January 11, 2019

Volume 13, Issue 2

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Metals - Gold

Gold in Bullish Trend

Nicholas DeGeorge

In the Friday morning trade, February gold is slightly in the green and currently trading at $1,289.7 a troy ounce. Since the middle of December, the gold market and the U.S. dollar have been closely tied together, especially this week. For example, the shiny one sold off on Thursday as the greenback recovered and then vice-versa in the overnight trading session. Some might say that gold is overbought after it couldn’t hold above the $1,300 an ounce handle last Friday. However, I would be careful to think gold can’t trade higher with the numerous ongoing issues such as: US/China trade negotiations, US Government shutdown, and you could even say Brexit. If these issues start getting worked out, then I would get less bullish.

If you look at the February daily gold chart, you’ll clearly see that gold has created a strong uptrend starting back in the middle of November which has put it back in bullish trend. The trend is your friend, so as long as gold stay in bullish trend look for higher prices. If the issues I mentioned above don’t get resolved within the first quarter of 2019, then I would not rule out $1,400 an ounce gold.

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

Where Does Silver Go From Here?

After a nice rally over the course of December due to a stock market sell-off, a scaling back from the Fed with its monetary policy, and a breaking dollar, the silver market has some resistance in the $15.75 per ounce area.  However, with the stock market as unstable as it is, many in the industry are calling for a big push higher regarding the precious metals and are bullish on silver in 2019. I think the support for silver is about $15.20 and about as far of a pullback we will have from here. I agree with the bullish consensus, and if you look at the gold/silver ratio which I have been writing about, I feel investors will look at silver as an attractive and cheaper metal to invest in.

I believe the recent run up with the equities has paused the rally in gold and silver, but I think the equity market is going to pause too as we wait for more information. I have resistance levels around yesterday’s close for equity markets. Overall, I believe silver has the potential to go much higher in 2019, reaching above $17 and possibly hitting $18. With rising inflation and a gold/silver ratio as high as it is, I feel 2019 will be a great year for the metals and we have many strategies in place to take advantage of the situation for the upcoming year.  We may be a little overbought now due to the recent run up, but I would be buying dips in the market. We can really take off if we get through and break the trend line on the weekly chart below.

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 Weekly Chart

Silver Weekly Chart

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Energies - Crude Oil

Crude Ready for Direction

Michael O'Donnell

As of Friday morning, the crude oil market is experiencing some chart damage relative to the recent recovery in prices amid sentiment, which some may say has been risk off the past couple mornings. Visible in the 4 hour chart below are the varying levels and fundamental factors which may be considered.  While the market has recovered somewhat from the nearly 45% drop from the mid-high $70s to the low $40s, it market seems poised for an outbreak based on the levels pictured.  Should a risk off sentiment build and this morning’s chart damage continue, the trend line pictured may be broken.  Should new highs be made with the pictured resistance being broken and becoming new support, there could be some space for the market to return to previous levels seen before the drop.

In addition to the possibility for the market to act as a proxy for global economic sentiment, the typical inventory, production and supply reports should be monitored as wel

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 Feb '19 Daily Chart

Crude Oil Feb'19 Daily Chart

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Energies - Natural Gas

Natural Gas Trending Sideways

Jeff Ratajczak

After a rocky Nov and Dec. the trading range for natural gas is between $2.800 and $3.000 with a sideways trend.  Just like last year, not much happened until November when price basis March ran to $4.600.  Support comes in at $ 2.770.  Resistance is at $3.028.  Eventually, I believe the price will try to fill the gap to 3.109 as soon as the weather turns to a more seasonable pattern. Momentum studies are at low levels and turning up now.  Until we get confirmation from the other indicators, price action should stay in the range.

It’s cold in the Windy city, but weather forecasts signal above average temperatures for the coming 2 weeks.  Today’s est. is for a draw of -62 bcf.  The actual storage number was closer to -92 bcf, however the market seems to be absorbing the draw with no problem. As of Thursday morning, natural gas is up around 3.5 cents at $2.870. The top of gap should be taken as a profit target.  Support levels can be used to bail on bullish strategies and colder weather should support prices as the polar vortex moves in later in the winter.

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 Mar '19 Daily Chart

Natural Gas Mar '19 Daily Chart

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Softs - Sugar

Sugar Rallies on Dryness in Brazil, Strength in Crude

Tyler Herrmann

The sugar market started the week spiking higher on Monday, closing at 12.63 and wiping out last week's loses. Support for sugar came from strength in crude oil with news of Saudi Arabia planning to cut exports as well as continued strength in stocks. Dry conditions in key growing regions of Brazil also added strength with the possibility of a decrease in production for this year. India’s sugar exports are behind government projection levels for the year, a sign of lower production as well. If continued, these events could cut into world supply and cause a longer-term move higher. Funds held a net short position that would accelerate a move higher on short covering. March sugar has put in a near term low, and has reverse the short-term trend to the upside. Resistance comes in at 12.95 with support around 12.50. A close below 12.30 would reverse the trend back to the downside with the most recent low of 11.69 as the target. Look for sugar’s strength to continue as the market builds a longer term trend higher and tests the October highs of 14.24. 

