July 6, 2018

Volume 12, Issue 27

Feature Article

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Metals - Gold

Slowing Demand Weighs on Gold Prices

Alexander Turro

Gold is coming off some technical short covering yesterday ahead of the tariffs that were implemented last night on $34 billion of Chinese exports. The anticipated slowing of demand for gold has contributed to the weigh down on prices. I imagine gold would have moved sharply lower following this escalating trade war if not for the recent weakness in the US dollar. Look for the precious metal to remain under pressure notwithstanding further geopolitical risk, enhanced buying interest from China and India as well as worsened negative sentiment to the US dollar which may offset some selling pressure.  It appears the precious metal may continue to trade in a sideways consolidation pattern and remain fairly range bound. Gold is coming off from oversold levels with resistance around 1263 and 1267. Near-term support comes in around 1253 with the next downside target of 1247.

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.

Gold Aug '18 Daily Chart

Gold Aug '18 Daily Chart

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Metals - Copper

Copper Futures Impact on the Chinese Trade War

Phillip Streible

There’s no doubt that the Chinese trade war has made an impact on copper prices by leaving it the second worst performing commodity year-to-date, down over 14.50%. Rising interest rates increase the cost of warehousing and financing projects which also hurts demand. Looking at the futures curve moving farther out in time does show a short-term supply issue, but it looks to be easily resolved into next year. One would need to monitor the trade war situation to see if it continues to escalate. If we see it continue, China will most likely look to Brazil for sources of copper. However, anyway you look at it this should result in lower consumption and slower demand growth for the product.

Below is a daily chart of September Copper showing the decline from the announcement of the tariffs.

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.

Copper Sep ’18 Daily Chart

Copper Sep '18 Daily Chart

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Energies - Crude Oil

Crude Possibly Reversing Following EIA

Michael O'Donnell

As of Thursday afternoon, the August crude oil contract has traded from a high of $74.90 per barrel to the current lows as of this writing near $72.55.  While there are a number of bullish factors such as dissention among OPEC, bottlenecks in the U.S., and lost production in a number of areas; the headline number for today’s holiday delayed EIA number was the build in inventories of 1.2 million barrels.

Following the build in inventories, which does coincide with reports of supply bottlenecks and high refinery capacity rates, the market looks to be trading towards a close forming a possible reversal on the daily chart pictured below.  This could also be a pause in a longer-term flag higher, and we should note this comes ahead of the looming deadline for tariffs.

While the longer-term trend for oil has been upwards as of this year, for traders with a shorter time frame or looking at the short side of the market, it is also interesting to note some of the calendar and Brent WTI spreads as well.  One may also note the market tends to run up prior to a crowded long fund trade, something time will tell with tomorrow’s Commitment of Traders report.

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 Aug '18 Daily Chart

Crude Oil Aug '18 Daily Chart

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Energies - Natural Gas

Natural Gas Injection Above Expected Average

Jeff Ratajczak

The trend for August natural gas is decidedly down.  The past few days have had lower highs and lower lows on a daily chart.  The injection today is above expected average, but well below the 5-year average and last year’s.  An Injection of 76 bcf is expected, the average drawdown is 70 bcf.  The shift in weather patterns has gone from above average to average temperatures in the next few weeks.  The central US is experiencing a well deserved cool down.  The weather pattern seems to favor the dry side going into the next 7-10-day period.     

The trading prices have broken through to a lower range and are trending lower.  The current price is trending lower and a bottom number is seen close to 2.750.  Resistance is at 2.870 and will take a $2.900 print to change the trend.  Between here and $2.840 and 2.750 will determine the following range.  The averages and momentum studies are both turning down.  Exposure to the short side is recommended until the next EIA number. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-874-8110 or jratajczak@rjofutures.com.

Natural Gas Aug '18 Daily Chart

Natural Gas Aug '18 Daily Chart

 

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Softs - Cocoa

Cocoa Support Provided by Ongoing Supply Concerns

Peter Mooses

With a shortened week due to the US holiday, cocoa has been unable to decide its next move. Supply is still the front story, providing most of the support. Will weather be a factor, El Nino? Will disease hit pods due to weather related problems? Will political uncertainty in Ivory Coast add to output concerns? All of these questions could boost prices higher.

Demand has been and will continue to be the biggest question. Looking at the euro and pound has given us little guidance. The equity market has been volatile and has led to more global uncertainty. The July 9 COT report will give us a view of what traders are thinking as they continue to position themselves.

