February 22, 2019

Volume 13, Issue 8

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Metals - Gold

Gold in Bullish Trend

Nicholas DeGeorge

In the early morning trade, April gold is up again after yesterday’s roughly $20 sell-off and $30 off this week’s high. The U.S. dollar is slightly up this morning and the gold bulls have to be pleased that the shiny one is trading higher for the day. It looks like the driving factor in gold right now is the subtle shift in opinion toward the Fed’s stance of being less dovish along with the thinking that economic uncertainty will decline following a trade deal between China and the U.S. If the trade deal goes through with China, one could say that physical demand for gold will go up on hopes of growth and inflation woes. The gold bears can make a case that gold can sell off do to a trade deal causing safe haven liquidation.

Let’s take a look at the daily April gold chart and keep it simple. You can clearly see the strong bullish April gold that started back in mid-April and a bullish channel since the beginning of the year. For the gold bulls, stay long if you see gold in this channel and above its bullish trendline. For the gold bears, look to be patient a sell at the top of the channel or if it breaks below the bullish trendline.

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

Silver Trend Still Intact

Frank J. Cholly

May silver futures ran into some significant resistance yesterday at $16.29, the previous swing high from January 31. I personally believe it was more of a “Fed induced” correction. The market expectation from the Fed minutes yesterday was for a more dovish bias.

The silver market has been trending higher for the past three months. Corrective dips should be well supported. A critical level for me is at $15.75 in the May contract. A close below that level is a short-term trend changer. However, I see something very bullish in the daily chart. It’s a “Golden Cross”! The 50 DMA has just crossed above the 200 DMA. That’s a very compelling bullish indicator.

Outside markets are also supportive. Dollar weakness should be keeping silver from sliding into a bear trend and copper is breaking out to the upside now. Also, the gold to silver ratio is 83 to one. Silver has a long way to go in my opinion.

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

Silver May '19 Daily Chart

Silver May '19 Daily Chart

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Energies - Crude Oil

Crude Testing 100-Day Simple Moving Average

Michael O'Donnell

As of Thursday, the April 2019 crude oil contract is being offered as the market weighs a build in this morning’s EIA number, a stronger dollar and downward price action typical with risk off sentiment in equites, metals, softs and interest rate products. Also of note, as crude had a built in inventories, the gasoline and distillate inventories had a draw. While the March crack spread closed yesterday at 9.32, the April crack spread is trading around 17.18 as of this writing and has rebounded almost 50% from January 31st’s 12.10 low.

 Visible in the chart below, today’s high tested the 100-day simple moving average for the second consecutive day as the market has cleared the $55 per barrel level, for now. In other relevant news, CFTC commitments of traders, which were delayed due to the government shutdown, have shown increases in longs. For the time being, it seems that 100-day moving average should be a significant indicator as the market has treated this level as resistance, in recent days, for now at least.

While today’s price action, at the time of this writing, has been an inside day, it would seem possible for the market to give back some of its recent strength as today could be the first down day in the contract in weeks. Equally possible, should the 100-day simple moving average be traded through with continued strength, the market could continue to trade at price levels not seen since last autumn.

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 Apr '19 Daily Chart

Crude Oil Apr '19 Daily Chart

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Energies - Natural Gas

Natural Gas Still Moving Sideways

Jeff Ratajczak

March natural gas expires at the end of February and is moving sideways between $2.500 and $2.750.  Friday’s low of $2.543 has bottom fishers looking for a bargain near contract lows. Temperatures stay around normal for the next ten days, and precipitation continues to make this an over average winter.  The momentum indicators are turning up.  RSI is at mid-level and MACD is beginning to make a move to the upside.  This is not surprising since gas is near a bottom in price on the charts. Support comes in at the low on Friday $2.534. Below that a washout may happen. A draw of -164 bcf is today’s estimate.  Last week draw was -78 bcf.  A move to a higher range, between $2.750 and $3.000 is more likely in my opinion in the coming months.

China’s trade war with the US will figure in the cost of Natural Gas.  Their turn to cleaner power should get the bull’s in charge over the next few months.  As soon as the other tariffs are lifted we should see a return to higher prices and more exports.

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

Lack of Demand Hurting Cocoa

Peter Mooses

The cocoa futures market began 2019 on a down note. Global uncertainty, political issues, trade talks and volatility in the currencies and equities added pressure to the soft. With demand concerns looming and production numbers coming in off estimates – it appeared that cocoa would have an uneasy Q1.