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

Sugar Mar '19 Daily Chart

Sugar Mar '19 Daily Chart

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Softs - Cocoa

Cocoa Futures’ Fundamentals – Running in Circles

Peter Mooses

Cocoa futures continue the same story; will the demand outlook brighten? Will supply be low? Is the weather premium already accounted for? These are the constant questions that carried us through the 2018 trading year.

As we trade in the new year, the techincals appear to be taking the lead. Overbought levels have been reached, causing a slight pullback. The March contract has traded between 2350 and 2425 – 2400 is a key level. A close and hold above 2400 should help traders see new highs this year.

Although most fundamentals appear bearish, prices have stayed strong. Weather premium may have already been put into the market. That being said El Nino events have been fairly calm, main growing areas have seen mild weather - do we have some downside ahead due to these factors?

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.

March ’19 Daily Chart

Cocoa Mar '19 Daily Chart

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Softs - Coffee

March Coffee Perking Up!

Adam Tuiaana

A massive short-covering rally is underway as March coffee prices continue find solid support among some key fundamental issues. The Brazilian currency has been very strong, while major producers such as Columbia and Indonesia fear potential threats from El Nino this year. The Hightower Group has reported “with the market less than 3 cents above the level from where the last COT report was measured (December 18th), coffee should still have a sizeable net spec short position that can fuel short-covering.” I believe this is just getting started.

A double-bottom at the 10250 level prompted a rally to break above the 10710 level, which has been a good resistance level and consolidation high. With this strong rally on high volume and RSI levels, I’d expect to see some immediate follow-through buying take place to push March coffee prices back to the 115 level, and then ultimately to revisit the 200-day moving average (approximately at 119).

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 - 01/11/2019

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

Dovish Tone From Fed Should Give the USD Trouble in Extending its Recovery

Tony Cholly

The USD has found some support after going down and testing the 12 week low, but it will take much higher trade to repair the damage done to the chart this year. The recent dovishness from the Fed could be underscored by the December FOMC meeting minutes which noted that many officials felt that the Fed could be patient on further rate hikes and that the timing of further rate hikes is unclear.  The economic slate for the US remains bleak with only jobless claims numbers to digest this morning, so the USD will continue to decide on a direction based on another busy day of Fed speakers.  The next area of resistance comes in at 9115 and 9575, while first support hits today at 9430 and 9400.

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 Mar '19 Daily Chart

U.S. Dollar Index Mar '19 Daily Chart

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Interest Rates

Fed Provides Flexible Outlook on Rates

Alexander Turro

U.S. government bond prices are moving higher and are on positive footing to start this morning, following a reaffirmation by Federal Reserve Chairman Powell that the central bank will be flexible in its outlook in raising short term interest rates this year. This comes amidst a release of inflationary data from China showing a steep decline in consumer and producer prices from last month, the latest evidence of a slowdown in the world’s second largest economy. Consumer prices rose 1.9% from a year earlier, while producer prices increased only 0.9%, which was the lowest rate in two years. The minutes of the December 18 – 19 meeting were released on Wednesday indicating that officials may be close to ending their series of rate increase after raising rates by a quarter of a percentage to a range between 2.25% and 2.50% and penciling in another two hikes in this year. Chairman Powell confirmed that concerns exist over slowing global growth as well as the ongoing trade tensions despite stating that the “U.S. economy is solid’ as well tentative advances between the U.S. and China. Resistance for the March 30-yr bonds is seen around 146 -13 with support coming in around 143 – 31.

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-Year T Bond Mar '19 Daily Chart

30-Year T Bond Mar '19 Daily Chart

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Equities

E-Mini S&P 500 Mar '19 Daily Chart

Bill Dixon

Following five straight days in the green, the e-mini S&P is in the red by a decent amount in the wake of the opening bell.  The slate of news Friday was very light.  Only the day’s CPI reading stood to potentially shake things up a bit however, it came out perfectly in line with expectations. Month-over-month readings came in at -0.1 percent, down from 0.0 percent at the last reading. Year-over-year readings came in at 1.9 percent, down from the last reading of 2.2 percent.  We’ll see a good amount of readings next week, highlighted by PPI, retail sales, housing starts, and a number of speeches from members of the Federal Reserve.  Traders will continue to look for any updates concerning China and the government shutdown as well.   

Despite rallying approximately 160 points in the previous five sessions, RSI still isn’t registering overbought readings.  Many technical indicators still forecast higher prices in equities.  Some of those readings don’t appear to be quite as strong as they were earlier in the rally, but I don’t see a whole lot on a daily chart that projects lower just yet.

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 Mar '19 Daily Chart

E-Mini S&P 500 Mar '19 Daily Chart

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