March 22, 2019

Volume 13, Issue 12

Feature Article

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Metals - Gold

Gold Channeling Back Up to $1,350

Nicholas DeGeorge

In the early morning trade, April gold is currently trading in the green extending this week’s rally and currently trading at $1,311.8 a troy ounce. The interesting thing about gold today is how it’s standing up to the strength of the dollar as the dollar is forging fresh overnight weekly highs. The shiny one is showing great resiliency as its obviously benefited from the Feds decision this week not to raise rates throughout 2019, which came to a surprise to most. As gold and silver seem to look like they’re back in bull market territory, the June US dollar forged fresh new highs and gold acting more as a currency might have some challenges extending its rally. However, I must admit it’s going to be hard to fade this chart and the fed’s decision to hold off on raising interest rates in 2019.

As I mentioned above, for the gold bears, it’s going to be hard fading this chart, so let’s take a quick look at the daily April gold chart. I highlighted the double bottom below and as you can see in January and March the gold market rejected going below $,1280 an ounce and both times to rebound above the $1,300 handle. Furthermore, I highlighted how gold is currently channeling up and looking likes it’s going to retest the February 20th high of $1349.8, so I do see a strong probability of gold trading back up to around $1,350 an ounce

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 Futures Get a Boost from The Fed

Frank J. Cholly

With a little help from the Fed announcement on Wednesday, May silver futures posted an impressive outside up day with the best close in three weeks. There are however still two pivotal resistance levels that need to be taken out before I get too excited about the recovery in silver. The first level in May contract is at $15.55 and secondly the 200-DMA is at $15.655. Once the market is able to get a close above these levels the bulls in the market will get more confident about buying silver futures. Both of these levels have been touched at the time this article is being written. Any reluctance to follow through with new buying will turn the market lower. That’s why I emphasize that these are pivotal levels. A dovish Fed is not enough on its own to completely reverse the trend. The market needs some technical follow through.

While I do remain long-term bullish on silver and believe that silver is under-valued at these price levels, I have to respect the trend is still sideways and therefore can still go either direction…up or down from here.

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 Oil Seesawing at Psychological $60 Level

Michael O'Donnell

As of Thursday morning, the front month May 2019 Crude Oil contract is trading above the $60 per barrel price following yesterday’s fundamentally significant surprise drop in crude inventories coupled with inventory declines in gasoline and distillates and a dovish Fed announcement which removed the 2 hikes in the Fed dot plot for this year.  Considering:

  1. the majority of estimates were looking for a slight build in inventories before the 9.6 million barrel draw and,
  2. for some, the Fed may have been more dovish than expected (i.e. one rate hike removed from the dot plot as opposed to both for 2019

the market has reacted bullishly from supply fundamentals and the inherent interest rate differentials in for the U.S. dollar.

While these fundamental factors are priced in and evident in trading since yesterday, today the market is seesawing around the $60 per barrel level and moving forward it would seem there are other factors to be considered.  Today for instance, the USD is stronger compared to other major currencies especially considering the upcoming Brexit outcomes. Also, the market seems tethered to the $60 level for the time being and the 200-day moving average and $61.37 level pictured below seem to be offering resistance in addition to the psychological $60 level.

Traders may also note the dovish policy decisions and their basis in addition to the possibility of oil becoming its own worst enemy and adding to inflation and stifling growth should the market continue to make new highs for the year.

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 May '19 Chart

Crude Oil May '19 Daily Chart

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Energies - Natural Gas

Natural Gas Headed Towards Positive Support

Jeff Ratajczak

After three down days in a row, natural gas is moving toward good support.  It broke through the $2.750 mark and is currently fighting to stay above this price.  Below the support level may move the trading to a lower range between $2.700 and $2.650.  A close above $2.87 could send prices above $2.900, but I wouldn’t bet on it.  It is the season between heating and cooling, and demand is not being driven by household usage. Momentum studies and moving averages are trending lower, this should accelerate any moves in this direction. However, the $2.750 to $2.850 range seems the most likely to hold. 

Above normal temperatures are forecast for the coming weeks, and draws should be lessened in the weekly storage numbers. Yesterday’s storage was estimated at -49 bcf.  The actual number was -47 bcf almost right in line the estimates. This is a far cry from the triple digit draws of the last few weeks. Higher temps and the “tweener” seasonals between heating and cooling should hold prices in check for a few weeks, barring any black swan occurrences we should stay in the current range.

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 Apr '19 Daily Chart

Natural Gas Apr '19 Daily Chart

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Softs - Cocoa

Cocoa Technicals Show Weakness/Supply, Demand Seesaw Continues

Peter Mooses

During Wednesday’s trading session, May cocoa attempted to break some key support levels. The contract ended up closing right above the 2140 level, trading below support, but closing 3 ticks above. With a close below the 9-day moving average (typically a bearish signal), traders may see a few more down days. With the high put in at 2201, prices attempted to break the key resistance level of 2200 but failed on the anticipation of stronger production data.

If the crop comes in bigger, look for prices to move lower unless global demand can grow stronger. A true supply reading out of West Africa won’t be available for weeks, but rumors will move the market in the meantime. Right now, the Asian demand should be able to provide some support for higher prices. Grinding data from that region looks to be moving higher against historical data. Demand from N. America and Europe continues to provide volatility and uncertainty. These areas continue to be wild cards.

