June 29, 2018

Volume 12, Issue 26

Feature Article

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Metals - Gold

August Gold, is $1200 The Bottom?

Joshua Graves

Currently, August gold is trading around the July 2017 low range at 1250. I would expect gold to remain under pressure as the recent economic data around the world (mostly positive numbers) coupled with a much weaker USD has gold only marginally higher. The US equity markets have seemed to have found their footing once more and a push back to 2800 on the September ES is a possibility. A fundamental look at gold shows that without more geopolitical tension, buying interest from India and China, a weaker USD, and a full-blown trade war with China it’s likely that gold remains under pressure. Chart damage has been done in great lengths with the recent selloff below 1250. It’s clear that a trade war with China would have negative ramifications for precious metals and industrial metals as more reason to be bearish. It should also be noted that the gold ETF’s out there are sitting at almost 3-month lows in long positions. Investors are clearly worried gold has more room to slide.

If you look how gold futures trade, a full contract is 100 oz. You could also trade the ICE mini contract of 50 oz and the COMEX 33oz contract as alternatives for trading the full contract. With the recent volatility in gold picking up it might be best to look at a smaller futures contract, or options trades for more conservative investors. On a technical level we really need to see closes above $1275 before any hint of being a longer-term bull can be justified. The levels to watch for pivot points to the upside are 1300, 1313, and 1330. These are Fibonacci retracement levels that are important to watch. Look for a washout down to the July 2017 lows before any support is found.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-435-4805 or jgraves@rjofutures.com.

Gold Aug '18 Daily Chart

Gold Aug '18 Daily Chart

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Metals - Silver

Silver Futures Fighting to Hold Above Psychological Level

Eli Tesfaye

September silver is trading at 16.145, up about 10 cents on the day. The dollar is relatively weak, giving a lift to both gold and silver. The silver market is trying to recover from yesterday's test of the psychological level of 16.000. As you see below in a weekly chart, silver is trading in a tight range. This chart formation suggests that a bounce is likely to take place to the upper end of the range. Crude oil is very strong, my take is that if the dollar sells off a bit here, it will lift all commodity markets in dollar terms. The silver gold ratio is sitting around 77.65 this morning. I have spent time discussing this in previous write-ups so I will not go into detail here but it suggests silver is cheaper.

This type of range trading environment provides a great deal of opportunity for trading silver options. Lack of direction could be frustrating to trade at times, options are handy tools if you master a few strategies. Silver is not trending right now. Again, as I write, the US dollar index is making a new low so that should benefit silver to hold this support line I drew on the chart below. Silver needs to trade above 16.50 to get the bulls excited. If the dollar recovers, low 15.00’s are likely.

Silver Weekly Continuation Chart

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or etesfaye@rjofutures.com<.

Silver Weekly Continuation Chart

Silver Weekly Continuation Chart

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Energies - Crude Oil

Crude Oil Rallies to New Highs

Tyler Herrmann

August crude oil has continued last Friday’s big move higher this week up through resistance at 72.50 to new highs today of 74.43, the highest level in three and a half years. The market trended higher, driven by bullish fundamentals. US crude oil production continues to increase as inventories decline from rising seasonal demand usage and more US oil being exported internationally. More support is given to the market with possible supply concerns in both Libya and Canada as well as pressure from the US to limit Iranian oil supply. The US dollar is pulling back today off of new highs this week also provides support to the energy sector. Although supply and demand fundamentals are supportive of this run higher in crude oil, momentum studies are at overbought levels. Resistance comes in just over the 75 level with support at 72.39 and 70.28. Trade down under 73.20 would reverse the trend back to support 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.

Crude Oil Aug '18 Daily Chart

Crude Oil Aug '18 Daily Chart

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Softs - Sugar

Sugar Chart Looks Heavy as October Tries to Hold at 12.00

Joe Nikruto

This week’s comment on October sugar futures finds our market rolling over. Tuesday’s move that took the October contract over 12.60 only to see a close of 12.45 now looks like a technical failure. Wire services are playing up Brazilian use of sugar cane to ethanol, which has been significant.  Wednesday’s Hightower comment talked of Brazilian monthly production for June down 17%.  Still, October sugar futures closed down yesterday, 40 on the day at 12.05 just 3 ticks off the low. Hightower also suggests this weakness could be courtesy of month end positions squaring.  Whatever fundamental we fit to the chart the painting is looking more than a little bearish. Sugar has been consolidating/coiling since the October contract failed to hold 13.00 at the beginning of June. 

Oftentimes a period of consolidation will be followed by a move in the direction the market was going before the consolidation, in this case up.   But sugar is burdened by heavy supply. I don’t think anyone is worried that the sugar will be piling up on warehouse floors. However, the size and duration of this continuing surplus may mean sugar will be working to find a lower trading level.  The drop below the 50-day moving average, 12.19, along with the proximity of trend-following short entry stops below 12.00 make this chart look heavy. Futures traders could wait for a test of the 18-day moving average, 12.36, and should it hold, enter on the short side.  Risk could be managed with stops above 12.65 or 12.85 depending on risk tolerance and available risk capital.  Speaking of risk, trend-followers will be herded into short positions should the market trade below 12.00 and 11.90.  I view these levels as the line in the sand.  Should October sugar futures begin to trade below these levels we could see the market accelerate and begin to work in earnest toward 11.00 and likely lower.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-453-4494 or jnikruto@rjofutures.com.

