December 7, 2018

Volume 12, Issue 49

Feature Article

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Metals - Gold

Gold is Officially Bullish Trend Again

Nicholas DeGeorge

In the early morning trade, February gold is currently trading at $1,249.4 which is up $6 an ounce overnight. Gold has yet again extended its rally that started back on November 13th and now trading at its highest level in over two months. Some of the key issues moving gold higher today is the sell-off in the dollar and the week jobs number this morning which might have caused some safe-haven buying or protection. Furthermore, Fed Chair Powell said that the U.S. labor market is very strong, so over the long hall, strong economic growth should be good for the metals.

If we take a quick look at the daily February gold chart, you’ll see that it’s a very bullish chart. Earlier this week it broke out of the symmetrical triangle pattern its been trading in for the last couple of months. Moreover, it is currently trading at the high on October 18th of $1,252, so if it breaks above this level, the shiny one should enjoy a momentum rally up to it’s 200-day moving average of $1,275 an ounce or higher to the $1,300 handle. The levels I spoke about above are highlighted below on my RJO 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

Could Silver See $15.00?

With the G20 trade last weekend providing some possible relief in China/U.S. trade tariff war and a 90-day halt to any additional tariffs, the U.S. equity markets have had a rough week.  U.S. payrolls came out this morning at 155,000 versus 198,000 expected, showing a possible fear that growth is slowing. Also in news, the U.S. Federal Reserve are showing a “wait and see“ attitude in regard to interest rates, which in turn is weighing on the dollar. This uncertainty in the dollar and U.S. equities has boded well for silver and other metals in the past week.

With that being said, can silver see the $15.00 area?  While gold has been outperforming the silver contract for quite some time now and at the higher end of its range touches around $1250 an ounce, silver has been quite lackluster clocking in around the $14.50 area. While this has been the trend this year, if you look at silver for a cheaper product to invest in, this may be the answer.  With rising global industrial and manufacturing production forecasts in 2019, we remain optimistic but cautious in the short-term.  We think in the short-term silver will continue to be a buy toward the $15 level where it should run into quite a bit of resistance and will take a step back to see what happens on a macroeconomic scale in the next few months and wait to see how things play out.  It may be a great time to look at some excellent options strategies that exist given the above outlook and with our thoughts prices will remain between $14.00 and $15.00 with a slightly bullish sentiment.

Support: $14.43/$14.35

Resistance: $14.64/$14.81

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 Mar '19 Daily Chart

Silver Mar '19 Daily Chart

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Energies - Crude Oil

Crude Oil Respecting $50 per Barrel…for the Time Being

Michael O'Donnell

As of Thursday morning, crude oil traders are digesting a wealth of market developments in the crude oil market as well as outside markets. The weekly EIA report was delayed a day due to the services for former President George H.W. Bush yesterday, and showed a draw in crude inventories of 7.3 million barrels, far in excess of estimates and again in contrast to the previous API number.

Other factors for the crude oil market include the OPEC meetings in Vienna and possibility of a change in output quotas for the year ahead and possibility of a lack thereof.  There are also the slides in equity indices, which many attribute to trade fears, not aided by the arrest of Chinese executive and yield curve inversions.

While some could have considered the draw in EIA to be bullish, the market has certainly not reacted that way. There could be anticipation of the market to break below $50 per barrel but the market has yet again held that level, up to this point. Recall that the drop in January crude oil from the October 3rd high of $76.55 to the November 23rd low of $49.41 is over 35.45%.

Until there is further word from Vienna and Beijing the market could be “held hostage or supported” such as other markets included in the recent G20 announcement (as noted in RJO Market Insights) such as soybeans. Note the support of the last 3 weeks at the $50 level pictured below.

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 Jan '19 Daily Chart

Crude Oil Jan '19 Daily Chart

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Energies - Natural Gas

Natural Gas Coiled and Ready to Move

Jeff Ratajczak

January Natural Gas is in a still in a bull trend, but a close below $4.320 could signal a turn to lower ranges.  Closes above $4.580 may signal blow-off tops to challenge the highs earlier in the month. Until then, the market seems to be coiling and waiting for news to move in either direction. 3 of 5 MA are below the market price, and two of the longer term averages are almost a dollar under the current price.  Momentum studies are at mid-levels, and trending downward. Volume is low because the holidays.  Resistance comes in at around $4.500 then further out just above $4.600.  Support is seen at $4.160.  This is the current trading range, and should be viewed as such. 

Natural storage numbers are delayed a day with the passing of President George H.W. Bush, but the decline is estimated at 57 bcf.  We are below the 5-year avg, but increases in production is making fear of a shortage go to the back of trader’s minds. The next weather reports show higher temperatures going out till later in the month. Any moves out of the normal, should be treated with extreme caution.  Large swings in equity can make the sledding rough.

