March 1, 2019

Volume 13, Issue 9

Feature Article

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Metals - Gold

April Gold to Hold 1300?

Joshua Graves

April gold bulls must be disappointed by the recent trade sessions this week. It appears that the market didn’t see enough follow through on the dovish fed stance and put more faith in the U.S. equity rally and a “risk on” attitude. There are still, plenty of reasons to be bullish the precious metal. The biggest potential factor for a gold rally, is the prospect of a “no-deal” with China. The meeting is supposed to be held at Trump’s Mar-A-Lago residence “sometime” in March. There was also the announcement that tariff increases were postponed “indefinitely” until a deal or no deal is announced. A surprise tariff bump or prospect of a no deal would surely be a positive for gold, and potentially put U.S. equities into a tailspin. Another positive for gold is the continued dovish fed, in the face of this strong stock market rally.

If inflation starts to tick up the fed will be in a position where a rate hike needs to be done, but as of now we are forecasting just 1 rate hike in December of this year. Technically, gold needs to stay above 1300 to have a chance at making back lost ground. I personally see gold having a struggle to get back to the highs, but a recovery is more likely than not given the extent of the selloff. An interesting point is that as I write this, a double bottom in the short term for April gold could have been formed. The Feb 14th low, and today’s low are quite close and could be argued that a move back toward 1330 is looking much better than a move beneath 1305.

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

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Metals - Silver

Silver Setting Up For a Run

Eli Tesfaye

Front-month May silver is trading 15.670 down 9 cents on the day. Silver is tracking equities this morning to the downside as conflict between Pakistan and India cools off. With the lack of bullish catalyst news, the market is drifting to sideways to lower.

Silver/gold ration is back above 84.00 as pressure mounts on silver. The chart below shows a repeated flag formation, but silver struggling to make a decisive move to the upside. Also, the chart is not convincing quite yet that the highs are in, but additional weakness is possible.  Again, a close below 15.00 most likely signal near term high, otherwise we are just looking at a consolidation for more potential upside.

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 May '19 Daily Chart

Silver May '19 Daily Chart

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Energies - Crude Oil

Crude Recovers from Monday’s Pullback

Tyler Herrmann

While crude oil had a poor start to the week, trading down to a low of 55.08 on Monday, we have seen a recovery back up, testing resistance at 57.80. The crude market got a supportive headline overnight with reports that a U.S. tanker was unloading at a Chinese port. Additional support came from a decrease in Venezuelan exports as well as a decline of U.S. inventory levels by 8.6 million barrels. Crude has been in a longer-term trend to the upside since its December 24th low of 43.00. Momentum studies are approaching overbought levels and with the market testing this resistance level over the past couple weeks we could see some sideways trading in the short term. A close over resistance would continue the trend to the upside with 65.00 being the next major target. Support comes in at 55.35 and if trade can break that, expect a pullback down to 52.20. As you can see on the chart below, the market has been in a wedge pattern that could provide a breakout either way in the next couple weeks.

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 Oil Apr '19 Daily Chart

Crude Apr '19 Daily Chart

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Softs - Sugar

Sugar, Shaping Up or Walking Off a Cliff?

Joe Nikruto

This week’s comment finds sugar right back where we left it in our last comment. After a move below 12.50, the May contract sprung into breakout territory travelling from a low of 12.34 to a high of 13.42 in 3 trading sessions. Poised to break out above 13.50, sugar promptly failed and retreated back into the 12’s. Shortly, the COT reporting will have caught up to the market and we will have a solid understanding of the positions market participants hold.  While not exactly occurring at the bottom of a downtrend, the head and shoulders pattern on the daily chart for the May sugar paints a few nice lines on the chart. 

If the May sugar futures contract should manage to rally out above 13.50, a quick measurement shows 15.00 could be in the offing. A move below 12.30 will point to an equally, if not more, powerful failure of the head and shoulders pattern and possibly prices back in the 10’s.  It is my opinion that the chart simply shows not only confusion left over from the government shutdown and lack of timely COT update, but a market waiting to see further confirmation of global production.  If sugar production numbers confirm no surplus and even a deficit, sugar will have to find a higher equilibrium price.  If, as in recent years, sugar production comes in higher than anticipated, it is likely we will see new lows for the move.  I have been suggesting traders look to puts to be positioned for possible downside. The chart has now given bulls reason to act and have calls in place as well.  While I still favor the downside I am trying to anticipate fundamentals. It is reasonable for bulls to do the same.  It doesn’t feel like sugar is going to be trading sideways for much longer.

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 May '19 Daily Chart

Sugar May '19 Daily Chart

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Softs - Cocoa

May Cocoa Showing Volatility

Peter Mooses

May cocoa futures have had a volatile week as we head into Friday. Bearish supply news earlier in the week out of Ivory Coast caused the market to move lower – but the futures found support from the possibility of a stronger demand outlook. With a weaker euro and pound though, the market wasn’t able to run with the demand news. If the May contract can stay above 2245, look for buyers to re-enter the market. A new trading range appears to have been established between 2240 and 2360. The trendline forming from December 2018 up to today’s close could help the market to recover. That line has been supportive over the past two months. If the May contract can also close above the 9-day moving average, a reversal could occur. The COT data tomorrow will provide some direction for the short-term.

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.

