August 3, 2018

Volume 12, Issue 31

Feature Article

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Metals - Gold

Bearish Trend in Gold Continues

Nicholas DeGeorge

In the early morning trade, October gold is currently trading up for the day at $1218.0 and bouncing of a new fresh low possibly due to the slightly disappointing monthly non-farm payroll numbers this morning. October gold might even see more buyers at this level with the US dollar showing signs of weakness this morning. However, reports by The World Gold Council that second quarter global gold demand was weak adds even more fundamental pressure to the shiny one in the long term as it tries to find support above $1,200 an ounce. For gold bulls, I would continue to follow the September US dollar and if it falls and closes below $94, then it would become much safer to buy and hold onto gold.

If we take a quick look at the October daily gold chart, you’ll clearly see the long-term downtrend in gold. If the market can break above this bearish trendline, which is highlighted below, then gold can catch some momentum buying up to the July 9 high of $1,272.3.

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 Oct '18 Daily Chart

Gold Oct '18 Daily Chart

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Energies - Crude Oil

Crude Oil Range Contracting

Michael O'Donnell

As of late Thursday morning, the October crude oil contract is trading near $67.75 per barrel, recovering today after being down most of the week.  Today’s gains come after reports that Iran is preparing military drills near the strait of Hormuz following the sanctions on the country.

Yesterday, the market absorbed the weekly EIA report which yet again was in sharp contrast to the API the night prior, showing a build in crude oil inventories of 3.8 million barrels.  There is also news of less compliance with production cuts and an even higher refining capacity rate of 96.1%.

From a technical standpoint, today’s strength follows a week of bearish trading and levels not visited in some time, as can be seen on the 60-minute chart below.  Also visible are the narrowing range which could be representative of a potential breakout once the lower highs and higher lows are traded through.  On a daily chart, should the market close at these levels, it would be a textbook outside day and a potentially bullish development.  However, should today’s strength subside, and the week’s downtrend continue, the market could very possibly experience long liquidation given the heavy amount of long managed money as noted in RJO’s bullish sentiment index following Friday’s most recent 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 Oct '18 60min Chart

Crude Oil Oct '18 60min Chart

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Softs - Sugar

Supply News Could Aid Sugar

Peter Mooses

Sugar futures are attempting to recover from recent lows during Thursday’s trading session. October’s contract made new lows this week due to Brazil’s supply situation and reaching oversold technical levels. Sugar was unable to find support until 10.37 was touched, consolidation has led to a breakout and possible reversal. The focus had turned to India’s crop, monsoons and the sell-off in energy prices. Ethanol prices in Brazil also hit 10-month lows. Currency prices added to the pressure in sugar earlier this week. The market has now shifted its focus to bullish supply news in the top-producing areas of the world. With short specs way below record levels, traders will monitor COT reports and watch for addition short-covering heading into the weekend. To reaffirm a potential reversal, a close and hold above 10.85 will be needed.

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.

Sugar Oct '18 Daily Chart

Sugar Oct '18 Daily Chart

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Softs - Cocoa

Long Liquidation in Cocoa Continues

Alexander Turro

Cocoa continues to possess a long-term bullish supply/demand outlook, however, the court ordering of the liquidation of top exporter, SAF- Cacao, has undermined prices. The firm may have as many as 50,000 tons of unsold cocoa beans, which would need to be sold in order to offset debt despite being of poor quality. Purchase orders for Ivory Coast mid-crop have slowed in recent weeks due to the poor quality as well as the small size of the beans. Recent weather in West Africa provides optimism for the upcoming main crop season, however, a potential El Nino event later in the year could provide difficulty in matching this season’s production. The market is oversold, however, look for further downside action until the SAF-Cacao situation is resolved.

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.

Cocoa Sep '18 Daily Chart

Cocoa Sep '18 Daily Chart

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Softs - Coffee

September Coffee Violates Key Support

Adam Tuiaana

It’s been reported by The Hightower Group that “it is likely that Vietnam’s upcoming crop will post a record high total.” This, in addition to a reported “record high Brazilian crop” continues to put major downside pressure on September coffee prices. However, this market is showing signs of being oversold, but even short covering rallies will need some bullish supply/demand news to negate this downtrend and turn this very large ship around. As I mentioned in my last article on September coffee, when the words “record high” are used when describing the upcoming supply situation (for any crop), use caution when taking a position against such news. Recently, these words have been used twice when describing the currently world supply situation, and we will continue to hold a bearish outlook.

