December 14, 2018

Volume 12, Issue 50

Feature Article

RJO Futures Spotlight - Our Trade Desk

While the Market Strategists might be the most recognizable employees at RJO Futures, there are many more employees who work tirelessly behind the scenes to keep the machine running. Today we’d like to put the spotlight on the Trade Desk Associates: Lisa Baker (8yrs), Maiesha Coleman (19yrs), Michael Demer (8yrs), Eric Larkin (15yrs), and Paul Henkel, whose diligent and exceptional work are the backbone to RJO Futures, we’d be lost without them.

The trade desk is crucial to the day to day business of RJO Futures as our associates are the ones who handle all money and trades that go in and out. On top of that they also do all of the risk management for RJOF, the billing for RJO Futures PRO, and provide preliminary tech support for all the trading platforms we offer.

Although all the above responsibilities are crucial to the success of RJO Futures, the Trade Desk’s most important responsibility is providing exemplary customer service to all of our clients because without our customers, we are nothing.

When asked about customer service, 8-year Trade Desk veteran, Michael Demer said, “It’s not enough to just help solve a problem, I try to show customers that we care about them. I try and learn what I can from customers that complain, you can learn more from a complaint than you can from a satisfied customer.”

This attitude and sentiment is shared by all of our Trade Desk Associates and is the reason why we continue to be a successful company. Thank you to our Trade Desk, for all your hard work.

RJO Futures Trade Desk

From left to right: Michael Demer, Lisa Baker, Eric Larkin, Maiesha Coleman and Paul Henkel.

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Metals - Gold

February Gold, Chinese Data to Spoil Everything?

Joshua Graves

February gold is trading back down toward the 1225 mid-range level where we’ve spent the better portion of 4 months, driven mainly on the Chinese data this morning. China posted a clearly disappointing retail sales number for November of 8.1% compared to the guess of 8.8%. This is what is driving almost all commodities lower this morning. Among the data was also the Chinese industrial output number of 5.4% vs 5.9% that was expected.

Other key reasons gold is down this morning are the most obvious and historically important for driving gold one way or the other. The first, is a very strong US dollar that is making new highs. The second, is a tone that suggests a more hawkish US Fed at the upcoming meeting on December 19th. Gold is trading down roughly $10 this morning at 1239. After breaking out above 1256 just briefly on Monday. I think that gold is still going to be supported in this range, but a new catalyst is needed to get the gold bulls excited again. If the fed were to take a step back on a rate hike, it would likely be seen as a surprise and move gold well above recent highs. The trade is discounting a rate hike at a coin flip essentially, as compared to as high as 90% just a few months ago. Stock market volatility, and mixed economic data has the fed concerned that rate hikes too aggressively could derail the soaring US economy.

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

Gold Feb '19 Daily Chart

Gold Feb '19 Daily Chart

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Metals - Silver

Silver in a Tight Range

Eli Tesfaye

December silver is trading $14.580, down 27 cents on the day. Per the weekly chart below, silver is sitting in a tight one-dollar consolidation for the past four months. A “Safe heaven” type of strategy hasn’t worked out for silver so far with the U.S. “government shutdown” talk back in the news. The dollar is relatively strong this morning adding another pressure to silver and metals in general. So far, silver is weak just like any other commodity, but if the battle over government funding heats up, more upside likely.

For now, sitting in consolidation waiting for direction. Sideways trading strategy using options might be an ideal way to approach this market. The Gold/Silver ratio is sitting at 84.82 from a recent high of 86.16 suggesting that “bid” for silver is improving relative to Gold.  As the old saying, “trade what you see not what you think.” The lack of any "flight to quality" type of market condition. leaves the bears with a bit of an advantage.

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.

Silver Mar '19 Weekly Chart

Silver Mar '19 Weekly Chart/p>

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Energies - Crude Oil

Crude is a Coin Flip at $50

Phillip Streible

Crude oil futures continue to hold support at $50 and need to build off bullish developments that are in the works. Recently OPEC had cut production by 800,000 b/d and Russia joined in by cutting 400,000 b/d. While global economic data has slowed in recent weeks we should see a pickup in 2019 after the FED completes its interest rate cycle. Also if trade tensions with China can continue to ease this should provide the underlying support to boost oil through near term resistance at $55. Looking at the daily January crude oil chart you can see that it has formed a base right at $50. While the average true range sits at $2.38 /d if crude can string together two or three straight days in the same direction another bull or bear move would be in the works.

