March 2, 2018

Volume 12, Issue 9

Feature Article

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Metals - Gold

The Bias is More Upside in Metals Futures

Tony Cholly

With the gold market under significant pressure to start yesterday and the dollar pressuring prices, the reversal today must have caught a number of traders off guard.  We are somewhat surprised that balanced Fed dialogue allowed for a nine-dollar bounce for gold off of its lows as the Fed pretty much said they still plan to raise rates several times throughout this year.  This coupled in with the dollar forging new highs made for an interesting recovery in gold.  However, the influences from previous trading sessions were cancelled out in the wake of Trump announcing the tariff on steel and aluminum imports as that kicks up safe haven interest in gold.  While the April gold has rallied this morning and posts an impressive performance, prices have yet to regain the prior session’s highs which suggests a classic technical stop loss buying rally.  The next downside target is 1297.  The next level of resistance is around 1326 and 1338, while support comes in at 1308.

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.

Gold Apr ’18 Daily Chart

gold_apr18_daily_chart

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Metals - Silver

Ratio: Gold Significantly Outperforms Silver

Phillip Streible

Silver futures continue to baffle the minds of traders with impressive rallies followed by periods of disappointment and head fakes. Its been one of the tougher metals to trade taking its cues from copper and gold. One thing to keep a close eye on is the gold/silver ratio. This ratio measures how many ounces of silver it takes to buy one ounce of gold. Looking over the past two years we can see a steady rise in the ratio indicating that gold has been significantly outperforming silver. Here is the chart of April Gold vs May Silver on a daily basis.

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.

Gold Apr '18 vs. Silver May '18 Daily Chart

gold_silver_ratio_chart

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Energies - Crude Oil

Crude Oil Falters Amid Inventory Build and Global Uncertainty

Michael O'Donnell

As of Thursday morning, crude oil was trading at the lowest level in a week following Wednesday’s EIA report.  The number showed a build in crude and gasoline inventories in addition to the dollar being somewhat stronger and stock markets monitoring the new Fed chair’s testimony.

It would seem the market could test the mid-February lows which coincide with the highs of late November and early December in the April contract.  While the week has been a good one for the downside, should the price action continue it could lead to some profit taking and offsetting before the weekend as well, given the pace of downward trading Wednesday and Thursday morning.  The market did seem to recover from the morning’s low of $60.18 later in the morning.

Moving forward, markets will also be monitoring European election outcomes, interest rate decisions and whether the stock market and global economy are subject to further volatility.

Clients on our desk work with calendar spreads, option spreads and outright future strategies amid such market activity.  To discuss how to incorporate such strategies in your portfolio, please contact me 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 Apr '18 Daily Chart

crude_oil_apr18_daily_chart

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Energies - Natural Gas

Natural Gas Constrained within 10 Cent Range

Jeff Ratajczak

The overall trend on a daily chart is slightly up to neutral.   After the wild ride three weeks ago, prices are starting to trade in a more normal range.  We are starting to get into that no man’s land between the heating and peak cooling seasons.  We’ve been constrained within a 10 cent trading range, and don’t expect to see any larger moves unless there is some kind extreme weather or supply disruption.  A close below 2.600 would be a precursor to a selloff, and a close above Monday’s high of 2.723 may signal the move to the next higher range.  Momentum studies are at mid-levels and aren’t really helping much as a directional indicator.

This week’s storage number expects to see a -71bcf draw, as opposed to an average draw of -120bcf.  Forecasts are calling for seasonal temperature’s over the next week, and above average the first week of March.   A strong dollar is loosening the bulls grip on the market, the smaller than usual draw, and warmer weather may have enough impact on the trend to take the market under 2.600.  I’d like exposure to short side of the market barring any unseen events slowing supply.   Put options are the least risky, but I’d also consider a short with a protective stop above Monday’s high.

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 Apr '18 Daily Chart

natural_gas_apr18_daily_chart

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Softs - Cocoa

Cocoa Comeback Led by Supply and Demand News

Peter Mooses

This week we saw the release of the ICCO’s quarterly supply/demand data. The ICCO announced that its global production expectations are down 2.3% and grindings are up 2%. Lower production estimates lead to higher cocoa prices and that is what we have seen of late. The West African dry season has added pressure to production and in turn we have seen a fairly strong bullish rally. Now that supply/demand news has taken center stage, we will look at outside forces to decide how long this rally can take place. Will a stronger dollar add resistance to this recent move higher? Can a recovery in the euro or pound help the demand side of the equation and give the market additional support? These questions will guide the trade as we enter the end of Q1.

Technically, the wheels are moving in the same direction as the fundamentals. Key levels have been broken, 2185, 2205. Support was found at 2215 and the May contract broke 2250 on Thursday. If the May contract can close above 2250, look for 2285 to be tested. With the recent change in production expectations, boost in demand and technical support – 2300-2400 prices are once again realistic price targets for cocoa 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 May '18 Daily Chart

cocoa_may18_daily_chart

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Softs - Coffee

May Coffee Violates Support

Adam Tuiaana

Although we have seen some strength over the past week in May coffee prices, the US dollar continues to show strength, adding ongoing pressure to coffee prices. It was reported by The Hightower Group that “Vietnam’s coffee exports for the January- February period were expected to come in near 347,000 tonnes” but it looks like they were short of this number. This has allowed coffee prices to hold some support at the 120 level. However, we cannot deny the fact coffee prices did manage to violate the critical low of 12051 from December 12 of last year. Although some short covering and consolidation may take place in the near term, with the inverse pressure continuing from a strong US dollar and large upcoming crop in Brazil, I would expect another retest of the 118 area in the next week or so.

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 May '18 Daily Chart

coffee_may18_daily_chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 03/02/2018

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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Currencies

More Downside for the US Dollar?

Tony Cholly

US Dollar: To no surprise, the dollar has extended to the downside overnight and looks to be poised for a series of declines moving forward.  Heading into the US trade this morning, it is the world against the US.  So far, the reaction to the tariff announcement has been from trade partners outside of China, but the reaction from China is probably set to extend on several unrelated commodity sectors.  The US saw slightly better than anticipated data on Thursday and University of Michigan sentiment is anticipated to jump as well, but we doubt the currency markets will focus on classic macroeconomic developments going into today’s trade. Near-term support comes in at 8970 with resistance at 9060.

Euro: The adversity in the USD will clearly benefit the euro moving forward, even if the strong response from EU officials on the trade issue could hold back the euro as European officials are typically more vocal. Unfortunately for trader bullish the euro, strong euro zone producer price results are largely offset by a contraction in German retail sales.  As with the USD, we don’t see classic macroeconomic developments being too important today.

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.

US Dollar Index Mar '18 Daily Chart

dollar_mar18_daily_chart

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Equities

Slide in Stocks Continues

Bill Dixon

Stocks opened lower again today and are poised to close that way for the fourth straight session.  The E-mini S&P and mini Dow are both now in negative territory for 2018, while the Nasdaq still has some downside to go to achieve that.  The E-mini S&P put in an all-time high of 2878.50 on January 29 before quickly falling just over 12% to 2529 in the matter of a week.  After a strong recovery (albeit one that fell well short of testing the all-time high), we are back on the schneid.  We are currently sitting about 8% off of the 2878.50 high.   

Earnings season is almost over, and the jobs data will not come out until next Friday, March 9.  In the absence of earnings news, we’re going to need some good data from the news cycle to right the ship.  All eyes are now focused on the Fed as they’re likely to announce the first of a projected four rate hikes for the year on Wednesday, March 21.

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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