February 8, 2019

Volume 13, Issue 6

Feature Article

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Metals - Gold

Gold Bulls Have the Advantage

Nicholas DeGeorge

In the early morning trade, April gold is slightly up trading at $1,316.7 an ounce and has held up strong in the eyes of a strengthening U.S. dollar. Yesterday, the gold bulls came in aggressively when gold approached $1,305 and with the revelation that a trade deal with China will not be finalized by the March first mandate. This gave the bulls that extra confirmation they need to hold on for higher gold prices. Furthermore, a Goldman Sachs analyst, stated that he sees more buying by central banks in 2019 and an ongoing inflow of gold and silver ETFS.

If we take a quick look at a daily April gold chart, you’ll clearly see the strong bullish trend that it has been in since the start of mid-November. It is above all its major moving averages and is in a bullish ascending triangle pattern, which I highlighted as well. The bull camp has the technical and fundamental advantage as of now, but if you’re a gold bear and looking to short this market, be careful with risk and try and short it at the top of the ascending triangle, which you can see has caused this market some pull backs as in bullish trend.

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 Apr '19 Daily Chart

Gold Apr '19 Daily Chart

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Metals - Silver

Optimism in Silver

As the silver market has pulled back from $16.20 per ounce, it’s felt that this is a temporary pause in a run higher up. Many fund managers and longer-term traders have forecast a bullish sentiment looking into the year.  The thought is that the U.S. dollar is going to having a difficult time moving forward, which will add support to an already positive situation for money that has left the equity markets.

With Brexit and slowdown in global growth it is believed that the global market is interested in silver. With all these geopolitical issues, given enough time and data to absorb global economic numbers, it warrants people will continue to turn to metals as a safe haven. 

All the way around there is a complete bullish outlook and optimism with $17.25 a price target. Take a hard look at the options or call to discuss option strategies that could facilitate a neutral to upward bias this year.  Implied volatility is not too high coming in at around 14 percent.  There are many strategies to take advantage of the sentiment that coincides with the outlook where your position in the market is fixed, without having to deal with the emotions of the ebbs and flows of the volatility.  Consider call spreads, butterfly’s, or possibly a wide risk reversal selling a put and buying a call.  Options offer you a variety of strategy depending on your risk tolerance.

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 Mar '19 Daily Chart

Silver Mar '19 Daily Chart

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Energies - Crude Oil

Crude Crossing Lower On Trendline Cross

Michael O'Donnell

As of Thursday morning, the February crude oil market is trading on its lows amid several factors, leading decidedly risk off trading.  Strength in the dollar index, coinciding with weakness in the euro, Australian dollar, Canadian dollar, and other commodity currencies has led to crude probing lower in the trendline seen in the daily chart below. Other contributing factors include strength in notes and a sell-off in equities and energies.

In addition to the demand side of the equation and outside markets, supply is also a factor as yesterday’s EIA report showed a build in inventories. This increase represents a build above the level a year ago, along with production in the United States near 12 million barrels per day and almost a fifth more than the same time last year.

Moving forward, the $52.50 per barrel level may be of interest as can be seen in the chart below.  A good amount of highs and consolidation may be seen at that level in recent weeks.  Also, this would be the midpoint of a $50-$55 range mentioned by many. Given that there are a number of options on the crude market at the $52.50, $55 and $50 price level in addition to others, a number of options strategies may be considered as well as combination of futures and options on futures.

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 Mar '19 Daily Chart

Crude Oil Mar '19 Daily Chart

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Energies - Natural Gas

Natural Gas Trending Down after Deep Freeze

Jeff Ratajczak

The trend in natural gas is still down over the short-term.  March is down nearly .11 cents today, and new lows are being forged out for the March contract today.  Momentum studies are oversold, but still trending lower.  Prices seem to be trying to go lower to a new range.  Divergence is being waited on to make any bullish decisions.  Over the short-term we need to stick with the trend.  Just above $2.650 is close in resistance on a pivot point calculator.  $2.740 and $2.680 show up above that.  $2.600 is the pivot and $2.510 and $2.460 show as support.

Temperatures are normalizing and going higher over the coming week. Last week’s deep freeze seems a thing of the past. The storage estimate for today was -248 bcf, and the actual storage was-237 bcf.  So, a smaller draw along with a favorable weather forecast sent prices plummeting.  I suggest that the price of Natural gas will stay in a range between $2.600 and $2.900.

