November 30, 2018

Volume 12, Issue 48

Feature Article

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Metals - Gold

February Gold, Is a Rally Possible?

Joshua Graves

Feb gold futures have once again, had a big reason to rally and did not seem to follow through going into today. If you look at the Feb contract this morning, we are trading down almost $9 following a quite bullish speech from Fed chair Jerome Powell. In his speech this week, he had indicated that the Fed in short might be a little slower and cautious with their rate hikes as we go into 2019. The market has all but priced in another rate hike before the new year in December. In theory, this should have bearish effects on gold, and bullish effects on the U.S. dollar index as investors seek a stronger interest-bearing asset. I believe that gold has plenty of room to run from here as the fed could seek a slower path to rate hikes in 2019.

It’s worth noting that Feb gold has been a very choppy, sideways trend for the past several months and there is a pretty big element missing to the gold trade, geopolitical tension. North Korean missiles have been stopped, tensions in the South China sea have been subdued, and there have not been many other areas of turmoil in the world recently. If there isn’t a deal at the G20 meeting this weekend, I would imagine that China will no longer help with the North Korean threat and that’s certainly something to at the very least consider when looking at gold to the upside. I believe that with the chance of rate hike slowdowns, North Korean tensions increasing once more, and a recently shaky stock market there are more reasons than in recent months to position long in the gold market. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-435-4805 or jgraves@rjofutures.com.

Gold Feb '19 Daily Chart

Gold Feb '19 Daily Chart

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Metals - Silver

G20 Hanging Over Silver

Eli Tesfaye

December silver is trading at $14.090, down 19 cents on the day. The morning’s financial news is mainly focusing on the G20 meeting, as the new North America trade deal is signed. There is news to come out of the potential agreement between U.S. and China. Potential affects of the trade deal made at the G20 between U.S. and China, could be a pop in silver price. Otherwise, to expect a downside pressure forcing silver to breach 14.00 level.

The daily chart coming into this session suggests that 14.00 would most likely be taken out. The potential of G20 adverse outcome has overshadowed all the optimism for silver bulls over the indication that the U.S. Fed will slow interest rate hike.  

The Gold/Silver ratio still the highest it’s ever been since early 1993 as per the monthly chart below. Gold is more expensive than silver.  Again, from the technical perspective, Silver is fighting to hold above 14.00. For now, a close below 14.00 in the December futures will signal further weakness.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or etesfaye@rjofutures.com.

Gold Silver Ratio Monthly Chart

Gold Silver Ratio Monthly Chart

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Energies - Crude Oil

The Key Retracement Number for Oil Traders

Phillip Streible

A retracement is a significant price adjustment of an existing trend. Traders commonly focus on Fibonacci retracements, and the three main levels are 38 percent, 50 percent and 62 percent of a prior move. I’m not going to get into all the complexities of Fibonacci analysis just know what these levels are, and what price points coincide with them in the market you are trading. They are key levels that act as a gravitational pull.

A two-day close through one retracement level can signal the markets next move could likely be to the next retracement level. When a market closes below the 38 percent retracement for two days, well often see a quick move down to the 50 percent level, because so many professional traders are watching, and trading based on these levels. Participants may also try to defend these levels for as long as possible to minimize their losses on positions.

Looking at the crude oil again, I will add the Fibonacci retracements to the chart. You can see the move up from low at about $26.00 in February 2016 to the high at about $77.00 in October 2018 creating your Fibonacci range. After mapping the retracements, you can see how important the 38% retracement held initial support. As a trader, you would want to watch for a two-day close below the 38 percent retracement level (which comes in around $58.00). If this occurs, the market is likely to head lower and could push down to 50 percent retracement near $51.50

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.

Crude Oil Daily Chart

Crude Oil Daily Chart

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Softs - Sugar

Sugar Spikes. Funds Forces Into Long Positions?

Joe Nikruto

This week’s comment finds March sugar spiking higher on what wire services have been calling short-covering. Strength in the Brazilian Real and energy markets finding their footing probably aren’t hurting either. So far, the March contract has been unable to surmount the 13.20 level.  Should the market close over this level, commodity trading funds will be forced to enter on the long side. This could be the fuel the market needs to test the 14.00 level. End of year trading can often take place in a lower volume environment due to the holidays, and it doesn’t take much imagination to see “short-covering” taking March sugar futures to recent highs. On the fundamental side, we are starting to see dueling sugar researcher/commentators. A recently released report from a commodity research concern, highlights the emerging discussion about production from India staying near 34 million tonnes. This morning, Hightower group mentions that most analysts have India coming in closer to 32 million tonnes or lower. 