Sugar May '19 Daily Chart

Cocoa May '19 Daily Chart/p>

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Softs - Coffee

Coffee Still Oversold, but Brazil Rains Could Have Funds Selling

Tony Cholly

The coffee market failed to gain any benefit from the end of month short-covering rally and finished February down 9.7%.  It will take fresh bullish supply news for coffee to find any legs, otherwise it may have trouble clearing its recent lows.  Coffee was pressured yesterday by weakness in the Brazilian currency and that should encourage producers to market their remaining old crop supply to foreign customers.  There is rain in the forecast for Brazil’s southern growing region through the end of next week.  While the rainfall wont completely fix the negative impact of flowering issues last year and dry conditions in December, it should provide some benefit to the upcoming 2019/20 crop.  With there being at least a few months until we have a better gauge on the crop, weather should be the source of pressure moving forward. 

If we can see resistance broke, we can see move higher because momentum studies are on the rise from lower levels.  The short-term trend is still negative until this happens.  Resistance comes in at 99.60 and 100.85, while 1st support hits at 97.25 and 96.15

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.

Coffee May '19 Daily Chart

Coffee May '19 Daily Chart

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Agriculture - Grains

Daily Market Update - Grain Futures - 03/01/2019

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 - Livestock

Weather Still Hurting Live Cattle

Peter McGinn

Weather has been one of, if not the biggest, driving forces in the cattle market this entire month. It is going to take some time for cattle on feedlots to recover and gain weight due to the severity of the of the weekend storm, which should keep the market in an uptrend and push cattle prices higher. One of the bigger questions for today’s trade would be what are the packers going to do this afternoon, do they buy less head at a higher price or try to bid at a lower price for more? What I do know is that distressed cattle are one of the worst things for your operation, essentially draining the capital right out of the operation.

If the packers decide that they only want 50k a head or so, then I would expect the April contract to start to see a downtrend as the distressed cattle would continue to drain capital, putting an emphasis on having them getting marketed as soon as they’re ready. Feedlot conditions are very poor and with the 8-14-day weather forecast, it doesn’t look like it’s getting any better. The USDA estimated cattle slaughter came in at 119,000 head yesterday. This was up from 108,000 last week, and up from 117,000 a year ago at this time. USDA boxed beef cutout values were up 18 cents at mid-session yesterday and closed 21 cents lower at $219.46. This was up from $216.49 the prior week. Technically, the chart shows that the current breakout could cause a push to the 130.20 level, resistance is that the 130.15 price level. 130.15 may not be tested today but with the upcoming weather, I suspect it will be sooner rather than later we start seeing 131 cattle.

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

USD and Japanese Yen Highlight Potential Trend Changes

John Caruso

The USD has largely carved out an approximate 200 point trading range since the end of 2018. With hints of an economic slowdown in U.S. growth coming to the forefront (a slowdown does not constitute a recession), and the Federal Reserve on pause and likely to become more “dovish” with their monetary policy stance in oncoming months, we’re still of the opinion the risks in the USD are largely tilted to the downside. However, the caveat to the USD trading lower (or higher) rests upon the economic conditions moving forward abroad.  In a sense, the USD is the cleanest dirty shirt in the currency drawer which has kept the USD trapped in a range of 97.30-95.30 since the end of last year. Bias: Bearish USD going forward

A treacherous drop in the Japanese yen since its bearish to bullish transition at the end of last year.  9485 was the blow off top in the yen on Jan 3 and has since slumped back to bearish trend with a more than 500 pt decline over the months of Jan and Feb.  The economic news has largely been mixed to bearish, and the BOJ has made recent mentions of being ready to redeploy economic stimulus if need be.  We’re going to go out on a little bit of limb here, because we’ve yet to see a catalyst, and suggest that worst of the worst is behind the Yen (for now), with immediate-term upside potential to 91.30-92.00.  The Yen does carry safe-haven qualities during times of global equity market uncertainty, and perhaps a correction in global stocks will bring that quality back for the Yen Bulls.  Bias: Counter-trend bullish.

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.

USD Mar '19 Daily Chart

USD Mar '19 Daily Chart

Japanese Yen Mar '19 Daily Chart

Japanese Yen Mar '19 Daily Chart

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Interest Rates

S-T T-Note, Eurodollar Failures Resurrect Broader Peak/Reversal Counts



Yesterday and overnight's relative collapse below the past MONTH'S support between 122.03 and 121.27 in the now-prompt Jun contract obviously is a display of at least short-term weakness and vulnerability.  The important by-product of this break is the market's definition of yesterday's 122.15 high as the latest smaller-degree corrective high and a level the market would now be expected to sustain losses below if the market has something broader to the bear side in mind.  Per such this 122.15 high is considered our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.  This tight but objective risk parameter may come in handy heading into this morning's key non-farm payroll report. Now-former 121.28-to-122.03-range support would be expected to hold as new near-term resistance.

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10-Year Note Jun '19 240 Min Chart

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Equities

U.S. Prepares Final China Trade Deal

Jeff Yasak

Stock futures are looking strong on this first trading day of the month, the bullish outlook is based on continuing optimism in the U.S.-China trade deal.  It appears that trade negotiators are working on a final draft which could be signed in a few weeks.  There is a 150-page document being prepped, but Treasury Secretary, Steve Mnuchin, cautioned that there is “more work to do”.  Helping fuel the gains this morning were positive earnings reports and relatively tame inflation data. Gap Inc, Foot Locker, Puma, Novavax, and Funko all beat the streets estimates Friday morning.  The personal consumption expenditures (PCE) price index, one of the Feds preferred inflation measure, rose .02 % and 1.9% on a monthly and yearly basis which matched the analysts’ estimates.  Moderate inflation and slowing domestic economic growth will support the Fed’s patient stance on raising interest rates this year. Support today coming in at 2790 with some key resistance around 281500.

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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