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 Light Jan '19 Daily Chart

Crude Light Jan '19 Daily Chart

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Softs - Sugar

Sugar Volatility Event on the Horizon?

Joe Nikruto

This week’s comment finds March sugar futures moving aggressively sideways.  After a spike higher at the end of last month it appeared that March sugar was ready to break out to the upside. Wire services have been replete with bullish supply guesstimates from every bank, industry association and farmers co-op even remotely involved with sugar. Outside markets have stabilized somewhat. March sugar, resting just below the 50-day moving average and laying on the shorter term 10 and 18-day averages, could be rolling over. In a market moving sideways, like sugar has been, it only takes a day or two worth of price action to change the technical picture.

If you subscribe to the fundamental narrative, sugar is just marking time until it’s off to the races with an upside breakout but, every day that sugar doesn’t break out, and the technical price action does not support the fundamental view, the March sugar futures contract gets heavier. Funds are mildly short, a little more than 50k contracts.  The market is not technically positioned for funds to be short. In effect they appear to be early to the short side. Price action below 12.16 would warrant entry on the short side but the market has yet to trade below that level in November and December.  It could well be that the managed money community is making bets on sugar basis the weakness in Crude and RBOB. This puts sugar in an interesting position as we work through the Holiday Season.

 If March sugar trades over 13.20 it could be that these recent short bets are underwater and may be forced to capitulate. This buying back of short trades could help fuel a move to the upside, exacerbated by Holiday trading conditions. Same goes for a move below 12.10. Commodity trading funds currently on the sidelines will be entering new short positions and funds already short will add to positions. In what most would consider, at least for now, a sleepy market, options traders not in a cookie induced coma may be able to find opportunity with a rather reasonable amount of risk.

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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Softs - Coffee

Tighten Coffee Bear Risk "Down Here"



The past few days' continued losses reaffirm the broader relapse from 19-Oct's high.  This slide leaves a litany of corrective highs in its wake, the latest smaller-degree one of which is 07-Dec's 107.00 high.  The market's failure to sustain losses below this level will confirm a bullish divergence in momentum.  But while such a minor mo failure will be of an insufficient scale to conclude anything more than an equally minor corrective bounce, traders are advised to err on the side of a more significant base/reversal process given the more extensive size of Oct-Dec's prospective correction of Sep-Oct's sharp and major rebound.  In this regard we're identifying this 107.00 level as our new short-term but potentially pivotal short-term risk parameter from which a still-advised bearish policy can be objectively rebased and managed.

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

Coffee Mar '19 240 Min Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 12/14/2018

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 - Grains

Senate Passes Farm Bill

Tony Cholly

On Tuesday, The senate voted overwhelmingly (87 to 13 vote) to approve an $867 billion farm bill as congress will pass legislation that will help an agriculture industry battered by the trade war.  Below, I will look to list of a few of the main highlights from this bill.

- This bill works to address the 5 year-52% decline in the farm economy, by providing certainty that an extension of current policy cannot provide.  The bill strengthens ARC (ag risk coverage) and PLC (Price loss coverage) options through 2023.  This gives producers an opportunity to make a new elections between ARC and PLC with several improvements. 

- SNAP, (Supplemental Nutrition Assistance Program) the nations flagship nutrition program had over 35 improvements made to it.  Most notably, existing work requirements are strengthened, streamlined and paired with a variety of options to increase opportunities for SNAP recipients.

- Farmers affected by unfair foreign trade are going to be helped.  Also, funding for vital tools and market development will be provided.

- The farm bill is going to streamline and reduce regulatory burdens.  The bill includes common sense reforms to the conflicting Endangered Species Act consultation process regarding pesticide to ensure farmers have the safest crop protections tools.

- As far as focusing on rural development, the bill focuses on bringing jobs to rural areas, where jobs have seen a decline due to the sharp downturn in the farming economy.

- Finally, the bill addresses helping beginning farmers and ranchers.  It does this by enhancing crop insurance to new farmers, as well as establishing scholarship programs designed to assist students interested in careers in agriculture.

To learn more about this recent Farm Bill and how it will affect you, please read the official House Agriculture Committee Highlights piece.