So far in February, cocoa saw a bit of a turnaround. Unfortunately, the potential lack of demand in Europe has hurt prices of late. On pullbacks, it appears the bulls are still tempted to go long, but as resistance is hit, 2360, any small rally has failed. 2280 also appeared to be a level of resistance but was able to be broken. Support has stayed around 2240, attracting buyers at that level.

As we close out February next week and all traders focus on the May futures contract in cocoa, follow the technicals for guidance as the fundamentals have been repetitive. A stronger pound and euro versus the dollar is worth monitoring too, this indicator could show us if demand could increase in key regions that impact cocoa costs.

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 May '19 Daily Chart

Cocoa Mar '19 Daily Chart

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Softs - Coffee

May Coffee Heading Lower

Adam Tuiaana

The market is trying to hold the 100 level, but a major violation of support has precipitated further sell-offs in May coffee futures. The main fundamental news is good precipitation in key growing areas of Brazil. Although the Brazilian real continues to hold support levels, this is not enough to prompt a reversal of May coffee prices to the upside.  Weak near-term outputs from Brazil will be completely overshadowed by the promise of a large crop to come, based on this wet weather Brazil is experiencing now.

On the technical side, the main area of attention was the 10095 level in May coffee. This area should have acted as strong support but, for the last three out of four trading days, have violated this area. Since we have violated this key support area, I would expect to see some continued aggressive selloffs take place in May coffee before we find any bullish news to hold support. A fairly convincing dive below the 50-day moving average is negative for coffee prices, but we may very likely see a revisit to support at the 102 area before another leg lower.

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 - 02/22/2019

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

Potential China Deal Weighing on Grains

Tony Cholly

Strength in soybeans yesterday was on renewed optimism from traders that China would return as a larger buyer of U.S. agricultural products after comments were made by trade officials. Rumors say that China said they would purchase an additional $30B a year of our grain products, such as beans, corn and wheat if a trade deal with U.S. is finalized.  Support was also seen from the USDA estimate for 19-20 soybean acres at 85 million compared to 89 million last year and average estimate of 86.1 million.  March beans have traded in a 38-cent range so far for the month of Feb, but for the week, the market is up just over 3 cents.  Resistance comes in at 919 and 926 with support at 902 and 893.

The corn market is in a position to see a major rally if China is a significant buyer of U.S. corn.  The USDA released their first look at the new crop season with ending stocks pegged at 1.65 billion bushels, down from 1.735 billion.  If China purchases 250 million bushels, this would leave ending stocks sharply lower.  Similar to the beans, the market was supported by the news of China possibly buying $30B in agricultural products.  Resistance comes in at 378 and 384 with support at 371 and 366.

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.

Soybeans Mar '19 Daily Chart

Soybeans Mar '19 Daily Chart

Corn Mar '19 Daily Chart

Corn Mar '19 Daily Chart

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Equities

Stocks Higher but Approaching Resistance

Bill Dixon

All the major indices are in the green by a slightly healthy margin to kick things off this morning.  The day’s slate of data is about as light as it gets, but we do have several Fed members speaking in New York.  Given that we’re just coming off the minutes on Wednesday, I would be surprised by any major revelations from their roundtable and speeches.  Next Tuesday and Wednesday, Fed Chair Powell will be in Washington to deliver the semiannual monetary report, which will likely have a bit more substance. 

From a technical standpoint, the mini S&P is charging higher, but may run into issues between the 2795-2820 levels.  While we’ve traded in that range a number of times after the initial sell-off in October, rallies have repeatedly failed and have been followed by significant selloffs.  The rally from the early December lows has been strong, regaining about 75% of the losses from the highs.  Volume hasn’t been all that inspiring as of late, but it’s hard not to respect the gains we’ve seen in a relatively short period of time.

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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Interest Rates

U.S. Treasury Yields Edge Higher

Alexander Turro

U.S. Treasury yields continue to move higher this morning following the release of the January FOMC minutes yesterday afternoon. In noting the most salient headlines, the minutes namely reinforced Powell’s previous comments in that the Fed will remain patient with the economic outlook and policy uncertain. More specifically, uncertainty regarding financial conditions, slower growth abroad and softer inflation. However, the Fed did note their interest to stop reducing the Fed’s assets holdings later this year but did not address the ideal size of the balance sheet as it pertains to policy, which alludes to the idea that the Fed has been merely responding to market conditions as it pivoted from hawkish to dovish in December. March 30-yr bonds prices are coming off a quasi double high with the next level of support coming in around 145 – 16, however, look for a near term bottom in U.S. treasury prices.

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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