October 26, 2018

Volume 12, Issue 43

Feature Article

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Metals - Gold

Gold is Prone to Move Higher

Nicholas DeGeorge

December gold is slightly up in the early morning trade, currently trading at $1,235.5 an ounce. The U.S. dollar has been on a tear over the last week and a half, while the gold market has been breaking above resistance and breaking new monthly highs. Yesterday, gold held up strongly in the wake of a decking stock market and today it’s holding up strong off this morning’s solid Q3 GDP number of 3.5%. Gold is finally looking like a market that is starting to wake up. Furthermore, gold ETFS holdings have been consistently rising since the beginning of October to 53.4 million ounces, so this might be another indicator that investors are starting to put their money on the long side of the shiny one.

If you take a quick look at the daily December gold chart, you’ll clearly see that on October 11th, gold broke above major resistance around $1,220 an ounce and has since gained roughly $20 an ounce. It has since held above the resistance and looks likes it’s prone to rally up to its 200-day moving average which lays at $1,289.0 an ounce. Furthermore, the 20 and 50-day moving average pattern would back up more upside momentum buying with the 20-day crossing above the 50-day this week. I highlighted these levels below on RJO's 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 - The Sleeping Giant Ready to Wake Up?

Tom Beller

With all the uncertainty in the U.S. equities this week, and due to a combination of higher interest rate fears, a cloudy future with China, and the U.S. dollar continuing its advance higher, there seems to be good support here for silver and gold.  While silver had a modest week in terms of overall price from last Friday, many believe $1450 is the support and also the low that we will take and go from there. Some are worried that the economy, and there also happens to be news out that there is a lot of movement in the vaults for physical silver at the New York Commodity Exchange. 

The dollar posted another high on Thursday, while silver and the other metals have held their ground.  In other world news, trading started on October 1st in Mumbai, BSE Ltd after receiving approval to launch a delivery futures contract for 30kg. The European Central Bank (ECB) left their benchmark interest rates unchanged on Thursday. The GDP report was released Thursday morning, and showed the economy expanded by a 3.5% annual rate versus 3.4% expectation of analysts.  Even with all the growth we have had, it still seems like people are worried and the tone has changed in regards to U.S. equities maintaining this growth in the future ahead. When you add it all up and the way the markets have been behaving, it is my belief that there is major support here for silver and money will flow into the metals markets. While silver is still under-performing gold, it may be where people go for value.

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 Dec '18 Daily Chart

Silver Dec '18 Daily Chart

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Energies - Crude Oil

Crude Between Technical Averages and Fundamental Factors

Michael O'Donnell

As of Thursday afternoon, the December crude oil contract is trading around the $67.40 per barrel level, up minimally today while still inside the range of the down day two days ago.  The market is also inside the range bound by the 100 DMA and 200 DMA (daily moving averages).  While the 200 daily moving average has acted as support to this point, the breach of the 100 day moving average could be a precursor to further declines below, switching the 200 day moving average from support to resistance, similar to the $71 price level noted 2 weeks ago.

As mentioned to Reuters previously, this comes at a time of year when refineries typically are in turnaround, as seen in recent EIA reports including builds in inventories and refinery utilization rates at levels lower than those in weeks past.  Outside markets have also featured drawdowns in equity indices and may translate to decreased energy demand, along with a safe haven bid in the dollar, which has traded at the year’s high today. 

It is also noteworthy, and visible on the chart below, that today’s trading comes on lighter volume and with ADX, RSI and Stochastics at low levels. Traders unsure of the market’s reaction to the moving averages may want to position with an options strategy.

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 Light Dec '18 Daily Chart

Crude Light Dec '18 Daily Chart

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Energies - Natural Gas

Natural Gas Continuing to Trade in Ten Cent Range

Jeff Ratajczak

December Natural gas has been trading in a ten cent range between $3.200 and 3.300 for the past week, before that $3.300-3.400 was the norm.  I believe that this pattern will continue between now and the first really cold forecast.  Moving averages are flattening out and so are momentum indicators.   Support comes in around $3.200 and resistance at about $3.300, with that said, closes above and below may move the price into the 10 cent range.

