November 21, 2018

Volume 12, Issue 47

Feature Article

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Metals - Gold

Gold is Back in Rally Mode

Nicholas DeGeorge

In the early morning trade, February gold has slightly extended its week long bounce off the $1,200 an ounce handle and is currently trading back up at $1,232.3. The shiny one is starting to act like a physical precious metal market. Yesterday, gold saw a little lower price action in the face of declining equity markets along with rising anxiety and there was still no safe haven buying. Furthermore, you’re seeing gold up this morning during the midst of higher equity prices and a weaker U.S. dollar. With gold holding and rallying off the $1,200 handle last week along with strong retail gold demand out of China and India last night, we may see prices trade back up to the high on October 26th of $1,252.

If you look at the daily February gold chart, you’ll see that it’s fixing to break out to the up side again. Gold held onto the $1,200 handle which was also where a bullish trendline came in and rallied back up $30 an ounce or roughly 2.5%. Now if it can only break above the bearish trendline which I highlighted below, then it can rally up to the October 26th high or even up to its 200-day moving average of $1,282.2. I highlighted some key technical level below on my RJO Futures Pro daily February 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 Feb '19 Daily Chart

Gold Feb '19 Daily Chart

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Metals - Silver

Silver - Advancing Soldiers or Reversal

Tom Beller

Last week, silver had a technical three bar advancing soldier pattern recognized by Japanese candlesticks, which usually means strength ahead.  However, Monday showed us topping out a bit and Tuesday having an $.11 cent break.  What do we make of it?

With all the uncertainty in outside markets, and both the equity indexes and the oil market taking a nosedive, there seems to be a great deal of skepticism, which I believe bodes well for the metals markets, especially silver.  While bears may technically have the advantage in the short-term, I believe it will be short lived. 

Silver found support at $14.00 an ounce in the December futures this month and we have resistance at $14.85, prices need to break through one of these levels to get any excitement stirred up in this contract.  We expect more volatility ahead in the outside markets until we get more from the G20 meeting, which is November 30th.  Not sure if much will come out of the meetings, so investors may be wary of equities with this year not posting any gains, shifting money into the metals markets toward year end and seeking a safer haven for assets. 

The options in January silver, with 35 days left until expiration, show an implied volatility of 18.5% and the at the money straddle is priced at about $.66 cents, signifying a break-even level of .66 above and below current futures price of $14.47, which is roughly the same support and resistance levels we have outlined above.  It is hard to see anything getting excited about until we break out of support or resistance

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

Oil at Lowest Level in Over a Year

Michael O'Donnell

As of mid-day Tuesday, the crude oil market has been down as much as over $4 per barrel and currently sits at $52.77.  Looking at the chart below of the continuous contract, one may see that it takes going back to over a year ago to see trading at these price levels and the fall from the multiyear high of $77.08 on October 3rd.  Also noteworthy, and possibly a painful lesson for many, is that today’s break lower comes after 4 positive days, although the 4 positive days were inside days, meaning that they traded within the range of the last day with a large leg downward in price action one week ago today.

Many, myself-included, have noted the factors coinciding with this price action, such as record production, builds in inventory, waivers on Iran sanctions, interest differentials which favor a stronger dollar, trade tiffs and their outlook on growth, the growth outlook in general, etc.

While these factors are priced in to this point and the averages pictured below (100 DMA and 200 DMA) have been sloping negative, we also see some indicators at oversold levels. Traders may also be monitoring developments at the upcoming OPEC+ meetings in December for production cuts, which are typically disputed among members, although the recent price action may spur Russia and others to cuts.  Market participants in oil and a number of other markets will also be closely watching any developments at the upcoming G20 and reported meeting between Chinese Premier Xi and U.S. President Trump.

Barring any developments on these fronts and others, the market will also be taking the former range of years past into consideration

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 Daily Chart

Crude Light Daily Chart

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Energies - Natural Gas

Natural Gas Has a Mind of Its Own

Jeff Ratajczak

The trend in December natural gas has me perplexed, it’s up one day and down the next. Higher hi’s and lower low’s each day.  It is trading like the stock market lately, reading in news stories over the last week.  High volume trading on up and down over the last three days has kept the prices between $4.500 and $4.700. Resistance at Wednesday’s close comes in at $4.690, and support is at about $4.500.  Prices are inflated, above all moving averages.   All momentum studies seem to be turning over toward lower prices. 

Weather seems to drive the prices right now.  The jet stream has shifted and warmer weather is forecast for much of the country. November in Chicago has high temps below normal all month, this might account for higher prices.  Today’s storage number is estimated at -105 bcf.   This is way above the usual number, and may support the market.  We are still below the 15 yr. avg. this should also support the market.

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

Holiday Week, Demand Concerns and Blommer Chocolate Being Purchased

Peter Mooses

As we monitor cocoa futures during a shortened trading week – the front story continues to be supply and demand. European and N. American demand remains weak, Asian demand is intact and potentially strong. The dollar, euro and pound have all been indicators in the short-term of the direction of cocoa. Supply may be affected as we enter the dry season in West Africa. Port arrivals remain ahead of last year’s pace. So with currencies, weather and supply adding to cocoa volatility and recent downturn, the last month of the year could be an interesting one. Weaker equities are also pressuring the global markets. With all these factors playing a part in cocoas market moves – add-in a potential sale of Blommer Chocolate to Fuji Oil, this could affect the demand side of cocoa’s equation.

For the rest of the holiday week, look to monitor cocoa or take the sidelines until there is more news available on these developing topics.