With Prime Minister May’s request to have Brexit discussions pushed out to late June – currencies will continue to be key indicators for cocoa’s short-term outlook as well

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 May '19 Daily Chart

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Softs - Coffee

May Coffee Due For a Move

Adam Tuiaana

May coffee prices are noticeably down this morning, after sideways consolidation for the fair part of March. Dry weather is forecasted for key growing areas of the world’s second largest producer, Vietnam. This, weighed against desirable weather conditions in Brazil (the largest producer in the world) have made for a continued-tight trading range and light volatility. However, should we see Vietnam’s forecast change to produce some wet weather, coffee prices may likely surge from the current 9650 level to the 102+ levels. 

On the technical side, the March 12th low of 9465 has been formidable support for May coffee prices, and I would expect this area to hold, at least through the end of March. The main area of attention for May coffee prices will be the aforementioned 9465 range low, and the 9870 corrective high from March 14th should act as strong resistance. These are great areas to monitor because should either of these areas been violated, we may likely see some strong follow through buying or selling shortly thereafter.  With such volatility on the horizon, I would advise using options to manage risk and gain exposure to a potentially large move in May coffee prices.

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

Grain Futures Update w/Stephen Davis - 03/22/2019

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

Corn Rallies to End the Week

Tyler Herrmann

Corn has rallied to end the week after a dismal start. Thursday’s close over 375^4 in May has continued the trend to the upside with 380^0 and 385^0 as the next points of resistance. With flooding across a large portion of the Midwest any potential adverse weather could cause planting delays which would be supportive. The U.S./China trade talks haven’t been able to gain much traction lately and it looks as if no one really knows if or when an agreement will be reached. With a large net short position held by funds and the possibility of a bullish shift in fundamentals mentioned above, corn could see a rally through spring and early summer. Export sales this week came in line, but nothing compared to what it could be if China came in as buyers. May corn needs to push through this initial resistance at 380^0 to maintain the current trend. Support comes in at 371^0 and if that level can’t hold expect to see the market trade back down to the lows around 361^0. Corn has a story forming that could cause a rally but if the fundamentals don’t line up it will be hard for the market to hold on to these recent gains.

May soybeans have seen choppy trade this week. The soybean market is holding out for news of a U.S./China trade agreement for support as well as watching the weather. If there is any delays in planting corn, more acres could switch to soybeans which would add to the already high world ending stocks number. Export sales this week were disappointing for the bulls, coming in well below expectations. South American production numbers with good weather forecasted the next two weeks as well as strong yields are also pressuring the market. In the May contract, support comes in at 900^0 and then around the recent lows of 890^0. Resistance levels are 912^0 and 919^0. In the short term in looks like soybeans could see a rally but barring any surprises in the fundamentals the longer-term outlook still looks bearish.

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.

Corn May '19 Daily Chart

Corn May '19 Daily Chart

Soybeans May '19 Daily Chart

Soybeans May '19 Daily Chart

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Equities

Stocks Weaker to Kick Things Off

Bill Dixon

Following Wednesday’s dovish statements from the Fed, stocks have displayed a mixed reaction.  Powell suggested that the balance sheet runoff would end in September, they’re lowering their GDP outlook, and there would be no hikes for the rest of this year.  They also suggested there would only be one rate hike in all of 2020 and 2021.  All of this continues the transition from a hawkish to dovish Fed, which has many believing that the next change in rates will be a cut rather than a hike. 

From a technical standpoint, the mini S&P is now trading slightly above the triple top we saw in the fourth quarter of last year.  The Dow is struggling right around those levels, and the Nasdaq is trading well above them.  Volume on the rallies hasn’t been all that impressive, but all those looking to buy dips haven’t had a whole lot of opportunities to get in as bulls continue to ramp this market higher. 

Next week’s slate of news is something you will want to pay attention to.  There is a lot of housing data, consumer surveys, and auctions.  The biggest number will GDP on Thursday, March 28th.  The Fed has already indicated they expect the number to be closer to 2%, and there are rumblings out there that the Q4 reading may also be revised lower. 

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 Jun '19 Daily Chart

E-Mini S&P 500 Jun '19 Daily Chart

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Interest Rates

US Yields Move Lower on Fed Dovish Posture

Alexander Turro

US government bond prices ticked higher after the Federal Reserve reinforced their dovish posture (for the third time) and signaled that it will not be raising rates this year, with one hike projected in 2020. Powell stated an end to the campaign to tighten monetary policy with the balance sheet runoff set to end in September which sent the yield below 2.5%, the lowest level since January 2018. In addition, Powell acknowledged the slowing of global growth and lowered US GDP forecasts to 2.1% from 2.3%. The yield curve is coming off a fresh ytd low of 13 bps with the yield on the benchmark 10-yr note remaining bearish trend and the current range seen between 2.47 – 2.65%. June bonds are near overbought levels with support for June bonds coming in around 146-27 with the next upside target of 148-00.

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-Year T-Bond Jun '19 Daily Chart

30-Yr T-Bond Jun '19 Daily Chart

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