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 Sep '18 Daily Chart

Cocoa Sep '18 Daily Chart

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Softs - Coffee

September Coffee Due for Short Covering Soon

Adam Tuiaana

Mixed signals from a weaker Brazilian currency and ongoing uncertainty related to the US/China tough-tariff-talks continue to be the main headline in all commodity futures for the past couple of weeks. Larger exports of Brazilian coffee suggest that the demand is still strong and likely bullish when viewing from the demand perspective. These continued strong export reports, coupled with short-term tight supply, has helped coffee to hold support. However, the key violation of the 115 level earlier this week is in fact continued bearish. The technicals don’t lie, and we are now approaching contract lows. September coffee is struggling for breath at the 11140 area now and it will take an amicable resolution to the aforementioned tariff situation to stabilize (and ultimately reverse) the price of September coffee. We all anxiously await the direction of these tariff talks, but now may be a good time for some short covering and profit taking for those who have been trading coffee to the downside. This senior strategist will be continued bearish, in a big way.

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 Sep '18 Daily Chart

Coffee Sep '18 Daily Chart

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Softs - Cotton

Cotton Ratings Increase, Trade Lower to Start the Week

Tyler Herrmann

December cotton started the shortened trading week lower after seeing choppy sideways trade last week. The market traded down 1.4 cents to 83.04 after trading up to a high on the day of 85.09. Trade tension and an increase in the US dollar has been much of the driving force lower. Although forecasts of higher temperatures and little to no rain across key growing regions in west Texas should provide support for the market, the cotton conditions report showed Texas cotton rated good to excellent up 3% from last week. The overall cotton crop came in at 43% good/excellent vs the 10-year average for this time of 49%. The market is also at risk to see some long liquidation with Friday’s COT report still showing a large net long position. Momentum studies are oversold but with improving crop conditions and increasing uncertainty with trade tariffs the market could see a continuation of the trend lower. Resistance is around 85.07 with support at 82.86 and then down around 80.00.

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

Daily Market Update - Grain Futures - 07/06/2018

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 - Grains

Market Movers: Looking Ahead to the July Crop Report

Is the USDA forecasting politics instead of pure model/survey for their July WASDE report? Industry experts Dave Hightower, Founding Principal of The Hightower Report, and Dan Basse, President of AgResource Company discuss this and  corn and soybean yields in advance of the July 12 USDA report.

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Currencies

Dollar at Risk to Continue Move Lower

Tyler Herrmann

The US dollar has traded lower this week after failing to hold over the 95 level during last week’s trade. The short-term trend is lower and that looks to continue with trade tensions between China and the US escalating as $34 billion in tariffs on Chinese goods go into effect Friday. Momentum studies are falling from overbought levels which could help push the already falling market lower. Friday’s unemployment numbers came in showing growth with stronger than expected non-farm payrolls which should provide some support. In the September contract a close below 93.88 would accelerate the move lower with 92.95 being the next downside target. Resistance comes in at 94.65 and then 95.25. Support comes in at 94.10 and then at the reversal point of 93.88. Barring a last minute trade deal look for the market to push the dollar lower until the uncertainty in trade disputes lessens.

The euro has seen choppy trade the past couple weeks trading between 1.1608 and 1.1795. The euro recently has seen support from a positive shift in German manufacturing data and the idea that the economy will not be hit as hard as the US as trade uncertainty continues to increase. The euro’s strength comes largely from any weakness in the US economy from Friday’s job report and US/China trade actions with possible tariffs from Europe on US products providing a cap for the euro’s upside potential. Momentum studies increasing though mid-range would support the market on a break of resistance levels. In the September contract resistance is at 1.1832 while support comes in at 1.1680 and then 1.1605.

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.

U.S. Dollar Sep '18 Daily Chart

US Dollar Sep '18 Daily Chart

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Equities

Jobs Number Provides Small Lift to Stocks

Bill Dixon

This morning’s jobs data showed an added 213,000 jobs.  Consensus had the number pegged at 190,000.  We also saw a revision to the June number of an additional 21,000, bringing that number up to 244,000.  On the other hand, we were expecting to see the unemployment rate hold steady at 3.8%.  That number rose up to four percent unfortunately.  An additional half a million unemployed people looking for a job was the main contributor there, which also raised the participation rate by 0.2%.  The net effect on the market so far has been a nice bump from the levels we saw when the data was released. 

The chart action appears constructive, but I think lack of any compromise on the tariff situation(s) is keeping a bit of a lid on the market for the time being.  The tariffs were set to go into effect today, and I was under the impression the market was remaining afloat on hopes of some kind of compromise in regard to the situation.  So far, it seems that the other parties involved are still preparing retaliatory tariffs rather than trying to reach an agreement on trade.  The market seems to be shrugging this off as posturing for the time being.  We will continue to monitor news over the weekend to see how this plays out.

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 Sep '18 Daily Chart

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

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