Watch for production estimate revisions in the coming weeks. Indications that production will be higher than the banks and commodity trading concerns have reported will make it difficult for prices to hold above 12.00.  For now, it doesn’t make any sense to fight the chart. The two day spike in March sugar futures has taken the market from 12.36 to 13.21. That is a sizeable move that must be respected. Funds could be in the driver’s seat being pushed up the hill to a cliff. Nimble, short-term traders with the tolerance for the risk can hop aboard for a ride up to 14.00. Recent swing low, 12.33, would be a level traders could use to manage risk. Ultimately, if we see production start to come in over estimates sugar is headed lower. This time of year makes guessing at fundamentals that haven’t happened yet more difficult that it normally is. “Follow the lines on the chart!” a wise man says to me from time to time. Certainly, sage advice. So many great trading opportunities occur in December.   I would only add that having an exit plan or a stop in place is always a great idea. Just in case we are not currently correct.

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

Crude Oil Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 11/30/2018

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

Lean Hogs Look to be Trending Up

Peter McGinn

December lean hogs closed at 57.90 with a bounce off the 50-day and 200-day moving average showing a little strength with the 50 DMA, making it look like it wants to crossover the 200 DMA to the upside. In the upcoming G20 summit, any trade talks that may take place between China and the United States, soybeans and pork will be the main topics of conversation. Any positive news that comes from this meeting will bring the pork prices higher, with imports expecting to rapidly increase if a trade deal is in sight, especially after all the African Swine Fever news that has been coming out of China. After the USDA report that came out last week there was an increase of roughly $5.00 per head, and we started seeing an increase of smaller pig prices, both in the early weans and feeder pigs. The downside news to the market is that the cash market has been weak, with losses coming in the previous 5 days. If China has not yet been increasing their imports of pork, along with the premium of the futures to the cash market right now, then the record supply of pork in the market right now will continue to put selling pressure on the hogs. The USDA estimated hog slaughter came in at 469,000 head yesterday. This brings the total for the week so far to 915,000 head, down from 958,000 last week at this time but up from 908,000 a year ago. The ’19 contracts look bullish and if there is any positive trade news comes between the US and China then that could move the near-term contracts higher in the face of record supply and test the $60 resistance level.

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.

Lean Hogs Dec '18 Daily Chart

Lean Hogs Dec '18 Daily Chart

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Currencies

Expect Japanese Yen to Turn Higher

John Caruso

The Japanese yen has largely been caught in the crossfire of the U.S./China Trade War. Any positive news that comes out of this weekend’s summit between Trump and Xi Jinping should be a “win” for the Japanese yen. Japan saw their October retail sales figures come out on Tuesday at a very strong 3.5% vs an expected 2.6%. More Japanese data was released overnight and was fairly mixed, however they did see the strongest jump in their factory output data since 2015.  We’ve also heard some speak out of the BOJ, suggesting that Japans extended period of low interest rates have actually begun to have a negative impact on economic activity – that’s was a slightly hawkish statement out of the BOJ and could imply that they may begin to allow their interest rates (JGB Yields) float higher.  I’d be hard pressed to suggest that I’m bullish on the yen, but I do expect a turn back higher in the Japanese currency on the back of strong data, and perhaps some sense that the US and China are beginning to find some common ground on trade. The yen remains bearish trend, with immediate downside to 87.60 and upside to 88.50 – that’s the immediate term range that should be risk managed.

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.

Japanese Yen Weekly Chart

Japanese Yen Weekly Chart

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Interest Rates

T-Notes, Bunds, Eurodollars Reaffirm Bullish Counts, Define New Risk Levels



MAR 10-Yr T-NOTE

Overnight's break above the 119-1/4-area that has capped the market as resistance in the now-prompt Mar contract for the past week-and-a-half reaffirms the developing uptrend and leaves yesterday's 118.305 low in its wake as the latest smaller-degree corrective low it now is required to fail below to confirm a bearish divergence in momentum, stem the rally and expose at least a more significant correction lower.  In this regard we are defining 118.30 as our new short-term risk parameter from which a still-advised bullish policy and exposure can be objectively rebased and managed.

Former 119-1/4-area resistance is expected to hold as new near-term support per any broader bullish count.

To read the full article RJO Futures clients may login here to the client portal and access all RJO Market Insights.

10-Yr Note Mar '19 240 Min Chart

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Equities

Stocks Dip In Front of the G20

Jeff Yasak

After a rally Wednesday led by Federal Reserve Chair, Jerome Powell’s, dovish comments U.S. stock futures are set for a lower open today.  Investors are taking a cautious approach with the trade talks between the U.S. and China coming up this weekend at the G20.  Presidents Donald Trump and Xi Jinping will hold a side conference Saturday at the summit in Buenos Aires. Traders will need to see some progress in the talks between the two sides to bring the market back to the highs it had in fall.  The market will also be looking at the release of the Fed Reserve minutes from the Nov. 7-8 meeting at 2 p.m. EST.  The Fed chose to hold the fed-funds rate steady at rates between 2% and 2.25%. Major earnings today include HP, Dell and Palo Alto Networks. Market support today at 271400 while resistance comes in around 275000.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-861-1656 or jyasak@rjofutures.com.

E-Mini S&P 500 Dec '18 Daily

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

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