May 25, 2018

Volume 12, Issue 21

Feature Article

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Metals - Gold

Will Gold Extend Its Rally?

Nicholas DeGeorge

In the early morning trade, gold has slightly extended its rally from yesterday and currently trading at $1,311.8, which is up $2 for the day. The main reason for yesterday’s $10 rally in gold was definitely because of the President’s cancellation of the June 12 nuclear summit meeting with North Korea, which put fear buying back into the risk markets. The little selloff in the US dollar yesterday and hopes that it will continue also added to some investors buying gold down at these levels. Furthermore, due to some weak geopolitical data this week, talks of tempering US rate hikes in June are most likely giving August gold a boost at these levels and might add to the rally.

If you take a quick look at the daily August gold chart, you’ll see that gold has rallied itself up into a very bearish down trendline, which should act as resistance at these levels. If it can eventually break above this resistance, the gold should rally to its last high of $1,332.4 back on May 11. If August gold continues to rally above this level, then you can’t rule out that it will rally up to the $1,375.1 high of April 11. All technical levels are highlighted below on my RJO Futures PRO 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 Aug '18 Daily Chart

Gold Aug '18 Daily Chart

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Metals - Silver

Silver Remains in Sideways Channel

Tyler Herrmann

Silver has traded higher this week but started the day lower off highs at 16.740. The silver market remains in a sideways pattern between support at 16.250 and resistance at 16.750; driven higher mainly as a result of the US pulling back from the North Korean Nuclear Summit and potential US rate hike fears coming in June. The dollar’s strength despite soft US data should be cautionary for silver bulls. A close above the 60-day moving average reverses the short-term trend to the upside and closing well off the day’s lows on Monday and Wednesday supports a move higher. Momentum studies trending higher will add to a move to the upside on a close above resistance at 16.750. The next target should the trend continue higher is at 16.965. Should the market fail to break resistance, support comes in at 16.540 and a close below 16.350 should reverse the trend to the downside.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.

Silver Jul '18 Daily Chart

Silver Jul '18 Daily Chart

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Energies - Crude Oil

Crude Oil has a Weak Week

Michael O'Donnell

As of Thursday afternoon, the July crude oil contract continued its turnaround which began Tuesday.  This followed an up Monday followed by a high of $72.90 on Tuesday, followed by yet another API which turned out to be the opposite of Wednesday’s EIA build in inventories.  While an API and EIA not matching have become the norm lately, it also did not help that there is talk of OPEC easing or eliminating the production curb quota.

Although this turnaround has occurred amid talk of managed money exiting their longs/booking profits and the market failed to test $73 per barrel; there is also a noted bottleneck with increased refining utilization and draws in distillates.

Looking ahead, we must wonder if the $70 level will hold as the market appears to have lost momentum and remains overbought by some indications along with bearish fundamental supply news.

Should this turnaround reverse and $73 be tested again, we have no recent resistance to act as support.  It will also be interesting to note whether the Brent WTI spread pictured below continues its uptrend or rolls over.

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 Jul '18 Daily Chart

Crude Oil Jul '18 Daily Chart

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Energies - RBOB Gasoline

RBOB Coming Off Contract High

Alexander Turro

RBOB came off Tuesday's contract high, down 0.0148 or .6538% on the day, to 2.2488 further extending the reversal. RBOB has found support on reports that Russian April gasoline exports fell by 37% off the previous month, however, lower crude oil prices and a rise in API gasoline stockpiles of 980,000 barrels have weighed down on prices. API distillate stocks had a weekly decline of 1.4 million barrels as expected with RBOB looking ahead to the EIA report this morning. RBOB should find longer term support ahead of the US driving season as inventories should continue to accumulate with consumption increasing which accelerates demand and moves prices higher. RBOB has upward momentum but appears overbought with resistance seen at the double top of 2.2585 and uptrend channel support at 2.2444 and 2.2200.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or aturro@rjofutures.com.