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 Mar '19 Daily Chart

Cocoa Mar '19 Daily Chart

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Softs - Coffee

December Coffee at Resistance

Adam Tuiaana

A failed break of the bullish continuation pennant has precipitated a quick violation of the 11516 level, and subsequent sell-off to the 11100 area. This should be viewed as a bearish signal, and although December coffee prices were able to hold good support over the past week, we still see formidable resistance at the 200-day moving average of 12142. 

A slower harvest in Vietnam, along with a currently weak USD and inverse strength of the Brazilian currency may prompt rallies to the 200-day moving average, but from a short term perspective, it looks like December coffee prices will be into good resistance at the aforementioned 200-day moving average.

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

Outside Markets Melt Down, Sugar Holds Up Well. For Now

Joe Nikruto

This week’s comment finds the March sugar contract holding up well in comparison to crude oil and gasoline. While these markets and sugar can often be correlated the recent decline in sugar pales in comparison to what has happened in those closely watched “outside” markets.  Wire service stories continue to highlight what many anticipate will be a year of declining production.  Pestilence, weather, and use of cane for fuel will all conspire to leave sugar with a deficit rather than the surplus we have seen for years according to these sources and sugar watchers have heard this song before.  As reports of better than expected production begin to roll in the market responds. I believe the recent fall from the highs is anticipating this story playing out again in March sugar.

Recent technical action has the commercial trader category selling into fund buying. This trend should be reversed as the funds are forced to capitulate and head to the sidelines.  12.08 looms large as an area where funds will begin to enter positions on the short side. 60 points away seems like a short distance for the market to travel to push the funds into these new positions. 

With the market jumping back and forth over the 50-day moving average, 12.68, it will be instructive to see if the March contract can hold here or continue to erode.  Price action from November 21 brought the market below 12.68 and the March contract even posted a close of 12.46. This puts pressure on underwater longs. While we know moving averages and other lines are merely derived the psychological pressure associated with losing positions around these lines is real. Bottom line, no pun intended, is that if we hold here the production deficit story is still in play and sugar could recover back into the 13’s. This is not what I consider the likely scenario. More likely the market is anticipating at least adequate production and maybe even ethanol margins in Brazil breaking down as mentioned in this morning's Hightower commentary.  While guessing at fundamentals can be imprecise at best the technical action will point the way in coming days. If the March contract doesn’t hold above 12.60’s, lower prices could be right around the corner.

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 Mar '19 Daily Chart

Sugar Mar '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 11/21/2018

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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Currencies

Gains Continue in the USD With a Trend Decision Nearing

Tony Cholly

On a negative note for the USD, the large amount of U.S. data today does not appear to have much conclusively positive news for the economy.  Although, it does appear that the USD may gain some support from the gains in U.S. equities as well as a lift from holiday sales headlines.  A limiting issue for the dollar to start today is the downshift in Italian budget concerns and fresh charges from the US administration of unfair Chinese trade practices.  Resistance comes in at 9710 and 9735 while support hits at 9625 and 9570.

As indicated already, the euro is seeing some recovery action off a slight improvement in the Italian budget fears as an overnight compromise has removed that issue as a concern for the Euro Zone.  However the Euro should remain under pressure from a stronger USD. The next area of resistance is around 1144900 and 1152900, while first support hits at 1133500 and 1130100.

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.

U.S. Dollar Index Dec '18 Daily Chart

U.S. Dollar Index Dec '18 Daily Chart

Euro FX Dec '18 Daily Chart

Euro FX Dec '18 Daily Chart

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Interest Rates

Pivot in The Fed?

Alexander Turro

U.S. Treasury prices are continuing to trend higher after trading near 2-month highs as the yield on the 10-Yr note fell to 3.063% after coming off a seven year high of 3.232%. This comes amid Federal Reserve Chairman Powell’s comments last week that the central bank was monitoring a slowdown in global economic growth as it relates to U.S. growth. Powell noted there was a risk that U.S. growth could experience a slowdown as recent fiscal stimulus wears off and the U.S. dollar continues to surge, applying pressure on emerging market economies. Although Powell acknowledged the recent sell-off in the stock market has the potential to affect financial conditions, market conditions are “one of many factors” the Fed looks at and that it is unlikely to impact their stance on monetary tightening. This more “dovish” stance was emphasized on Friday after Fed Vice Chairman Clarida noted that it is important to continue to monitor the incoming data as interest rates continue to move closer to the ‘neutral level.’ Resistance for December bonds comes in around 139 – 25 with near term support seen at 138 -23.

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-Yr T Bond Dec '18 Daily Chart

30-Year T Bond Dec '18 Daily Chart

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Equities

Stocks Gain Overnight

Bill Dixon

The indices are showing signs of strength heading into this morning’s opening bell.  The Nasdaq is leading the charge up 1.25%, while the rest of the indices are 0.6-0.8% higher thus far. Most of the strength in the Nasdaq can be attributed to the FANG stocks (NYSE FANG Index up 2.69%).  The trend has turned down, but many indicators issued oversold readings yesterday.  We often see rallies leading up to Thanksgiving (and then into Christmas), but we aren’t used to seeing this much technical damage leading up to the holidays as of late.  It will be interesting if the seasonal tendency is able to help these markets find some footing.  Volume should be light today, and that can often exaggerate a move higher or lower.   

Markets have normal hours today, but most are closed or have early closes tomorrow and Friday.  Please feel free to email me or give me a call if you would like a copy of the trading schedule.  Have a wonderful Thanksgiving.

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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