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.

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Agriculture - Livestock

Recent Live Cattle Rally Leads to Close about 50-Day Moving Average

Peter McGinn

Yesterday, we saw a rally in both the feeder and live markets with a close in the Feb live cattle above the 50-day moving average at 122.475. Exports of beef from Brazil have an expectation to reach a level of about 1.6 million tonnes for the year of 2018, with next year having an expectation to reach a record level of 1.8 million tonnes. China has emerged as the world’s largest importer of beef, but not necessarily from the U.S. In 2018, China will import roughly 4,000 tonnes of U.S. which is a fraction of the amount they will import from countries like Brazil. Overall, the major trend in the market could be turning up with that close above the 50 DMA, the next upside target in the market is 123.900 and test the contract highs. Boxed beef cutout values are lower on choice cuts and firm on Select cuts. select and choice loin cuts are steady while chuck and round cuts are firm. Choice rib cuts lower while Select weak. Beef trimmings mostly slightly lower on light demand and offerings.

In the pig market, we are seeing the market in the process of correcting itself with the overbought conditions and the wide basis due to the still high number of near-term supply. The market gapped lower on the opening yesterday which continued to draw new sellers into the market, driving down to the lowest close since November 28th. USDA pork cutout values were $71.35 which was up 17 cents from Monday and up from $69.78 in the previous week. The outlook into 2019 for the pork market remains bullish.

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 Feb '19 Daily Chart

Live Cattle Feb '19 Daily Chart

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Currencies

U.S. Dollar Stays "Winning"

John Caruso

What it all boils down to in the currency space is the USD (+0.62% this morning) continues to be the “cleanest” pair of dirty underwear in the drawer. It’s honestly as simple as just about everything else, the world continues to slow at a faster pace than the U.S. More European data releases in the overnight continue to show a multitude of problems across the European region, in the likes of France, Germany, and Italy. Furthermore, yesterday we received the U.S. budget data that ballooned to 205B in deficit spending, +52% compared to last year at this time.The idea that the “Twin Deficits” via the fiscal deficit (domestic spending) and Current account deficits (imports vs exports), that are both running in the “red” for the US has largely been the bear case for the US Dollar for quite a while now – and at some point this will matter, but clearly not at the moment as other mainstream economies around the world continue to slow at a faster pace than the US. Remember, Q4 2018 data releases don’t begin until January / Q1 of 2019.

This is when we believe the bull case for the U.S. dollar begins to show “cracks in the ice”. One of the main beneficiaries of the dismal state of the U.S. twin deficits, we believe will likely be the Japanese Yen. We’ve heard some inklings out of the Bank of Japan recently that their long running “easy” monetary policies are beginning to have a negative impact on the Japanese economy and that they may have to begin playing catch-up with the rest of the Worlds tighter policy outlooks. We have no hard evidence of such a pivot by the BOJ, but we do believe based on recent speeches coming out of Japan’s Finance Minister Aso may warrant a slight turn in the BOJ’s monetary efforts at the BOJ meeting next Thursday, Dec 20th. Coupled with the USD and the Fed perhaps taking a more “wait and see” approach to additional rate hikes, trying to get the timing correct on this call will of course be the hardest part. In the meantime, the trend remains your friend in the USD vs Yen pair trade. Stay tuned for more updates.

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

U.S. Dollar Index Weekly Chart

USD Weekly Chart

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Equities

Stocks Mixed Amid Ease In Trade Tension With China

Jeff Yasak

The overnight stock markets were generally mixed with China and the U.S. coming in higher on reports of an arrangement that China will purchase 2 million tonnes of U.S. soybeans. This arrangement helps ease some of the tensions from the U.S./China trade standoff. Treasuries and the dollar edged higher as U.S. jobless claims came in below estimates. The claims dropped to 206,000 while Reuters had forecasted 225,000, this is near a 49-year low.  European stocks rallied slightly after UK Prime Minister May won a no-confidence vote and Italian Prime Minister Conte put forward a cut in the deficit target, both should ease tensions in the EU.  However, May did not come out unscathed as the Wednesday vote had one third of lawmakers voting to remove her.  After hour earnings are highlighted by Adobe and Costco.

Support today is 262000 and 260000 with resistance coming in at 267500 and 271000.

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 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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