On the technical side, a violation of the downside 106.90 corrective low from July 6 was violated with today’s price action. We will now likely see some volatile follow-through selling down to the 105 level before long. Keep on the bearish side for now and consider using put options to manage risk effectively.

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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Agriculture - Grains

Daily Market Update - Grain Futures - 08/03/2018

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

Export Concerns Drive Wheat Market Higher

Phillip Streible

It’s been a volatile week in the wheat market with a 60-cent range and a new concern about supply. Ukraine is the world’s fifth largest wheat exporter and has planned to set limits for grain exports for the 2018-2019 season. This sent prices sharply higher and close to retesting last year’s high. Back in 2010-2011 we saw Russia (the world’s largest exporter) pull a similar move and institute restrictions on wheat exports causing another sharp move higher.  Technically wheat futures have been in a strong uptrend since hitting contract lows last month but didn’t give a clear upward signal until the July 25 breakout. Caution should be taken – buy the bulls if we see a break below 545.

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.

Wheat Dec '18 Daily Chart

Wheat Dec '18 Daily Chart

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Agriculture - Grains

Market Movers: Looking ahead to the August Crop Report

Industry experts Dave Hightower, Founding Principal of The Hightower Report, and Dan Basse, President of AgResource Company, preview the August 10 USDA report discussing corn and soybean yields in advance of its publication.

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Currencies

Jobs Number from US Could Move USD Higher

Tony Cholly

To no surprise, the upbeat Fed stance from yesterday has contributed to the dollar strength this morning.  In fact, the trade has restarted talks of a September rate hike and that thinking is largely due to residual proof of strength in the US job sector.  Besides a good ADP reading Wednesday, the markets will be presented with four jobs related data points by Friday morning and the bias is for decent/positive readings and that would seem to set the stage for a near-term rise back above 95.00 and potentially a rise all the way back to the mid July highs of 9545.

While euro zone producer prices could have been mildly supportive of the euro this morning, significant fresh damage on the charts and residual bullish sentiment toward the dollar leaves the currency in a definitive downward motion.  Resistance is at 11720 and 11750 with support at 11677.

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 Sep '18 Daily Chart

US Dollar Sep '18 Daily Chart

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Interest Rates

Post FOMC - Fed Rates Unchanged

As expected the Fed announced interest would remain unchanged at today’s FOMC meeting.  They gave an upbeat economic assessment, stating that the US economy is ‘strong’.  Traders anticipate the Fed will make two more hikes this year, with one coming next month.  According to Bloomberg, there is a 92% chance that the Fed Funds rate will be hiked in September.

There have been seven rate hikes since the financial crisis, and the FOMC statement notes that the Fed still plans to continue raising interest rates gradually.  Jerome Powell had stated last month that the job market would remain strong, and inflation contained around 2% with the proper monetary policy.  In today’s statement the FOMC says “On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent.  Indicators of longer-term inflation expectations are little changed, on balance.” Furthermore, they stated that “gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.”

Since my last article, 30yr bond prices have been steadily falling, while yields have been rising.  The price runs inverse to the yields.  It was noted in the last article that 30yr bond futures were near the top of the range, and it made sense continue trading in the range as long as it held.  If traders got some short exposure when the last article was written, near the top of the range, well done, you are looking at a winner with barely any heat.  If no action was taken, it still makes sense to continue trading the range.  At this moment the Sep 30yr bond futures are trading 142’08, well off the high of the range, and actually in the lower half.  Thus, it is a crapshoot, and I would stand pat until we are back in the upper third, or lower third to take a position.  Feel free to check in for new levels of support and resistance, and trades we are looking at.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-672-0664 or thusseini@rjofutures.com.

T-Bond Daily Chart

T-Bond Daily Chart

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Equities

No Surprises in Jobs Data

Bill Dixon

This morning’s jobs data came out inline, but on the lower end of expectations.  The nonfarm payroll number was expected to come in around 190,000 but fell a bit short at 157,000.  On the other hand, last month’s number was revised higher by 35,000.  We also saw the unemployment rate fall a tenth of a percent to 3.9%.  The highlight of the report was the manufacturing data, which despite only expecting about 15,000, came in at 37,000.

The market reaction in the wake of the data has been pretty subdued.  Perhaps the PMI and ISM numbers will be able to provide the market with a reason to make a move of consequence.  However, heading into the open, the four major indices are basically unchanged.  Next week’s slate of data is pretty light, but we’ll continue to monitor any developments regarding the tariff talk out of Washington.

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 Weekly Chart

E-mini S&P 500 Weekly 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.

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