March 29, 2019

Volume 13, Issue 13

Feature Article

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Trading Agricultural Futures

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Metals - Gold

June Gold, Can We Just Pick a Direction?

Joshua Graves

June gold has been unable to pick a direction ever since crossing the 1300 threshold. It appears that every time we make a run toward 1400 the gold bears take control and push the market back down toward the pivot point of 1300. There have been ample reasons to play both sides to this trade. The most important bullish factor we have seen recently is the extremely dovish fed which has essentially guaranteed a rate hike is not happening this year, and even a rate cut being put on the table. Another bullish factor which has yet to develop (and could start any day) would be a stock market correction. Even a little one at that. We’ve seen quite a run in U.S. equities over the past few months, and with companies such as Fedex giving pause to the health of the global economy in their recent earnings I think investors should be paying more attention to the precious metal.

The technicals of the gold market appear to show a classic head and shoulders pattern that did not develop until the recent $30 sell-off in the June futures. I would be looking for a short position in gold down to around 1250 before covering. Traders who are long from this level should be watching the 1285 level as a key area to exit the trade should they be wrong. Keep in mind the ATR or average true range in gold show that $13.50 is a typical day’s move in the precious metal currently. Options are a good play for traders who want calculated risk when futures are moving as much as they are. Look for a more pronounced move lower in the short term, but longer term this market could be range bound between 1250 and 1350.

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 Jun '19 Daily Chart

Gold Jun '19 Daily Chart

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Metals - Silver

Silver Showing Strength

Eli Tesfaye

The precious metals markets of gold and silver have been showing their strength since the substantial price decline down below 15.00. Daily charts show that silver is trying to hold 15.00 support. A close below that would likely signal fresh selling interest. The U.S. dollar is relatively soft this morning, giving a much-needed lift for these markets. With the U.S. Fed holding off near term rate hike, the dollar would likely trade in consolidation resulting near term support for silver.

Silver is tracking equities as it has been the past few sessions. Technical traders should be encouraged by the bounce here but as always, the bull camp needs fresh news to sustain a continues to rally. In my opinion, the bears still have the advantage due to significant chart damage done to the market. There are always great opportunities for silver to shine for bulls in the long-term as we approach the chaos of the next U.S. presidential election, the uncertainty of Brexit, concerns of a bursting bubble in this long U.S. equities bull market, and whispers of a recession gathering volume. “The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown,” wrote H.P. Lovecraft, and when all else looks uncertain, and fear sets in, silver runs with the bulls.

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

May Crude Trades Lock-Step with Stocks

Joshua Graves

May crude oil seems to be directly tracking U.S. equities as we continue to go through the tug of war between supply and demand. Let’s start with the supply story as a whole. Venezuela and Iran will continue to grab headlines regarding the effects of sanctions on supply. Iran has the waivers on exporting crude oil which seems to keep oil flowing out of the country, while Venezuela’s production hovers around 1M barrels per day as the country continues to fall into decline. The OPEC deal will continue to take 1.2M barrels off the market, and likely for the rest of 2019 provided Russia agrees with the group. All of this, however, is likely to be countered by the surging US shale production which is expected to put an additional 1M barrels per day onto the market bringing US production up to 13M barrels per day by the end of 2019.

On the demand side, it seems like every time there is buying interest in stocks and we push higher I look and see higher numbers on WTI crude. As the world continues to question the strength of the economy, oil follows equities almost every day with each moving together. Take a chart of the S&P and lay it on top of a chart of crude oil and tell me otherwise. Oil has limited upside from here, and I see that number around 65 at best. Downside is limited as well to around 52. Anything outside of these numbers means that a new catalyst has come into the picture and right now the biggest threat I see to oils big 2019 gains is a stock market correction. Look for options strategies as volatility is likely to move higher sooner than later.

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.

Crude Oil May '19 Daily Chart

Crude Oil May '19 Daily Chart

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Softs - Sugar

Sugar Rally Fails at 50-Day Moving Average, Chart Heavy

Joe Nikruto

This week’s comment finds the May sugar futures contract hemmed in. Bouncing around in a rather tight range bounded by the 50-day and 18-day moving averages sugar appears, yet again, to be poised for a move. With the May contract trading in a roughly 1.75 range since December it feels like I am being convinced by Lucy to try, just one more time, to kick the football. Feelings aside, sugar has recently rallied above, but failed to hold, the 50-day moving average, 12.73. Price action has eroded below trendlines drawn off both the September and January lows. While currently holding above the 18-day moving average, 12.47, the market looks heavy. 12.33 and 12.08 are swing lows that appear to be within shooting distance.