Sugar Oct '18 Daily Chart

Sugar Oct '18 Daily Chart

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Softs - Cotton

Cotton Slide Continues, Defines New S-T Bear Risk

On the heels of mid-Jun's obvious 3rd-wave-type portion of this month's decline, this week's relapse is consistent with a still-bearish count that contends last week's recovery attempt from 19-Jun's 82.94 low is a 3-wave and thus corrective event capped by Mon's 86.22 high. Per such we are considering that 86.22 high as our new short-term risk parameter from which to rebase and manage the risk of a still-advised bearish policy.
This tight but objective short-term risk parameter at 86.22 may com in handy given:

  • the developing potential for a bullish divergence in daily momentum above
  • the prospect that this week's resumed slide is the completing 5th-wave of a 5-wave sequence down from 08-Jun's 94.82 high and
  • the market's proximity to the (82.47) 38.2% retrace of Jun'17 - Jun'18's entire 65.80 - 94.82 rally on a weekly log scale basis below.

We would also remind traders that while this month's decline has developed in a pretty obvious and impulsive manner, against the backdrop of 2017-18's major bull trend this break may only be the INITIAL (A- or 1st-Wave) decline within a much broader peak/reversal-threat PROCESS that should not surprise by a potentially extensive (B- or 2nd-Wave) corrective rebuttal. Such a rebound would be first indicated by a recovery above 86.22. Such 86.22+ strength would provide traders the specific and objective opportunity to pare or neutralize bearish exposure and circumvent the heights unknown of such as a corrective rebound. Until and unless such 86.22+ strength is shown however, there's no way to determine the scope the current downtrend.

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

Cotton Dec '18 240min Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 06/28/2018

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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Agriculture - Livestock

Favorable Risk/Reward Buy in Hogs

In Mon's Technical Blog we identified 21-Jun's 75.82 corrective high as our short-term risk parameter the market needed to sustain losses below to maintain a more immediate bearish count. Its failure to do so yesterday confirms a bullish divergence in momentum that defines Mon's 73.27 low as the END of a textbook 5-wave Elliott sequence down from 14-Jun's 80.00 high and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

The intriguing thing here is that this bullish divergence in admittedly short-term momentum stems from the extreme lower recesses of the past three months' range shown in the daily (above) and daily close-only (below) charts of the Aug contract where it's not beyond the realm of possibility that the past couple weeks' decline is the completing 5th-Wave "failure" (meaning the 5th-wave did not break the 3rd-wave low which, in this case, is the early-Apr low) of the long-term downtrend from the Jan high. The potential for a "double-bottom" reversal pattern is also obvious.
As always, we cannot and will not conclude a broader base/reversal count based on only smaller-degree strength, but the facts stated above amidst historically bearish sentiment present a compelling base/reversal case that includes smaller-degree risk to levels below Mon's 73.27 intra-day low and/or Mon's 73.67 low daily close. Until those lows are violated, we believe this market is prone to at least another intra-3-month-range recovery and possibly a broader reversal.

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

Lean Hogs Aug '18 60min Chart

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US Dollar Extending Week End Reversal

Alexander Turro

The US dollar is coming off yearly highs trading negative on the day following some safe haven outflows as well as largely positive European economic data. The dollar has been lifted on expectations that strong US economic growth will accelerate the Fed’s pace of interest rate increases which has continued to benefit the dollar, however, a dovish tone from Fed members earlier this week as well as mixed US economic results today have weighed down on prices. The Euro has found further support with the EU reaching an agreement on a new migration deal in the overnight, which will help reshape the European political landscape. The US dollar is coming off near overbought levels with near-term support coming in around 94.17 and resistance around 95.26. Look to sell rallies in the Euro with momentum negative in the near term. Resistance comes in around 1.17550 and support around 1.15950.

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.

U.S. Dollar Sep '18 Daily Chart

US Dollar Sep '18 Daily Chart

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Trade War Fears Persist; S&P Needs Less Fear or More Down to Come

Jeff Yasak

The Shanghai Composite and South Korean KOSPI indices led the Asian stock markets which were mostly lower.  The Chinese Yuan recorded a 7-month low Vs. the dollar and retail sales numbers in Japan were lower than anticipated. The North American session will start with a weekly reading for initial jobless claims that are expected to see a minimal weekly uptick from the prior 1.723 million reading.  The last reading of the first quarter GDP is forecasted to hold steady with a previous 2.2 annualized rate.

There is hope that the administration is making progress on the China trade issue, but the market does not like the uncertainty and disagreements within Trump’s camp on the issue and this uncertainty is a crucial bearish influence in the short term for the S&P.  In addition, emerging market concerns continue as higher energy and consumer good prices due to increased global tariffs are factors which are helping send investors to the sidelines.  Resistance is around 2729 and 2762 with support coming in at 2682.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-1656 or jyasak@rjofutures.com.

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

E-mini S&P 500 Sep '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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