RBOB Gasoline Jul '18 Daily Chart

RBOB Gasoline Jul '18 Daily Chart

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Softs - Cocoa

No New News Leads to More Uncertainty in Cocoa

Peter Mooses

July cocoa futures continue to make lower lows – no fresh news has led to a bearish market. Long-liquidation, production uncertainty and a quite demand tone has the front month trading near 2600. Will production data be stronger than expected from West Africa? That question has weakened the market. Will the weather also help these numbers move higher? Will grinding data come in-line with expectations around 1.5-2%? The cocoa market has created more questions than answers over the past week. To add to the confusing equation, demand in cocoa has been lacking, but suddenly traders may see a boost - this will be dependent on the currency trade as well as corporate news – Barry Callebaut plans on expanding some locations which could mean demand is anticipated to grow. Technically, the market is weak and a break lower, around 2500 is realistic looking at the July chart. The market will take a wait and see approach until traders can obtain some solid fundamental news.

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 Jul '18 Daily Chart

Cocoa Jul '18 Daily Chart

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Softs - Coffee

Coffee Prices Struggling Again

Adam Tuiaana

The Hightower Group has reported that “the increase in open interest on the recent recovery bounce is a surprise and somewhat supportive.” Coffee prices have in fact been holding support up until this morning, a massive down-day is in progress. Coffee appears to be heading down to challenge the 116 level, or last corrective low of 11635 from May 15 of this year. Coffee prices will need solid supply issues from Brazil to hold support in this area.

There has been chatter about colder temps in key growing areas of Brazil, and that has helped to support, but now all eyes are on the 116 level. Keep in mind that the US dollar continues to strengthen, while the Brazilian currency seems to struggle, adding pressure to coffee prices. If the 116 area is violated, a race down to 115 is very likely. Expect coffee prices to head lower for the rest of the week (possibly back to the 116 level again). Traders should position themselves for a long-term downward continuation using long put options that allow exposure and leverage, while managing risk effectively. In addition, buy equal-numbered quantities of options, so that you can remove half of the position when the option value doubles (thus eliminating the premium risk). 

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 Jul '18 Daily Chart

Coffee Jul '18 Daily Chart

 

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Softs - Cotton

Cotton Continues Higher to Start the Week

Tyler Herrmann

December cotton traded up to 84.89 yesterday before coming off its highs and closing at 84.16. Many areas in west Texas saw rain over the past week, but the market pushed higher with bullish support coming from strong demand, and worsening weather conditions with hotter/dryer temperatures forecasted for the next two weeks. China is also seeing declining crop conditions from too much rain and the need for substantial replanting. News over the weekend that the US and China trade negotiations were put on hold with a statement that China would increase purchases from the US gave the cotton market a boost along with other agriculture and energy markets. The weekly planting progress comes in a little higher than last year, but Texas is still behind the 10-year average. The recent rains in west Texas look to not be significant enough to overcome drought conditions and with smaller crops from China, look for the market to remain bullish.

The short-term trend to the upside brought the market again to new highs yesterday. Momentum studies are now at overbought levels, which could accelerate a move lower if the market breaks support. Resistance in the December contract comes in at 84.90 and 86.15. First support is around 83.10 and a close below 82.40 would reverse the trend to the downside. Look for the market to try and build some support at this level with possible profit taking up around resistance levels.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.

Cotton Dec '18 Daily Chart

Cotton Dec '18 Daily Chart

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Agriculture - Grains

Wheat Continues to Trade Higher Amidst Weather Concerns

Alexander Turro

Wheat has traded higher this week with Chicago July wheat up 12 cents while Kansas City July wheat up 10 ¼ cents, however, the surging U.S. dollar and weaker energy markets are applying downward pressure this morning. Both markets came off yesterday’s high with profit taking after finding weekly support from weather concerns in the Black Sea, Canada and parts of Australia as well as news that China will increase imports of U.S. agricultural commodities.  The weather concerns in the U.S. remain with extreme drought observed in Texas, Oklahoma and Kansas and heightened drought concerns in Colorado with the weather outlook hot and dry with limited rainfall expected. Momentum appears to be positive but coming in near overbought levels. Chicago near-term support is seen at 522 ¼ and resistance at 538 ¼ with Kansas City support at 541 and resistance at 557.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or aturro@rjofutures.com.

