October 12, 2018

Volume 12, Issue 41

Feature Article

Fundamentals of Energy Futures

Trading Energy Futures

Wednesday, October 17 at 11 a.m. CT

In this session you will learn:

  • Energy Commodities 101
  • The benefits of trading energy futures
  • Basic technical analysis and trading strategy applicable to these markets

Register Now

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Metals - Gold

Gold is Breaking Out of Bearish Trend

Nicholas DeGeorge

December gold has pulled back slightly from its overnight highs and the two-day strong bull rally. There appears to be a lot of anxiety in global markets due to the massive two day sell-off in U.S. equities and investors flocked into gold out of fear, which caused it to rally roughly $30 an ounce. The sell-off was mostly due to the fear of rising interest rates continuing into next year according to the Fed Chair Powell. However, the U.S. markets might gain some support by strong economic data that came out of China last night and end of the week profit taking.

If you take a quick look at the daily December gold chart, you’ll see that it broke above significant resistance levels yesterday and breaking out of a long-term bearish trend. Furthermore, gold is now above its 20 and 50-day moving averages and if it could gain some strong buying from the bulls after yesterday’s break out, then gold can rally all the way up to its 200-day moving average of $1,294.4 an ounce. All levels are highlighted below on my RJO Pro daily December gold 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 Dec '18 Daily Chart

Gold Dec '18 Daily Chart

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Metals - Silver

Silver to Remain Range-Bound

A lot of news and a volatile week in the markets have created a lot of volatility, with silver being no exception. The PPI report on Wednesday showed a 0.2% increase, which matched the estimates from analysts.  The CPI report on Thursday showed an increase of 0.1 %, which marked the sixth increase in a row, but there were higher estimates out.  A strong economy, coupled with the unemployment at a 48 year low, has led to an increase in inflation.  This increase in inflation has led to what seems like “fear correcting” in the equity markets.  The markets have closed low for six consecutive days, with the Dow Jones Average losing 1375 points in two days.  With the massive sell-off this week in equities, people have rushed into the metals as a safe haven. Silver posted close to a $.30 cent gain on Thursday, almost getting back what it had lost on Monday and throughout the week. Last Friday, December silver was at $14.68 an ounce, with Thursday’s close at $14.62 an ounce we are not far off from where we started.  Further support was added with the dollar index breaking this week as well.

Looking forward, I expect silver to remain range bound between the highs and lows created from the beginning of September, which has shown a recent high of $14.95 to a low of $13.96.  We have support in the December silver at $14.42 and resistance at $14.79.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or tbeller@rjofutures.com.

Silver Sep ’18 Daily Chart

Silver Sep '18 Daily Chart

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Energies - Crude Oil

Correction in Crude Following EIA

Michael O'Donnell

As of Thursday, the December Crude oil contract is trading down approximately $2 near the $71.20 per barrel price. This comes following another large build in inventories in the EIA and API numbers, which were delayed from the Monday holiday. While the draw in EIA was less than the API last night, the sizable draw still comes at a time of year that typically coincides with refinery turnover, evidenced by the decrease in the refinery utilization rate to 88.8 percent. Given the downside in global equity markets this week, and the possibility for oil prices to act as a proxy for global growth and demand, outside markets may also want to be considered.

The builds in inventory and global equity sell-off have led the market back to the highs of May and September, visible in the chart below.  Traders may position around the $71 per barrel level, as today’s price action has respected this level at the time of this writing.  It may be possible that this level continues to act as support, like today, or become new resistance should trading break below that level.

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 Nov '18 Daily Chart

Crude Oil Nov '18 Daily Chart

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Energies - Natural Gas

No Trend in November Natural Gas

Jeff Ratajczak

November’s Natural Gas is trendless, with a price range between $3.100-3.300.  A close beneath $3.100 should take the cost down to the next trading range. Conversely, a close above $3.300 should take us higher, but today’s candle gives no clue to direction yet. Support is around $3.109 and resistance is near 3.306.  Momentum studies are turning over but are at mid-levels, so they are no help as to direction either.  Moving averages are looking up.  Staying on the sidelines in cash might be the way to go. 

Another hurricane, Michael, came and went quickly. In its wake, over 1 million people were left without power.  Michael ran across the Carolina’s too adding to their devastation too. Due to the widespread loss of power, usage was down well under the averages putting a little rise in prices. This week with warmer temps predicted, gas might be the next commodity to correct and get even more affordable.

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 Nov '18 Daily Chart

Natural Gas Nov '18 Daily Chart

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Softs - Cocoa

Global Uncertainty, Equity Sell-Off, Grinding Data – Which Will Lead Cocoa Futures?

Peter Mooses

The recent turn in the equities has taken control of the global markets causing further volatility, as stocks sold off, and some commodities followed. The currencies also tried to make sense of the recent moves – euro and pound found some strength, as did the dollar. The currencies will be a critical watch as we wait for grinding data and some guidance in the demand outlook from the key regions, North America, Europe and Asia. It does appear that most traders are anticipating demand to rise overall.