Fundamentally, this morning’s Hightower comment sums up the situation. Lower Brazilian currency, surplus (yet again) for 2018/2019, talk of supply deficit for 2019/2020 and massive use of sugar cane for ethanol vs sugar in Brazil. That last fact may be what the direction of the sugar market hinges on in the near term. If prices for RBOB gasoline can remain high the ethanol margins in Brazil can support aggressive offtake of sugar can for use in fuel.  If energy prices can’t hold, sugar may have difficulty holding here as well. Bottom line, while the jury could be characterized as still out technically, the inability of the May contract to hold above the 50-day moving average is not bullish. Admittedly, it will not take much of a move higher to change the chart picture. But until we see sugar trading above 12.90 the path of least resistance appears to be lower.

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

Six Positive Trading Days in Cocoa Futures Heading into the Weekend and COT Report

Peter Mooses

May cocoa futures have had a positive week. Short-covering and re-establishing bulls have helped the market reach its highest levels of the month. As we end Q1, traders will continue to wait for an increase in demand expectations. The COT data released on Friday’s has recently showed heavy selling and declining open interest. Technically, 2280 will be some resistance – a break and hold above this number will be needed for a push back above 2300. As we enter April, we will start to focus on the roll to the July contract. Inverted levels have been close all week between the May-July cocoa contracts. The tightness in the spread may attract longs to roll earlier.

Demand appears to be on the rise globally. Bearish supply news seems to be already priced into the market. Currencies could also help support current levels. Brexit news can also move the cocoa market at any given moment if any votes/deals break.

Technically, a continued close above the 9-day moving average along with a nice trendline forming, leading prices higher – Q2 may start off strong for the cocoa market.

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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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 03/29/2019

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

Live Cattle Sell-Off to Continue

Peter McGinn

Yesterday had continued selling in the June live cattle contract, as it closed at 119550. The weakness is coming from the cash market and a downturn in open interest. Looking ahead, the supply of cattle on feed is at a record high, while the market ready cattle numbers look to increase in the nearby months. The June contract has reached its lowest level since March 13th. The forecast for the plains is dry weather which also triggered the long liquidation. I suspect the market to continue to sell-off, passing through the 50-day moving average to the 117900 support level. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 358,000 head, up from 355,000 last week. and up from 352,000 a year ago. USDA boxed beef cutout values were down 70 cents at mid-session yesterday and closed 52 cents lower at $228.99. This was up from $228.67 the prior week. Cash cattle trade was fairly active in Kansas, at $126, down $2.00 from last week.

Lean Hogs seem to have plenty of short-term supply and with the USDA Hog and Pig report, it is likely to show that there will be more expansion and more record supplies. The main issue would be the demand level from China and how much they are going to buy. In December, the total U.S. exports reached 526 million pounds, if these numbers continue then we are likely to see monthly exports jump 50% for some time. The USDA estimated hog slaughter came in at 477,000 head yesterday. This brings the total for the week so far to 1.422 million head, up from 1.409 million last week, and up from 1.384 million 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 Jun '19 Daily Chart

Live Cattle Jun '19 Daily Chart

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Currencies

A Rebounding Pound: Down on the Dollar

John Caruso

The dollar opened today at 96.765 and has tracked lower in trade Friday morning. The dollar is encountering what appears to be significant resistance and should have a difficult time breaching its recent high 97.16 made on March 4th.  The latest Fed announcement was dovish, which is bearish for the dollar. Last year, the Fed was expecting to raise rates multiple times in 2019 and now they’re forecasting rate cuts later in the year. Accelerating “dovishness” is shifting currency markets out of the dollar’s favor, as this morning we observed a lower high as the dollar entered overbought territory. Foreign currencies trade against the dollar, and we are already seeing signs of a bottom in the Japanese yen and the British pound. All of this is in line with the macroeconomic picture. Essentially, investors are reallocating funds into markets that move against the dollar as U.S. interest rates fall on questions pointing towards a decelerating economy. All eyes will be on UK Parliament today and whether they can agree to set a hardline May 22nd date for their exit or “Brexit” from the Eurozone. Any developments that point to a Brexit sooner rather than later we contend will be a net positive for the British pound. Our intermediate to longer term view is to position long the Pound and Yen vs the USD.

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

We Have Lyft Off!

Jeff Yasak

U.S. stock futures were up overnight as the trade news was a bit upbeat. The Secretary of the Treasury, Steve Mnuchin, tweeted that constructive talks have concluded in Beijing, and he was looking forward to meeting China’s Vice Premier Liu in Washington next week.  The Chinese commerce ministry spokesman, Gao Feng, was also positive stating that both sides are currently sparing no effort in the talks. The investors are also very excited today with ride-hailing company Lyft entering the market today with its IPO. The company is hoping to put upwards of 30 million shares up for sale at an anticipated price of $72 each.  Lyft with a valuation of $24bn is widely preferred to Uber and it’s $120bn valuation.  Uber has been criticized for concerns of passenger safety and sexual harassment. Today’s resistance is 283400 and 284500 while support coming in at 256000 and 254500.

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 Jun '19 Daily Chart

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

 

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