Wheat Jul '18 Daily Chart

Wheat Jul '18 Daily Chart

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Currencies

US Dollar Pushes Higher as Euro Woes Continue

Tony Cholly

The dollar has rallied the past two weeks, off support at 92.41 after failing to break resistance at 93 the first week of May. Although US fundamental data has shown a possible slow down, the market has been driven higher on the outlook that European growth has slowed even more. In this week’s trade we have seen the 94.00 level as some resistance. With US durable goods being reported today look for possible pullbacks. Barring any potential surprises, look to buy pull backs as the market’s trend remains higher. Support comes in at 93.54 and a close below 93.20 should reverse the short-term trend to the downside. Resistance comes in above Wednesday’s high of 94.12.

The euro continues its trend lower as economic data shows more slowing. The Italian debt outlook adds more pressure to the already weak currency. Even with a possible pullback in the dollar today on US durable goods, the euro market has been ignoring slight supportive news as of late. The euro sharply broke support of 1.1785 on Wednesday and has started today’s trade falling to new lows. Momentum studies are increasing from oversold levels and would support a move higher if resistance can be broken. Resistance comes in at previous support of 1.1785 with support at 1.1710 and 1.1680.

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 Jun '18 Daily Chart

US Dollar Jun '18 Daily Chart

Euro Jun '18 Daily Chart

Euro Jun '18 Daily Chart

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Interest Rates

Momentum, Waves, Fibs Threaten T-Note Bear



As always, you can't conclude a broader base/reversal condition from smaller-degree strength. And we're not going to do so here. But relative to some very interesting longer-term momentum, Elliott and Fibonacci elements we'll expound on below, we don't want to ignore the extent of this week's rebound above our short-term risk parameter defined by 11-May's 119.17 high detailed in the 240-min chart below.

This week's recovery obviously defines 17-May's 118.105 low as the END of the decline from 04-May's 119.315 high. And that larger-degree corrective high remains intact as our key long-term risk parameter the market is MINIMALLY required to recoup to break even the Apr-May decline, let alone threaten the secular bear trend. This raises the question of what this week's larger-than-expected rebound above 119.17 is. Is it just another slightly larger-degree correction within the major bear or the start of a more protracted correction or reversal higher.

As a result of yesterday and overnight's sharp gains, the market has identified Tue's 118.23 low as the latest smaller-degree corrective low and new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed. A relapse below this level will render the recovery from 118.105 a 3-wave and thus corrective affair that would then be expected to re-expose the secular bear trend. Further gains however would contribute to a trendy, impulsive rally from last week's low that would raise the odds that this rebound is just the initial move of a broader basing/reversal threat...

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

10-Yr T-Note Jun '18 240min Chart

T-Note Jun '18 240min Chart

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Equities

Stocks Open Weak Ahead of Holiday Weekend

Bill Dixon

Stocks seem to be struggling to find a direction after the strong recovery from the early May lows.  While it looked as if the cancellation of the summit between President Trump and North Korea would send the markets on yet another downturn, stocks were able to put in a sizable recovery to close only slightly lower yesterday.  Following today’s open, the three major indices are lower.  The Dow and E-mini S&P are both trading in the middle of the last couple weeks’ ranges while the Nasdaq is still towards the higher end of its range.   News today is rather light with only the Consumer Sentiment reading coming out today.  We do have a number of speakers from the Fed on the docket, but I don’t see a whole lot of movement coming as a result of anything they are discussing.  Things should pick up again following the Memorial Day weekend.  Next week’s slate of data is highlighted by GDP on Wednesday and the Non-Farm Payrolls on Friday.

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 Jun '18 Daily Chart

E-mini S&P 500 Jun '18 Daily Chart

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