Weather in Ivory Coast has been favorable for growth. A little rain with dryer weather could help production this time of the season.

As we wait for the grinding data, European third-quarter results are set for October 15th – we will keep an eye on the technicals for short-term trades. The North American data may disappoint but the Asian grinding data has not released a negative result since 2015 so the market could find support and a rally higher over the next few weeks.

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 Dec '18 Daily Chart

Cocoa Dec '18 Daily Chart

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Softs - Coffee

December Coffee Rallies

Adam Tuiaana

Bullish forces stepped in to take control coffee prices over the past couple of weeks, most likely due to a tighter supply outlook for the upcoming Vietnam crop. This short-covering rally pushed up past the 50-day moving average with strong momentum (and even gapped higher on the open on October 8th). The long-term supply/demand outlook is bullish, but for the time being, expect that the gap from October 8th will likely be filled. Bullish traders should consider initiating new long positions when said gap is filled and a subsequent pullback to the 107 level is complete.

 On the technical side, a rally through the 50-day moving average (and subsequent pullback to the 107 support level) was in fact bullish, complete with follow-through buying that lead December coffee prices to challenge the lows from July of this year. Consider using put options to take a bearish position and 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 Dec '18 Daily Chart

Coffee Dec '18 Daily Chart

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Softs - Sugar

Volatile Price Action in Sugar

Alexander Turro

Sugar for March delivery has seen some volatile price action as of late, trading at a 14-week high before closing negative on the day. The market has been surging and is up nearly 20% since hitting a bottom on September 27th. The recent strength in crude oil has provided support, as well as a rally in the Brazilian currency. Brazilian ethanol demand remains strong and while Indian productions remains unclear, Indian exports are expected to pick up. Momentum in sugar remains positive but are near overbought levels with near term support seen around 12.55 and resistance around the 200 day moving average at 13.16.

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.

Sugar March '19 Daily Chart

Sugar Mar '19 Daily Chart

 

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Agriculture - Grains

Daily Market Update - Grain Futures - 10/12/2018

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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Equities

Volatility Continues in Equities

Phillip Streible

The wild ride continues on Wall Street with one of the worst weeks we have seen in years. The S&P 500 fell over 4% while the volatility index rallied over 29%. The market felt toppy once we saw headlines about this move being the “longest bull market ever” or its been “3,000 + days since a correction of over 20%”. Keep an eye on the 200-day moving average, the last few corrections we have seen back earlier in the year have held. Both the 200-day exponential and simple moving averages come in right about at 2775.50 and should be strong support. Next week’s data is packed with a combination of earnings that are generally expected to be positive and a flood of economic data. The economic data scheduled should show weaker results due to the recent rapid rise in interest rates. The 30-year t-bond hit its highest level since 2014 and the 10-year hit its highest level since 2011. I do expect interest rates to come down from these historic levels due to the Feds over tightening. These high rates should weigh in on housing starts and existing home sales and could weigh equity prices next week.

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.

E-Mini S&P 500 Dec '18 Daily

E-Mini S&P 500 Dec '18 Daily Chart

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Equities

Futures Market Insight w/ John Caruso - 10/12/2018

John Caruso

It’s been a wild ride the past few sessions especially in the equities space.  The biggest difference between yesterday and Wednesday’s move in stocks, was that money was “moving” yesterday.  We saw a large bid under the gold and bonds and bond proxy markets yesterday as traders sought out perceived safe haven assets.  These are the days when retail can find themselves chopped up and spit out, A) make sure you’re respecting your stop losses, B) you’ve got a good risk manager and CNBC doesn’t count and C) DO NOT CHASE VOLATILITY.  3 simple rules for when the market tape “breaks” and markets get sloppy.  Stick to your process and adhere to your rules – remain disciplined.

Quick Market Rundown-

US Equities:  You can’t say that we haven’t warned of a “growth slowing and inflation slowing” environment.  We began making this call in Aug.  The market trend is now overwhelmingly bearish with Wednesday’s break down, however we like to see at least 3 consecutive day’s of a close below our trend line. 

Price- Bearish
Volume- Bearish (+41% vs the 1 month AVG!!!)
Volatility- Bullish

This is the quintessential formula for “bear” market activity.  When Price, volume, and volatility factors line up in the manner they are above – we’re sellers of bounces in US equities FROM THE TOP OF OUR RANGE!  Once again, DO NOT CHASE MARKETS.  

PPI and CPI inflation misses this week on a y/y basis.  This is inline with our inflation slowing call moving fwd.  As always we remain vigil to the data and will change our thesis if the data changes. 

Markets are bouncing this morning from very oversold levels  (which comes as no surprise) – Even China is bouncing +1.0% overnight and still -26% since January’s peak.  We’ll remain patient for the time being and signal to our traders “Sell” at the top end of our respective ranges in SP500 – NASDAQ – RUSSELL Index’

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or jcaruso@rjofutures.com.

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