December 21, 2018

Volume 12, Issue 51

Feature Article

RJO Futures Echo Trading

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Echo Follower Video

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Metals - Gold

February Gold is Ready to Rally

Joshua Graves

February gold recently broke out to levels we have not seen since mid-July. The biggest news this week came on the heels of the FOMC meeting and the decision to hike interest rates once again by a quarter basis point. This is typically a very bullish event for the U.S. dollar, and bearish for gold. However, in this situation, it was widely expected that a hike was likely, and a more dovish tone was going to be taken by Fed chair Jerome Powell. He did the complete opposite, pressuring gold initially.

Thursday’s move in gold has me confident that we are going to make a run back toward the psychological level of 1300 over the coming months. You have several fundamental aspects that line up right now such as fear (and a lot of it) of economic slowdown and stock market volatility that has investors fleeing riskier assets and pushing money into safe havens. Another reason is the likelihood of a prolonged government shutdown. The border wall is likely to be a sticking point for President Trump, and this will push more fear into the market. The single biggest factor that I see pushing the gold market higher over the coming months besides the obvious stock market selloff, is the break in the U.S. dollar index. It’s pushed down to 1-month lows and broke the nice channel it had been in for months. This more than anything will continue to support gold at the 1250 level, and give it gas to run toward 1300 and beyond.

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

Gold Feb '19 Daily Chart

Gold Feb '19 Daily Chart

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Metals - Silver

Will Silver Push Through $15?

With a wild week in the commodities markets across the board, silver is rallying and approaching the $15 an ounce price level.  With Wednesday’s move by the Fed making a quarter point increase on interest rates, it sent the dollar for a ride down and equity markets taking a very hard and volatile move down as well.  Crude oil is not much better, posting major losses on the week.  With the possibility that the U.S. and global economic growth may be slowing, this has sent money into a flight to safety mode, the gold and silver markets.  But what do we make of it from here?

The 15 level is resistance in the March silver contract. However, the fact that the rate was raised this week may have tempered the outlook next year in the amount of rate increases. Due to this dovish attitude, I feel it has sent the dollar index lower, while also making a benefit to gold and silver.  I certainly believe we will test the $15 an ounce area soon even though gold continues to outperform silver as the gold/silver ratio above 85 still, however, this is historically at the high end of the ratio.  I feel silver will be seen by other investors as a bargain metal to reduce risk while providing a safer and cheaper instrument to invest some funds, especially those that have reduced their equity holdings and for investors abroad who find it somewhat a cheaper investment that is tied to the U.S. dollar.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or

Silver Mar '19 Daily Chart

Silver Mar '19 Daily Chart

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Energies - Crude Oil

Crude Continues Collapse

Michael O'Donnell

As of Thursday afternoon, the February crude oil contract was trading around $46 per barrel, down over $2 per barrel on the day and continuing the slide which began at the beginning of October. While there are a number of fundamental factors listed below, the equalized weekly active continuation chart shows the severity of the damage done the last 10 weeks.

In addition to the record supply from countries such as the United States and Russia, and the implications for OPEC compared to their production and that of Saudi Arabia; there are also factors such as global demand with a number of equity indices trading at their lows for the year and 2019 and 2020 forecasts for decreased growth and GDP.

While the market has been bearish and may remain so given any major developments, bulls may note oversold levels on some indicators and the possibility for the markets to balance, as the multiweek slide in crude pictured below is clearly more pronounced than a number of weeks past.

Also of note are the technical levels of the past and the market’s price action before, during and after such levels.  For instance, the last 10 weeks sell off takes the market to levels it has not been since the run up from June 2017, and prior to that the market spent a good amount of time with less pronounced ranges (on a weekly basis compared to those seen lately)

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

Crude Light Weekly Chart

Crude Light Weekly Chart

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Energies - Natural Gas

Natural Gas in a Slight Uptrend

Jeff Ratajczak

Happy Holidays to all. Natural Gas is in a slight uptrend. After a wild ride the past month, the prices are starting to stabilize and are about half way between $4.600 (resistance) and the  $3.000 mark (support). A gap opening early this week has been closed and I believe the prices should try to fill November’s gap at $3.300 before normalizing and following the weather patterns more closely.  The price action is between the shorter and long-term averages.  Volume is down because of the holidays. Momentum studies are mixed, MACD is pointing down, RSI is at mid-levels and moving sideways.

Weather is still forecast for above normal temperatures for the foreseeable future.  Yesterday, gas traded down to a low of $3.475, but was able to recoup about half of the losses on the day.  Colder weather will be needed over the coming days for bulls to take control again.  Today’s draw is estimated at -136 bcf.  On the demand front, a large deal has been inked with Poland over the next 20 years.  15 -20% of Poland’s gas needs could be taken care of by this deal.  To discuss February Natural gas, or other trades call 888-874-8110.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-874-8110 or

Natural Gas Feb '19 Daily Chart

Natural Gas Feb '19 Daily Chart


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Softs - Cocoa

Weaker Demand, Weather Premium and the Market’s Reaction to the FOMC

Peter Mooses

Markets reacted poorly after the FOMC meeting yesterday, as equities continued to sell off, traders took a risk-off approach. Gold futures climbed, most commodities turned red though. With only 2 Fed hikes being forecasted now for 2019, traders tried to interpret the “hawkish” vs “dovish” hints that followed the minutes.

The March cocoa futures chart looks to be moving higher the last month of the year, but decided to sell-off after the market digested the information provided yesterday. The Euro has moved higher, giving cocoa some support and the potential for the demand side of the equation to recover but this will most likely take some time. Production levels have also given some support but the main factor, global risk, continues to steer commodities.

