February 1, 2019

Volume 13, Issue 5

Feature Article

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Metals - Gold

Gold to Keep Shining Into 2019

Joshua Graves

April gold futures have been surging amid several factors, with the primary reason being a very dovish fed from the last FOMC meeting. April gold has finally broke through the psychological and technically important 1300 level, to what I would now perceive as a brand new trading range. April gold should now trade between 1260 and 1400 for the foreseeable future. The lows in this contract were around 1200 back in August and October of 2018, now the most recent mid-December low of 1260 becomes a legitimate area of support. 1400 is a level that is still far away from current prices of 1325, which would be a level we have not seen since January and April of 2018. The bulls are firmly in control right now, as the supporting factors clearly support gold and make a case for a sell-off in the U.S. dollar which typically trades opposite of gold.

We have a very dovish fed, a government shutdown that’s likely to happen once more in 2 weeks, and a trade deal with China that even as progress was made this week still seems miles away. There are too many big issues to resolve before the March 1 deadline when 200B worth of tariffs go to 25% from 10. The economy in China is slowing down, and some US companies industrial companies such as CAT are whiffing on earnings leading investors to believe there could be a slump around the corner. The perception of this alone is enough to keep gold well supported for the foreseeable future. I’m short term bearish as this run up has been significant enough for the longs to take chips off the table, but longer term bullish on the metal.

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 Apr '19 Daily Chart

Gold Apr '19 Daily Chart

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Metals - Silver

Silver Profit Taking

Eli Tesfaye

Front-month March silver is trading 15.980 down 8.5 cents on the day. Silver is still relatively strong coming off the week's dovish Fed outlook as well as the weak dollar. Pull-back in silver would be a buying opportunity rather than selling. I have previously stated, trade most likely retest near 16.00. I still think more upside in silver. If you are not long already either using options or futures or any combinations, I suggest sit tight for a decent pullback.

Still, hold the view that Silver has a bit to go on the upside. Also, the gold/silver ratio is sitting at 82.75 from a recent high of 86.16 suggesting that “bid” for silver continues to improve relative to Gold. Again, 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 Oil

Crude Oil Gearing up For a Rally

Phillip Streible

Crude oil futures continue to coil in the all too familiar Bill Williams alligator pattern. This is where the belief that the markets spend about 75% of the time consolidating and 25% of the time trending once the sleeping alligator wakes up. Oil right now has the fundamentals lining up to make an explosive move higher while the biggest headwind crude oil faced last year was Donald Trump’s aggressive stance towards pushing prices lower. He won that battle and has since then shifted focus towards the border wall and the U.S./China trade agreement. Once the trade agreement has been resolved we should see the bull camp take over on a reemergence of the Chinese economy and a pickup in exports. This leaves the import picture in question with a very delicate situation in Venezuela. Venezuela historically has exported on average 16 million barrels to the U.S. and now those exports have been shut off.

Below is a daily March Crude Oil chart where a push over $55 should clear the way for an aggressive move back to the 200 DMA.

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 Mar '19 Daily Chart

Crude Light Mar '19 Daily Chart

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Softs - Sugar

Sugar Chart Points Lower

Joe Nikruto

This week’s comment finds sugar trying to hold above last Friday’s low. March sugar futures dropped from 13.01 to 12.37 with over 120k contracts trading hands. Big drop on big volume. This was even more notable as it came on the heels of an upside breakout on heavy volume just 6 sessions earlier. To my mind, what’s left on the chart is a wholesale rejection of the 13.00 level. Since then sugar has labored mightily to regain the higher ground near 13.00, trading as high as 12.93 and 12.85 in succeeding sessions. So far, that work has been in vain, but right now March sugar sits at 12.77 and has been as high as 12.85.  Chart watchers will also note that sugar in the 12-13 range occupies a kind of technical middle ground that can make attempts at a directional call treacherous. Still, it may be that chart is portending better news on the horizon from global sugar producers.

Wire services in the last few months have been rife with banks and associations tied to the production of sugar calling for dramatically reduced sugar supplies this year. Recent technical action may be telling us that revisions to these calls are forthcoming. Again, because of where sugar is currently, treading water it won’t take much to reinforce either a bullish or bearish view on the charts.  Yesterday’s Hightower comment highlighted the fact that there has not been a Commitment of Traders report for some time as the government has been shut down. Hightower holds the opinion that the fund trader category often referred to as Managed Money or Large Speculator holds a large, maybe excessively large, short position.  Since the report has not come out in so long it is impossible to know for sure, but with the March contract recently trading over 13.00 it is very difficult to see the fund category maintaining longs in the face of such price strength.  The CFTC intends to begin releasing the delayed reports in piecemeal fashion. Here is the text from cftc.gov:

“COT: The last COT report was published on December 21, 2018. Reports going forward from that date will be published in chronological order beginning with the report previously scheduled for release on Friday, December 28, 2018 (based on data from Monday, December 24, 2018).  The CFTC expects to publish this report on Friday, February 1, 2019. After this, the CFTC expects to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule.”