The actual build was lager than expected, 56 bcf v 47 bcf, which should keep the pressure on Dec. natural gas to keep going south. The added pressure of warm temperatures should keep prices in the current range, and I think the price of gas will continue to vacillate in that range. Staying on the sidelines, keeping your powder dry for a bigger move makes sense for now.  Any decisions should wait for confirmation by the charts, until then doing nothing is a trading strategy that works while we wait for confirmation of a move in either direction.

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 Dec '18 Daily Chart

Natural Gas Dec '18 Daily Chart

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Softs - Cocoa

Stocks Taking Control of Overall Market Tone

Peter Mooses

December cocoa moved lower Wednesday for the second consecutive day due to the sell-off in equities. The overall world market tone has been vulnerable of late – this paired with a strong dollar has pressured the softs.

Demand in cocoa has been a big question mark this year, will we see a growth in the need for the commodity as we continue to trade in the final quarter of the year? There are no signs that demand is headed for an increase, so traders look to supply for some fundamental direction. The weather outlook in key growing regions, mainly Ivory Coast, appear to be bullish. Overly dry weather mixed with El Nino fronts could negativity impact production.

Technically, we have seen resistance at 2230 in cocoa futures, a break and hold above this level could have the market headed back to where it should be this time of year, closer to 2300. Look for a trading range of 2300-2400 as we head into the last stretch of 2018.

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 Daily Chart

Cocoa Daily Chart

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Softs - Coffee

December Coffee is Strong

Adam Tuiaana

It appears as if the bullish forces are still in charge of coffee prices, continuing the momentum that’s been in place over the past month. The continued strength in December coffee prices continues to be a straight-forward tight supply outlook for 2019/20. What may have started as a significant short-covering rally, has now turned into a bullish long-term supply/ demand outlook, which looks like a solid reversal to the upside in December coffee prices. Bullish traders should consider initiating new long positions on corrective pullbacks.

On the technical side, a rally, temporary consolidation, and ultimate break above the 200-day moving average (and subsequent close above) was in fact bullish, and triggers technical buy signals for traders. 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 - Cotton

Cotton Pulls Back After Strong Start to the Week

Tyler Herrmann

December cotton started the week trading 2.13 higher, closing at 79.98. Tuesday we saw the market take back some of the week’s gains, trading to a low of 78.18 before closing up off the lows at 78.92. Cotton has seen support from rains in key Texas growing regions and there is more rain in the next 5 day forecast as well as in key growing regions of the south eastern U.S. There is still a chance for additional decrease in crop conditions, adding to the loss in Georgia from the hurricane. India is also seeing increasing worries over the size of their crop. The market is still trending higher with potential for a continued advance up to resistance at 80.81 and then 82.55. Momentum studies are approaching overbought levels which could accelerate a move lower given some bearish pressure. Support comes in at the trend line around 78. 38 and then below that at 77.33. Look for the market to trade higher and test resistance levels with a close below secondary support to turn the rend back down to the recent lows.

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 - 10/26/2018

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

December Live Cattle Moving Towards Bearish Trend

Peter McGinn

In the December Live Cattle contract, we saw a sell-off and close at 116.825 in yesterday’s trade. If we continue to see prices fall and close below the 116.400 level, then that should turn this into a bear market. The 50 Day Moving Average is at 116.375 before the opening today, if there is a breakthrough of this level I could see prices continuing to fall possibly to the 114.500. If there is a failure to breakthrough the 50DMA, then I could see these levels climbing back up and trying to make a push through the 118.500 price level.