Weather premium could help prices, El Nino is headed towards cocoa’s key regions in the next month or so, dry fronts are headed towards West Africa and little to no rainfall. If production levels drop early in 2019, prices should test 2400 again before the March contract roll. Monitor the 2250 level for some technical guidance. A move above 2320 should help cocoa get back on course.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-4124 or

Cocoa Mar '19 Daily Chart

Cocoa Mar '19 Daily Chart

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Softs - Coffee

March Coffee Resumes Downtrend

Adam Tuiaana

The coffee supply situation is still putting strong pressure on the March coffee futures. The world’s number one coffee producer (Brazil) has increased their outlook for next year’s production numbers, which will continue to keep the market in check. In addition, the continued weakness and uncertainty in the stock market has resulted in more “risk-off” mentality and we will likely see a continued downtrend situation.

On the technical side, we’ve finally taken out the 100 level, and were able to reach a low of 9860 in today’s price action. Today’s low falls just shy of the September 18th critical support area of 9855. I would expect that we will see a brief short covering rally over the next week with a possible retracement to the 105 level before a continued sell off takes place.

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

Coffee Mar '19 Daily Chart

Coffee Mar '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 12/21/2018

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

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Agriculture - Livestock

Large Supply Pressures Hogs

Tyler Herrmann

The hog market started the week lower after failing to hold Friday’s high of 66.80. Lower trade was seen today despite news over the weekend of two new cases of African swine fever in China. African swine fever could cause a bullish shift to the hog market but right now a large supply is pressuring the market lower. The February hogs are currently trading at a premium to the cash market which adds pressure to the downside. The USDA estimated hog slaughter came in slightly lower for the week but is still up from this time last year. The bulls are looking for China to import pork and other meats from the U.S. to make up for their loss in hog hear due to ASF. Until then look for the market to trade lower, with resistance at this week’s gap of 64.775.

UPDATE (12/21/2018) - If Monday’s low is broken trade lower should continue to support at 62.40 and then 59.675. Strong exports were reported on Thursday morning which could continue to help support if China becomes a buyer of US pork in 2019.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or

Lean Hogs Feb '19 Daily Chart

Lean Hogs Feb '19 Daily Chart

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Trend is Down in USD/Rallies Could Be Lookd At as Selling Opportunity

Tony Cholly

The USD is being destroyed as a result of the tempering of 2019 rate hike outlook. We are thinking the dollar will see more selling following the U.S. initial claims uptick, with the prospect of a temporary avoidance of a U.S. government shutdown giving little reason to bargain hunt the dollar from the long side. It seems like the USD has made a major top, as its distinction as a strong economy has been pierced with the Fed adding recession prospects by its rate hike. The USD in the last positioning report showed a net spec and fund long of 40,999 contracts and that would seem to leave a long liquidation as a force in the USD trade.  Resistance is around 9680 and 9695, while first support is at 9625 and 9580.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or

U.S. Dollar Index Mar '19 Daily Chart

U.S. Dollar Index Mar '19 Daily chart

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Interest Rates

Fed Raises Rates with More Needed

Alexander Turro

The Federal Reserve raised interest rates by a quarter of a percentage point which will bring the federal funds rate between 2.25% -2.5%, the ninth such increase since the FOMC began ‘normalizing’ rates since December 2015. Fed officials pulled back on their projection of interest rate increases from its previous forecast of three to two over the next year with the median projection of the ‘neutral rate’ moved lower from 3% to 2.75%. The neutral level is one that neither stimulates nor slows the economy. The tone was not sharply ‘dovish’ as the committee included a revised statement that more rate hikes would be appropriate as it would “continue to monitor global economic and financial developments and assesses their implications for the economic outlook.” Slight adjustments were made to their economic projections indicating lower inflation and slower growth. Fed officials expect core inflation, which does not include energy and food, to come down to 1.9% from an earlier projection of 2%. GDP expectations for the year were lowered from 3.1% to 3.0% and 2.3% from 2.5% the next. The yield on the benchmark 10-year yield fell to 2.782% after the announcement before retracing, hitting the lowest level since May. The 30-yr bond market is immediate term overbought with the next upside target seen around 146-28 with support around 144-20.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-1120 or

30-Year Bond Mar '19 Daily Chart

30 Year Bond Mar '19 Daily Chart


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So Much for the Santa Claus Rally

Bill Dixon

Death, Taxes, Santa Claus rally.  Well, it appears one of those isn’t quite as certain as we have become accustomed to.  The December e-mini S&P printed it’s high for the month on December 3rd (the first trading day of the month).  It had appeared that we double bottomed on 11/23 and the seasonal rally was back on.  We saw six straight days of higher trading, ultimately topping out at 2819.  At one point yesterday, a mere thirteen trading sessions later, we were 337.50 off of that high print.  The low print of 2441.50 was the lowest seen since August 28th, 2017.  Despite all the negatives, we did manage to close the session up at 2487.75.  The recovery triggered a turn higher in the McClellan Oscillator, which is usually a very good indicator when it comes to picking bottoms in drawn out selloffs on the daily e-mini S&P chart.  Stochastics appear to be nearing a cross, but the MACD still projects lower prices. 

Markets have abbreviated trading hours on Monday, and they’re closed on Tuesday.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5342 or

E-Mini S&P 500 Mar '19 Daily

E-Mini S&P 500 Mar '19 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.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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