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 - Cocoa

Demand and Fund Buying Moving Cocoa Futures Higher

Peter Mooses

Bulls in the cocoa futures market have waited patiently for the demand of the soft to improve. Over the past few sessions, the patience has paid off. Longs have re-established their positions as funds have also increased purchases. Production levels have been able to cancel demand increases in the past though as they have washed each other out. The market has quickly gone from oversold, to a buying opportunity. Currencies must be monitored, as the dollar has gained strength while the euro and pound have weakened. COT reports have shown increases in the longs, if traders continue to believe prices should be higher look for this continued path. Global markets are still a concern and key factor adding to volatility across all commodities. As we approach the March roll in the futures, traders will monitor if longs re-establish in the May contract. With resistance broken at 2255, look to see if the market can move and close above 2285. In a market that many traders believe should be trading near 2400, watch to see if supply/demand is enough to support those levels.

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.

Cocoa Mar '19 Daily Chart

Cocoa Mar '19 Daily Chart

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Softs - Coffee

May Coffee Sideways For Now

Adam Tuiaana

Positive production numbers coming out of Columbia weighed against a challenging 2019/20 crop from Brazil and have tied May coffee futures prices to a tight consolidation range. The consistent strength in the Brazilian real, for the time being, may be enough to keep May coffee prices well within a defined trading range. We’ve seen May coffee trade “in the zone” from 102 to 110 since December of last year, so the likelihood of a revisit to sub- 100 levels is unlikely for the time being. However, we can see this trading range slowly but surely break above the 50-day moving average (resting at 107) and now we wait to see how long support can be held in this area. As I’ve mentioned before, this is a market that has been in a complete freefall for quite some time and turning this massive ship around will require patience.

On the technical side, a break above this 50-moving average is positive for coffee prices, but we may very likely see a revisit to support at the 102 area before another leg higher. I would not be surprised to see a static range in consolidation for next couple of weeks. Buying call options or selling put options with hedge protection could be a great way for traders to approach the bullish side of coffee, while effectively managing risk in the trade

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 May '19 Daily Chart

Coffee May '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 02/08/2019

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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Agriculture - Grains

Corn Still Coiling, Needs Direction From Report

Tony Cholly

The market has been coiling the last few weeks in anticipation of the USDA report Friday. Ethanol production came in a bit more negative yesterday, with production for the week ending Feb 1st averaging 967,000 barrels per day.  This is down 4.45% vs. last week and down 8.51% vs. last year.  This is also the lowest weekly production since the week October 6th of 2017.  The slow production due to negative margins should give way for the USDA to lower ethanol usage by 50 to 100 million bushels in Fridays report.  Yesterday was also day four of the Feb crop insurance discovery period with Dec ‘19 corn averaging $4.03 so far.  This would be the highest insurance level since 2015.

Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated.  Also, a close above the 9-day moving average suggests the short-term trend remains positive.  Resistance comes in today at 381 and 382 while support comes in at 378 ¾ and 377 ¾.

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.

Corn Mar '19 Daily Chart

Corn Mar '19 Daily Chart

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Interest Rates

U.S. Government Bond Prices on Rise

Alexander Turro

U.S. government bond prices continue to move higher on Wednesday for the second consecutive session with the 10-year yield falling to 2.691% after settling at 2.702% on Tuesday. This comes following the Federal Reserve’s dovish tilt and posture on interest rates as well as decelerating growth data in the U.S. and Germany. ISM Services Index for January reported its non-manufacturing purchasing managers index fell -1.3 pts from 58.0 to 56.7 with the leading component, an index of new orders, falling -5 pts from 62.7 to 57.7. Export orders fell -9 pts to 50.5 from 59.5, the largest sequential decline and lowest level in two years, which is only slightly above the 50 reading that indicates expansion. German manufacturing data in the overnight showed Germany’s construction PMI falling to 50.7 with factory orders falling -7% year over year, only exacerbating the recession risk in the EU. Later on Wednesday, the US Treasury will be auctioning $27 billion in US in 10-year notes, which is expected to be met with good demand. Near term support for the March 30-year treasury bond comes around 145 -- 06 with resistance around 146 – 08 and the next upside target around 146 – 21.

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-Yr T Bond Mar '19 Daily Chart

30-Yr T Bond Mar '19 Daily Chart

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Equities

Stocks Lower Again on U.S. China News

Bill Dixon

Yesterday, it was announced that a meeting between President Trump and Chinese President Xi Jinping was not likely to occur prior to the deadline for the trade deal on March 2nd.  While the market took the news badly, it is not as if they have called off a meeting of any sort.  Trump is set to meet with North Korea’s Supreme Leader Kim Jong-un at the end of the month in Vietnam for the second time, and some speculated that given the proximity, Trump and Xi would find time for one another. According to Larry Kudlow, the meeting is still expected to take place.  However, he cited that the two sides aren’t exactly close to any kind of a deal.  While this news is not encouraging by any means, I would be surprised if there is not some kind of extension of the current status quo to avoid the increased tariff hikes.  Barring that, I would expect significantly more downside as the market has seemingly discounted the possibility that an agreement of some sort will not be reached.

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.

S&P 500 Mar '19 Daily Chart

S&P 500 Mar '19 Daily Chart

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