Last week’s Cattle on Feed report was bullish with the placements being 5 percent below the level from last year, and marketings 4 percent below the level from last year. However, the slaughter numbers up from year to date (16.2% from last year’s pace), near-term supply levels seem to be putting downside pressure on the Dec cattle. There has been little activity in the cash market this week, with the Iowa and Minnesota trade showing $110 for only 120 head of cattle on Tuesday. Choice cuts were up 1.71 @ $231.10 and select .49 cents higher @ $198.31. The USDA estimated cattle slaughter is at 119,000 head on Thursday, totaling 356,000 head week to date. Those numbers are estimated to be 4,000 above the previous week and up 7,000 on the same date from last year. Export sales were also up in the week of 10/18 from last week @ 14,637 MT with shipments of 16,654 MT.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 866-536-8601 or pmcginn@rjofutures.com.

Live Cattle Dec '18 Daily Chart

Live Cattle Dec '18 Daily Chart

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Currencies

There Seems to Be No Leader in Currencies Today

Tony Cholly

The dollar has shown some minor pullback action this morning and that is not surprising considering the large upside extension yesterday and a moderate early risk on tone in U.S. equities. On the other hand, the fundamental track from U.S. scheduled data today would seem to add to the corrective bias in the dollar and an initial downside target could easily be accomplished if the data supports that.  The USD might also see some minimal pressure today from a positive shift in the UK exit.  Resistance comes in at 9640 with support at 9580

Despite somewhat favorable news on the exit situation overnight, the euro remains held to the spike low from yesterday because of a weak set of German IFO readings overnight.  In fact, the euro received only a little support from suggestions that the ECB will stick with their exit targeting despite the darkening global outlook.  Resistance is around 11493 with support at 11395.

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.

Dollar Index Dec '18 Daily Chart

Dollar Index Dec '18 Daily Chart

Euro FX Dec '18 Daily Chart

Euro FX Dec '18 Daily Chart

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Interest Rates

U.S. Bonds Extend Rally

Alexander Turro

Treasury prices continue to move higher amid the continued sell-off in U.S. equity markets, with recent lackluster corporate earnings as well as concerns involving China’s economy and Italian debt providing support. Yields have been weighed down by the recent move by the People’s Bank of China to support financing for the private sector, Italy’s continued dispute with the EU regarding a budget that violates fiscal rules as well as missed earnings from industrial giants 3M and Caterpillar. Fed officials continue to remain hawkish with a fourth rate expected in December as they attempt to ensure that the economy does not overheat while managing inflationary pressures, despite recent weaker headline inflation readings. Concerns remain regarding comments from Fed officials that they could continue to raise rate over the ‘so called neutral level,’ which may in turn may become restrictive and slow growth. Recent price action alludes to the idea that a bottoming process may be in place with bond prices one of the most heavily shorted, according to the CFTC.  The initial upside target in the December bonds is seen at 139-00 with the next target near the September consolidation low of 139-17.

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.

30-Year T Bond Dec '18 Daily Chart

30-Year T Bond Dec '18 Daily Chart

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Equities

New Lows in Stocks

Bill Dixon

The E-mini S&P and E-mini Nasdaq printed new lows overnight.  The E-mini Dow was able to hold slightly above the low print from a couple sessions ago.  All of the indices have recovered a decent amount since hitting their overnight lows, but are still down anywhere from 0.5% to 1.6% shortly after the open.  The GDP number actually came out better than anticipated at 3.5% vs. the expected 3.3%. Consumer spending proved to be the biggest contributor as it came in at 4.0% vs. 3.3% expected. Consumer sentiment is set to come out shortly.  Expectations are for a reading of 99.0. 

We’re back into earnings season, and yesterday afternoon’s data, highlighted by Amazon and Google, can be partly to blame for the overnight weakness. It is difficult to say what it will take for the market to turn back higher, but perhaps a string of better earnings reports will act as the catalyst.  We’ve been treated to several Thanksgiving and Santa Clause rallies in the fourth quarters of previous years.  We’ll see if this correction entices more market participants to buy in.  Then again, many traders seem to be of the mindset that the levels we’re seeing are still a bit too lofty.

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 Dec '18 Daily Chart

E-Mini S&P 500 Dec '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.

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