continues Sideways

Adam Tuiaana

Coffee prices continue to make lower highs and lower lows, threatening to revisit the 118 level not seen since December of last year. The ongoing story has been weak near-term supply versus the promise of a large upcoming crop from the world’s largest producer. Although the near-term supply from Brazil is scarce, we will have to keep in mind that other major producers throughout the world are in a good position to export. Demand continues to be strong, but is it going to be enough to combat the upcoming abundance of Brazilian coffee?

The 118 level should pose strong support for March coffee prices, while upside resistance will come in around 126. I’d expect to see some continued large swings in this range for quite some time as the fundamentals and supply/demand issues continue to slug it out.

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


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Agriculture - Grains

Daily Market Update - Grain Futures - 02/16/2018

Stephen Davis

RJO Futures Senior Market Strategist Stephen 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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Good Data will be Needed to Turn the Tide in US Dollar

Tony Cholly

US Dollar: While the US dollar was able to reject the initial salvo into a new low, the bias remains down with fresh damage done to the charts. Reports that foreign investors have sold US treasuries for the third straight month highlights the fact that investors are moving away from US assets and moving into riskier and higher yielding instruments. While the US scheduled data this morning might temporarily help the dollar, we suspect the March USD will see some fairly heavy resistance @ 88.83. In order to disrupt the downward tilt on the charts today, we will need to see a sweep of much better than expected data.

Euro: A big range up extension was rejected at first in the Euro, perhaps because the idea that ECB rate hikes might last longer that the trade has recently priced in. However, German wholesale price readings on a month over month basis, came in relatively better and that should reverse a recent deflationary threat from that country. A critical level of support for the March Euro comes in at 12465-12475 and the currency will need to break through the 12530-12540 level to extend upside breakout.

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.

U.S. Dollar Mar '18 Daily Chart


Euro Mar '18 Daily Chart


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Stocks Quiet Heading into Long Weekend

Bill Dixon

Following five straight days in the green, stocks are pretty quiet leading up to the opening bell.  The Housing Starts data came out slightly better than expected this morning, while the Import and Export Prices data showed higher than expected numbers on both fronts.  Consumer Sentiment will be released shortly and is expected to come in at or around 95.5.  Outside of that, today’s slate of data is pretty light.   

Stocks have put together a solid recovery following the massive correction we saw to kick off the month of February.  Considering that we’re already seeing the best week in just over five years, it wouldn’t be surprising to see a bit of profit taking ahead of the long weekend.  It will be interesting to see how the market responds to the selloff moving forward, but I don’t believe all that much has changed from a fundamental standpoint.  Stocks simply moved too far too fast and were in need of a correction.  Next week’s data is pretty light as well, but traders will be looking for some hints about potential rate hikes from the FOMC minutes on Wednesday afternoon.

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


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Interest Rates

Treasury Futures Are Signaling Inflation

Frank J. Cholly

The primary function of futures markets is to manage risk or uncertainties in a market by locking in prices or hedging the risk of future purchases or sales. So therefore, the futures markets also function as an “alarm” to wake us up to the possibility of a change in the supply and demand fundamentals in the market.

Since the middle of December, the Treasury futures market has been sounding the alarm. Inflation is coming! We have been stuck for far too long in a historically low interest rate environment to stimulate our economy. The US has not been alone in this bad strategy. Central banks all over the globe have been de-valuing their currencies trying to kick start their respective economies. There has been too much easy money out there for too long and we are going to pay for it with higher prices in the long run. Interest rates will necessarily move higher if the Fed doesn’t want inflation to get over heated.

The Fed is probably going to risk inflation overheating rather than raising rates too fast and crushing the recovery before it really has some legs to keep running. Higher prices for commodities will be a result of inflation overheating. Commodities will be a vehicle to hedge against inflationary pressure.

The Treasury futures are letting the rest of us know that there has been a shift and the US will lead in a move back towards a more normal monetary policy. It must happen, and if the Fed won’t do it, the Treasury market will do it. That’s how future

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.

10-Yr T-Note Mar '18 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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