April 26, 2019

Volume 13, Issue 17

Feature Article

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Metals - Gold

June Gold, Old Lows Now Become Resistance

Joshua Graves

June gold futures have seen a breakout below the key level that most traders were watching at 1285. This was a level that gold bounced off of three separate occasions going back to mid-January this year before rallying up above 1300. With the move beneath this 1285 level (Christmas was the last time we were there) we can assume that that those old lows between 1285 and 1290 are now the point where gold should have trouble getting above. I am looking for gold to make a move down to about 1260 before the move lower is completed. This would represent a 62% correction between the contract low and high.

Interestingly, we are currently tracking gold up $9 off the 50% retracement level and on news of a blowout U.S. GDP number of 3.2%. If you look at the fundamentals that are driving gold lower it’s quite clear a very strong U.S. dollar, strong U.S. equities (with great earnings numbers so far), and a market environment that is taking a very "risk on" attitude that are driving golds trade lower. Investors right now are looking at the environment and clearly the trend in the stock market points toward higher prices, a bearish theme for gold as it’s seen as a safe haven asset. There are no current geopolitical tensions in the world other than Iran threatening to close the Strait of Hormuz which they’ve repeated in the past as a bluff. The main catalyst I can see right now to drive gold higher is a sell-off in U.S. equities driven by a potential “no deal” situation with China. Should this happen you would likely see a rally in gold well above $1300. If you’d like to know how to play gold given its current trading range contact me directly.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or jgraves@rjofutures.com.

Gold Jun '19 Daily Chart

Gold Jun '19 Daily Chart

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Metals - Silver

Silver in Bear Trap Mode

Eli Tesfaye

July ’19 silver futures continue this week’s trend of lower highs with downward momentum. The bulls haven’t been able to have a sustained rally since the double top in February 2019. Risk sentiment has been steady with a multi-month bull run in the indices and crude oil providing a bearish tone to gold and silver. Inflation continues to read below Fed target, and with the no near term geopolitical concerns, the trend continues to favor the bear camp. However, from a technical perspective, silver is coming to support that I think will hold for a while. Lately, it seems that much of the safe-haven purchases that might lend strength to gold and silver favored the US dollar, which is seeing significant new highs and adding pressure to silver.

This morning, silver futures are trying to hold above $15.00, as the dollar index, E-mini S&P, and crude oil all are in profit taking mode. Again, the bear camp continues to hold technical advantage; however, the inside day chart set up below give the bulls a bit of technological edge. If we close the week with trade above $15.00, near term lows most likely be fast approaching.

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 Jul '19 Daily Chart

Silver Jul '19 Daily Chart

 

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Energies - Crude Oil

Crude Oil is Picking up Steam

Phillip Streible

Crude oil futures have rallied over 41% year to date and with oil supplies continuing to tighten it would not surprise me to see $70 by year end. There has been a fundamental shift with the U.S. not renewing waivers that allow countries to buy Iranian oil without facing sanctions. This could be met with retaliation from Iran which threatened to close the Straits of Hormuz. Looking at the inventory data, current supplies are sitting at 460 million barrels while the 5-year average is 458 million barrels. There was a small pickup in imports which helped offset some of the tightness. Something to watch is the national average for gasoline that is sitting at $2.836 per gallons and is an increase of 30 cents over the past month.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-438-4805 or pstreible@rjofutures.com.

Crude Oil Jun '19 Daily Chart

Crude Oil Jun '19 Daily Chart

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Softs - Sugar

Sugar Trading Sideways

Joe Nikruto

This week’s comment finds sugar trading sideways, trapped within a range bounded by 13.00 to the upside and roughly 12.20 to the downside. July sugar has tried to breakout, both to the downside and to the upside, yet here we sit at 12.90, again. On Wednesday morning, Hightower spoke of two fundamentals that caught me by surprise.  Chinese imports way down. According to the widely read commentator, Chinese cumulative imports for 2019 were down over 50% vs the same time in 2018. Additionally, in Brazil, a record low amount of sugar cane used for sugar vs used for ethanol, 36.45%, according to Hightower. Less sugar demanded by a top five global importer. Less sugar produced by the world’s largest producer. These two fundamental factors may point to exactly what we see on the chart. July sugar is trading in a range and will likely do so until something changes fundamentally. Intermediate- term trend followers look to get long above 13.30 and short below 12.30. At this point, it is difficult to see the catalyst for a sustained move in either direction.

