January 18, 2019

Volume 13, Issue 3

Feature Article

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Metals - Gold

Feb Gold, A Changing Landscape Could Pressure

Joshua Graves

February gold futures have been on the verge of a breakout in either direction for the past few weeks. The chart has been consolidating for some time and it looks like in the near-term gold is headed slightly lower. Overbought and oversold are terms that are used widely in the trading world and they mean nothing. Markets can remain in these “overbought” and “oversold” areas for months, even years. How can you predict the next move based on those terms alone? gold wasn’t “overbought” as it approached 1300, the landscape simply changed from a fundamental perspective. The recent optimism in the market came with reports of an easing of Chinese tariffs more likely now than in the last 6 months, and general stock market stability have put gold on the defensive. The U.S. economic data continues to show a robust economy, and no real changes that show a cooling.

The partial government shutdown isn’t affecting anything other than politics and airport security lines, but the perception is that it will impact the economy. This should be bullish enough to keep gold in the upper 1200’s for the foreseeable future. A key event that could put gold into wild swings both up and down is the trade delegation from China meeting U.S. trade officials in Washington on Jan 30-31. If framework is reached for a deal you could see gold push to new lows, and US equities to new highs. On the bearish side, if the opposite happens for the meeting and equities push lower it’s likely we see a swift move above 1300 and likely 1325 as the markets runs stops hovering above 1300.

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

Silver Riding the Palladium Wave

Eli Tesfaye

Front-month March silver is trading 15.410 down 11.5 cents on the day. Silver is closing down on the week, but the chart below suggests an upside breakout is likely once the market works itself out through this “coil type” of price actions. The prenominal strength in the palladium market had a spillover effect in other metals. The Brexit implementation has been very problematic, and I’m not sure it will lift silver the coming weeks. The trend is clear, even with the recent pullback, that silver will likely return to the recent highs. Trade most likely retest near 16.00 in my view.

Again, silver is in bull trend and I’m not ready to throw in the towel on this recent pullback.  Technical indicators for the bulls will improve on a break above 15.900, really unless silver trades below 14.600, the bulls will continue to hold a decent advantage.

The Gold/Silver ratio is sitting at 83.26 from a recent high of 86.16 suggesting that “bid” for silver continues to improve relative to Gold. The path to least resistance is to the upside for now, any pullback might be seen as buying rather than selling opportunity.

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 Daily Chart

Silver Mar '19 Daily Chart

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Energies - Crude

Crude Trades Sideways at Resistance

Tyler Herrmann

February crude traded sideways to slightly higher this week, building support above $50. The market couldn’t continue the trend higher that was seen the previous two weeks off the recent low of 42.36 from the end of December. This week’s inventory data didn’t add much support, but demand is improving causing some support. Also helpful for the market, the OPEC production number came in lower than previous months. Fundamentally the market looks to see some short-term weakness before stronger trade in the longer-term outlook. The government shutdown and no progress in U.S./China trade talks haven't seemed to weigh on the crude market. Positive trade today is favorable for the bull camp, with trade over resistance at 53.30 needed for a breakout to the upside. The market looks to be back in a sideways channel between 50.55 and 53.30. The bulls are needing additional fundamental news to continue the trend higher. Momentum studies are showing overbought levels which would accelerate a move lower if support is broken.

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.

Crude Light Feb '19 Daily Chart

Crude Light Feb '19 Daily Chart

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Softs - Sugar

Big Volume on The Rally. Small Change in Open Interest.

Joe Nikruto

This week’s comment finds March sugar fully breaking out to the upside. 120, 000 contracts traded in the March contract on Jan 15th, resulting in a mere 6,000 contract change in open interest. With many government agencies sidelined by political in-fighting there is no account of which trader category holds what size position. It is likely however, that commodity trading funds who were sellers on a trend-following short entry signal 10 days ago were big buyers yesterday. The resulting chart formation is a very good example of what trend-following as trading strategy looks like when it does not work.

We have been waiting for further evidence that production has been declining and yesterday we got some. Hightower comment this morning points to data released by UNICA, the largest sugar producers organization in Brazil, suggesting that sugar production decreased in the second half of December by 38% year over year. This is not the only headline number we will be watching for signs that lower prices have begun to impact production but a step in that direction. Traders will need more confirmation of declining production and continued demand globally for yesterday’s action to ultimately be more than a short squeeze. The number of contracts traded and the relatively small decrease in open interest, coming at a time when many chart watchers are flying blind without Commitments of Traders data, leaves this move ever so slightly suspect.