That isn’t awkward at all! Why can’t they just release all the reports at once and get everyone caught up? Our tax dollars at work, or rather, not at work.  Sugar, technically, is suspect and points to lower prices. As mentioned above, it won’t take much to change that so trade with care no matter which side of the bull/bear discussion you occupy.  This area, while indeed a tough place to take a shot, could reward those who can take the risk. Looking at March puts, we notice there is only 15 days until expiration. The May options offer 74 days until expiration at only twice the premium.  Traders who think sugar can drop hard and fast could have the March options for very little in the way of premium cost, but time waits for no person. If one is going to position for either short side or the long side, it might be wise to spend up for the May options and the extra time. One way or another sugar isn’t going to be sitting here at 12.80 come April.  Keep your eyes on the headlines for sugar in case some new fundamental comes along to save the day for the bulls. Closes outside a 13.25 – 12.05 channel can be used be used to toggle exposure or manage risk, long or short. 

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 - Cocoa

Cocoa on Track for Another Negative Week

Tony Cholly

Cocoa prices have fallen for three trading sessions in a row and looks to start today over 100 points below Monday’s high and on track for a fifth consecutive negative week.  While recent wet weather can begin to ease concerns with the upcoming west African mid-crop, cocoa’s demand outlook could improve if key outside markets have a positive turnaround. For the month of January, cocoa prices fell by 268 points for a loss of 10%.  Cocoa’s turnaround coincided with a sell-off in the euro currency that fell from a new 2.5 week high well into negative territory late in the day.  Fourth quarter euro zone GDP posted its lowest year over year increase since early 2015, which weighed on European equities as well. There were some positive vibes from U.S./China trade talks that could give a boost to Asian and North American demand prospects.  Producers in the Ivory coast remain optimistic about their growing conditions with plantations in the east showing leaves that are green and pods on the trees.  Resistance comes in at 2180 and 2200 with support at 2150 and 2140.

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.

Cocoa Mar '19 Daily Chart

Cocoa Mar '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 02/01/2019

Stephen Davis

 

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

Frigid Conditions in Midwest Effecting Livestock

Peter McGinn

Right now, the April live cattle market is short-term bullish and ready for a push to the 128.300 level. If we see a close above this level, that could indicate that there will be a climb to the weekly high of 130 .100. There is some support coming from the frigid weather sweeping through the Midwest making it difficult to maintain cattle weight gains, so once the cold passes the upside may be somewhat limited. Furthermore, there are continued talks of strong packer margins due to higher beef prices which have helped the market keep its bullish trend. Traders are continuing to see poor feedlot conditions and slow weight gains which is causing even more support in the market. The next cattle on feed report is expected to show placements in December up around 1.2% from last year, marketings near unchanged, and January 1st on-feed supply 2.2% above last year. April cattle closed moderately higher on the session yesterday as the market continues to advance on strong beef prices. USDA boxed beef cutout values were up $1.61 at mid-session yesterday and closed 73 cents higher at $218.13. This was up from $216.34 the prior week and is the highest beef market since November 7th. The USDA estimated cattle slaughter came in at 119,000 head yesterday. This brings the total for the week so far to 237,000 head, up from 235,000 last week, and up from 234,000 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 Apr '19 Daily Chart

Live Cattle Apr '19 Daily Chart

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Currencies

Currency Wars, Are They Back?

John Caruso

My two favorite currencies moving forward are the yen and British pound. We have held a fundamental view since November that the USD’s best days are likely behind it. We heard from a very obedient Federal Reserve Committee on Wed - expressing that they have now put their interest rate hikes on hold for the remainder of the year.  This is not a bullish scenario, as less aggressive interest rate policies tends to lead to a weaker outlook for the USD. On the other side of this outlook is the Euro Currency, that as all currency traders know, carries an inverse relationship to the USD. It’s our fundamental outlook that the euro zone could be barreling towards a recession and we fully expect the ECB to react in kind to the U.S. Fed with a more dovish monetary policy stance. 

So what do you do? You don’t want to buy the USD and you don’t want to be invested in the euro – we think the bullish case for Gold (yes I consider Gold a currency), Japanese yen, and British pounds is very strong moving throughout 2019. Japan has made mention of adopting an ever so slightly less dovish monetary stance, coupled with the yen being a safety destination during times of economic distress.  Furthermore, there will be less of a need for the yen to carry trade (borrowing in yen at a rock bottom interest rate and converting/investing in another foreign currency – most commonly the USD) as global interest begin to decline. The case being made for the British pound as an investment destination is as simple, as BREXIT is finally in the rearview mirror (and potentially avoiding some of the residual effects of an impending European recession).

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

S&P Recovery Continues, But Beware



Mar E-Mini S&P's

Yesterday and overnight's resumed rally above 18-Jan's 2678 high reaffirms the past month's recovery from 26-Dec's 2137 low and leaves 23-Jan's 2612 low in its wake as the latest smaller-degree corrective low the market now needs to sustain gains above to maintain a more immediate bullish count.  Per such and given a number of factors discussed below, we are considering this admittedly very tight corrective low a key risk parameter from which a bullish policy can be objectively rebased and managed.

Former 2675-area resistance would be expected to hold as new support IF the market has something broader to the bull side still in store for us "up here".

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

E-Mini S&P 500 240 Min Chart

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