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 Jul '19 Daily Chart

Sugar Jul '19 Daily Chart

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Softs - Cocoa

Cocoa Futures Crash Down in Price

Eric Scoles

July ’19 cocoa futures crash down after consolidating in over bought territory for most of this month. The major sell-off started slowly at first the night of April 18th with prices trading around $2400 per ton. Since then, cocoa futures have given back a major portion of the gains made during the late march/ early April bull run where we saw prices close higher for 14 days straight. It appears the market has grown impatient waiting to see if supply concerns for the mid-crop are valid and is correcting fiercely. Prices are in danger of a continued decline with market momentum still pushing down. At the time of writing, June ’19 cocoa is trading at $2241/ton and there is a possibility it could continue down to $2175 with bears in near-term control. Caution should be paid by bears and patience is advised to bulls; below average rain fall with continued dry soil conditions on the Ivory coast and crops under threat of “Swollen Shoot Virus” in Ghana could still impact mid-crop harvest and see prices bounce back up.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-367-7290 or escoles@rjofutures.com.

Cocoa Jul '19 Daily Chart

Cocoa Jul '19 Daily Chart

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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 04/26/2019

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 Trading Sideways, Lean Hogs Awaiting China Deal

Peter McGinn

The past two days in cattle have showed some longs liquidating their positions along with negative supply news and a bearish cattle-on-feed report have pushed the market down to the 121000 level. Right now, traders are keeping this market in a sideways trade and could continue this way for the next week. The market is on good support levels and may look to bounce off those levels and continue the sideways trade into the rest of the week. The USDA estimated cattle slaughter came in at 122,000 head yesterday. This brings the total for the week so far to 236,000 head, down from 242,000 last week, but unchanged from a year ago. The USDA boxed beef cutout was up 25 cents at mid-session yesterday but closed 37 cents lower at $234.11. This was up from $232.05 the previous week. 

Lean Hogs are seeing profit taking continue and the June hog contract hasn’t seen early this month. In the second half of the year we should expect to see some import activity from China. The progress for the U.S./China trade deal is close to fruition causing another push in this market along with many other Ag markets. The CME Lean Hog Index for April 19th came in at 81.54, up 52 cents from the previous session and up from 79.57 the previous week. The USDA estimated hog slaughter came in at 475,000 head yesterday. This brings the total for the week so far to 799,000 head, down from 904,000 last week, and down from 928,000 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.

Lean Hogs Jun '19 Daily Chart

Lean Hogs Jun '19 Daily Chart

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Currencies

USD Makes New Highs: Can the Strong Dollar Persist?

John Caruso

First quarter real GDP growth came in this morning at 3.2%, surpassing expectations of 2.3%. Nevertheless, the dollar has ticked lower in morning trade from its new highs made earlier in the week. This makes sense from a technical perspective, as the USD entered overbought territory yesterday after a substantial run-up over the last 4 sessions. Friday morning, the dollar is trading 30 ticks off its weekly high, but will likely be supported in the short term by strong GDP growth and lack of competition from other developed economies. However, we’re still of the opinion that the days of the bull run in the USD are numbered. The Fed has pivoted from hawkish to dovish over the last few months, and there is reason to believe more dovishness will blossom throughout the year as there are still talks of rate cuts down the line.

A dovish Fed is bearish for the USD. Recently, the dollar has been winning by default, as foreign currencies trade against the dollar in the global market. With the dollar reaching new highs, and pulling back despite impressive economic data, there is reason to believe foreign currencies are in a bottoming process and it is apparent on their charts. For example, the yen has held in its consolidation pattern this week as the dollar surged higher, and it is now trading near its weekly highs, despite dovishness from the BOJ this week. The euro also stands to benefit from a downfall in the dollar - as the exit situation falls into the background - and it is currently trading in oversold territory. We are seeing an upward reversal in the euro Friday morning despite better than expected US GDP numbers; it appears a beat was already priced into currency markets.

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.

Japanese Yen Jun '19 Daily Chart

Japanese Yen Jun '19 Daily Chart

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Equities

A Strong GDP Is Good to See

Jeff Yasak

U.S. stocks rebounded Friday morning after data revealed that the economy grew at a faster rate than anticipated during the first quarter.  The markets were trading considerably lower before the GDP release after poor earnings from Exxon Mobil and Intel.  According to CNBC, “First-quarter GDP expanded by 3.2% in the first quarter, the Bureau of Economic Analysis said in its initial read of the economy for that period. Economists polled by Dow Jones expected the U.S. economy increased by 2.5% in the first quarter. It was the first time since 2015 that first-quarter GDP topped 3%.” Exxon fell almost 3% after reporting their earnings in the premarket badly missing the expectations from the analysts.  Intel fell more than 7% after providing a weaker than expected revenue forecast for the year.  Aside from the U.S. GDP report, investors will be looking for a glimpse of consumer sentiment, when the University of Michigan releases its index at 10 AM (ET).

Today’s support is 291500 and 290500, with resistance checking in at 293700 and 294700.

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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