Fundamental sugar watchers are seeing less sugar. Technical traders see a chart that points to full steam ahead for a rally.  Intermediate trend-followers are getting long now with yesterday’s close over 13.14.  Longer term trend-followers are looking for a move over 14.25 to enter long positions. In the March contract the 50-day moving average comes in at 12.53. If the trend has changed and this rally has legs that will be a level the market should be able to hold above.

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

Coffee Relapse Raises Odds for Major Bear Resumption



In 08-Jan's Technical Blog following that day's bullish divergence in short-term momentum, the combination of that mo failure, historically bearish sentiment levels and the market's proximity to the extreme lower recesses of the past quarter's range warned of a base/correction/reversal threat and gave the bull the opportunity to perform.  This mo failure defined 19-Dec's 98.60 low as one of developing importance and a risk parameter from which non-bearish decisions could be objectively based and managed.

But while that 98.60 low remains intact, the extent of the market's relapse the past few days and it's inability to sustain gains above 26-Dec's 104.00-area resistance-turned-support renders the 98.60 - 106.85 recovery attempt a 3-wave affair as labeled in the 240-min chart below.  Left unaltered by a recovery above 106.85, this 3-wave bounce is considered another corrective/consolidative event that warns of a resumption of Oct-Dec's downtrend that preceded it.  Per such, traders are advised to neutralize and cautious bullish exposure recommended after 08-Jan's bullish divergence in momentum and move to at least a neutral/sideline position ahead of a suspected resumption of a bear trend that could easily resurrect the secular bear trend to indeterminable and potentially severe losses below 95-cents.

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

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Agriculture - Grains

Daily Market Update - Grain Futures

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

Live Cattle Breaking Out

Peter McGinn

Cattle broke out to the upside yesterday. This aggressive buying action and higher close is due to fear that weather is going to disrupt the market in the plains region, along with a lot of short covering. The Texas and Oklahoma region shouldn’t see any type of significant weather for the rest of the week, but Kansas City should be getting some more heavy snow. As of 3:00 pm Tuesday, there has been a standstill in the Southern Plains and in Nebraska. There was inactivity in the western cornbelt due to very light demand.  With a new contract high being made yesterday, the stochastics are entering the overbought levels. The RSI is still below any over buying indication, signaling to me that there is still some upside potential in the market, with a target to the 128.000 price level. USDA boxed beef cutout values were up 56 cents at mid-session yesterday and closed 19 cents higher at $212.21. This was down from $213.98 the prior week. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 239,000 head, up from 237,000 last week at this time and up from 233,000 a year ago

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

Keep an Eye on the British Pound

John Caruso

The March British pound was a big mover in the currency space this week. It currently sits at +220 pts since the start of January, and showing some good bottoming action on the charts. Plenty of news surrounding a Brexit deal this week, with the proposed plan being rejected by an extreme margin in British Parliament, prompting a non-confidence vote against May. She did in fact survive the “no confidence” vote, which would’ve have prompted a general election and caused even more uncertainty and dysfunction within the British Government. Despite the drama within British Parliament, it does in fact appear that the majority are in favor of striking a deal ahead of the March deadline. This is likely what spurred a rally this week in the British Pound. The British pound has been largely held underwater for the past 2 years from what seems to be a never ending drama story surrounding Great Britain’s exit from the EU. With Brexit in the rear-view mirror no later than February, coupled with our “bearish” outlook on the USD, we believe all can breath a sigh of relief and give way to a stronger British Pound in coming months. Upside target in the near-term is 1.3300 with longer-term to 1.3800.

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.

British Pound Weekly Chart

British Pound Weekly Chart

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Equities

Good Week for U.S. Stocks

Jeff Yasak

U.S. stock futures were up Friday, looking for the forth straight day of gains as investors are banking on Washington easing tariffs on Chinese goods. This comes on the heels of a Thursday report claiming US Treasury Secretary Steven Mnuchin was considering scaling back on said tariffs. The gains were not extraordinary, but the market surely is paying more attention to the positive than the negative news. Futures stayed bullish despite rising interest rates, 27 days of government shutdown, Tesla’s layoff announcement and a Netflix earnings miss.

Resistance is checking in at 265600 and 267500 with signs of support at 241050 and 238300.

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 Mar '19 Daily Chart

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.

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