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 Jan '19 Daily Chart

Natural Gas Jan '19 Daily Chart

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Softs - Cocoa

Negative Global Market Tone and Technical Trade Lead Cocoa Futures

Peter Mooses

Wednesday’s trading session in cocoa pulled March futures down below 2100. At one point the market traded as low as 2095 – testing key support levels. Cocoa futures closed down around 3.5% for the day, leaving the contract priced at 2109. The market saw follow-through following two down days to start the month. If the market breaks lower, look for 2060 to be tested.

Demand in the soft is still in question as is production estimates. The dry season is currently happening in West Africa, which could affect output. El Nino is also heading that way which could also hurt production. As of now, these are “what ifs.”

Globally, equities and commodities have had a rough week. With the shortened trading schedule on Wednesday, we will see what the markets do to end the week. If the equities continue to slide, look for commodities to possibly follow.

Heading into the final weeks of trading in ’18, look for cocoa to recover from this weak few days. The fundamentals are still mainly bullish - poor production possibilities, end of year demand boost and a technical recovery after oversold levels are hit could lead to the March contract ending the year at 2400.

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

March Coffee Resumes Downtrend

Adam Tuiaana

March coffee prices continue to fall far below the 200-day moving average, which was challenged in October and November. The fundamental driver to the downside price action is the formidably bearish supply news coming out of the number one producer of world coffee, Brazil. The Hightower Group has reported “Brazil November exports are at a record high”. In addition, large exports numbers out of Columbia have also added pressure to March coffee prices.

A recent violation of the 11025 level has resulted in continued selling pressure and although many traders feel that March coffee prices are at oversold levels, the market is finding it hard to garner new support from buyers.  Look for a revisit of the 100 level soon.

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 Mar '19 Daily Chart

Coffee Mar '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 12/07/2018

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

USD Needs Solid Data to Continue Higher

Tony Cholly

The USD is finding minor support this morning, but has stayed in a tight range early on because of the flare up in U.S./Chinese trade tensions from Chinese CFO being arrested in Canada and extradited to the U.S. This most likely indicates that traders are waiting on today’s set of U.S. data before the USD can attempt to extend rallies, especially because FED Chair Powell’s recent comments on U.S. rates being close to neutral.  Although ADP survey and jobless claims may be overlooked by traders because of tomorrows employment situation, the trade balance and factory orders readings could have more impact on the markets given what has happened the past week.  Support comes in at 9677 and 9556 with resistance at 9716 and 9736.

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 '19 Daily Chart

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Interest Rates

Treasury Benchmark Rate Continues to Fall Below 3%

Alexander Turro

U.S. bond prices continued to move higher on Tuesday as the yield on the ten year note fell to 2.915% after hitting a seven year high of 3.23% on Nov 8th. This comes amidst a sell-off in the equity market as concerns remain involving the outlook for US economic growth. The gap between the two and five year yields inverted on Tuesday following Monday’s inversion of the three and five year yields. The gap between the two and ten year narrowed to 11 basis points, the smallest difference since 2007. This difference between the shorter and longer term yields are often closely observed as short-term rates have exceeded long term ones before every recession since 1975. Despite being viewed as a recessionary indicator; this shift could be reflected in the Fed officials most recent comments indicating that interest rates may be just below the ‘neutral level’ with further direction expected regarding a pause in monetary tightening at the conclusion of the policy meeting on December 19th. The 30-year bond market is immediate-term overbought with support coming in around 141 – 10 with the next upside target around 144 – 09.

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 Mar '19 Daily Chart

30-Yr T Bond Mar '19 Daily Chart

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Equities

Markets Lower Following Weak Jobs Data

Bill Dixon

The stock indices are in the red in the wake of a jobs number that will be chalked up as a miss. All four major indices are now lower on the day, despite trading in positive territory for a bit after the open.  The reading was anticipated to come in at or around 190,000, but the actual number came in a bit shy at 155,000.  We also saw a small revision lower from the previous reading of 250,000 down to 237,000.  One bright spot was manufacturing. The prediction was an increase of 16,000 jobs, but we actually saw an increase of 27,000. The data also showed an hourly earnings increase of 0.2%.  It’s progress, but that was on the lower end of expectations as well.  The unemployment rate remained unchanged at 3.7%. Consumer Sentiment came in steady at 97.5 versus an expected reading of 97.4. 

Next week’s data is fairly light, but traders will be looking ahead to the FOMC announcement on the 19th. They’re expected to raise rates another quarter point and should shed a bit more light on their intentions moving forward.  Recently, there has been an indication that some of the members are backing off their hawkish stance a bit.  I’m assuming they’ll continue to say something about changes being data dependent, but it seems as though they’re having discussions about veering off their gradual, quarterly rate increases at some point.

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 Dec '18 Daily Chart

Gold Feb '19 Daily Chart

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