May 3, 2019

Volume 13, Issue 18

Feature Article

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Metals - Gold

Can Gold Get Back into Bullish Trend

Nicholas DeGeorge

In the early morning trade, June gold has bounced up nicely from its 200-day moving average and is currently trading at $1,277 an ounce. Furthermore, it looks like gold might have found more support from news that India might consider a reduction on their import duty on gold from 10% to 4% along with the World Gold Council news of rising global gold demand. However, gold might have a challenging time maintain momentum with the strong uptrend is the US dollars and it looks like major capital is flowing into equities.

If we take a quick look at the daily June gold chart, you’ll see back on March 1st that gold broke through its long-term bullish trend and has yet to regain any type of steam or get back to a bullish trend. It looks like overnight the shiny one got a nice pop off its 220-day moving average and really need to get back and close above $1,300 an ounce. I have highlighted these levels below on my RJO Pro daily June gold chart.

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 Jun '19 Daily Chart

Gold Jun '19 Daily Chart

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Metals - Silver

The Silver Market and The Federal Reserve

Frank J. Cholly

The Fed, as expected, decided yesterday to leave rates unchanged. Fed Chairman Powell’s comments came across more “hawkish” than “dovish” and this seemed to disappoint some traders in the market who were looking for a rate cut. Bottom line here is that the labor market remains strong and the Fed expects wages to increase. That is the main reason why the current low inflation environment is considered to be transitory. It won’t last.  More people working and earning more money will spend more money.

So, not only is the Fed not leaning towards a rate cut at this time, but it’s possible to see a rate later in the year. They didn’t say those words, but they did say that the economy is in good shape!

Silver futures and other precious metals remain under pressure. My next level of support for the July contract comes in around $14.45. Whenever it is that inflation becomes “undeniable”, you should expect silver to return to a longer-term bull market. It’s a question of when, not if.

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 Jul '19 Daily Chart

Silver Jul '19 Daily Chart

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Energies - Crude Oil

Crude Approaching Key Retracement Levels

Michael O'Donnell

As of Thursday, the June 2019 Crude oil futures and options contracts are being offered as the market is down over approximately 2 dollars. This week, and yesterday especially, a number of developments seem to have shifted from bull to bear control of the market.  Some of the main developments so far have been:

-The weekly EIA report showing a build of 9.9 million barrels

- The FOMC announcement and following press conference noting a lack of inflation

- A lack of added tension from the end of Iranian waivers

Also noteworthy is the bearish market action amid the tensions in Venezuela and announcements of OPEC+ cuts planning to be extended.

Given yesterday’s non-dovish, possibly hawkish by default FOMC and corresponding strength in the Dollar, it is not out of the question for the market to trade to the 38.2-50% area pictured below, for both the recent months low to high and high to low moves, along with the amount of longs in recent COT reports. It is also possible for the averages pictured below to offer some support or resistance should the markets follow through.

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 Jun '19 Daily Chart

Crude Oil Jun '19 Daily Chart

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Energies - Natural Gas

Natural Gas Futures Falling Bear-Side

Eric Scoles

Jun ’19 natural gas futures fell sharply this morning with continued bearish fundamentals but remain within this week’s trading range currently. Natural gas has seen five straight weeks now of larger than expected storage injections. Continuing increases have left folks considering this an early start to the injection season. We have now seen working gas in storage push above last year’s levels for the first time in 10 weeks. Supply is seemingly abundant currently and warm to average weather in most of the US limiting the demand side. Fundamentals consistently favor the bears but with prices as low as they are, you have to wonder if the market has priced the negatives in as low as they will go. A rise in price since the end of April lows suggests a bottom may be in place for now. Near-term technical factors suggest there may be positive price movement. However, with natural gas trading in this week’s long range and fundamentals supporting the bears I’d recommend caution to the bulls with any gains being hard fought.

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.

Natural Gas Jun '19 Daily Chart

Natural Gas Jun '19 Daily Chart

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Softs - Cocoa

Technicals Dictating Short-Term Price of Cocoa Futures

Peter Mooses

July cocoa futures’ prices have been unable to hold above 2425. After reaching the high in April on the 11th, the market slowly crept down to the 2250 area. Although we had strong demand news on grinding data and the market had also found support in production levels; profit taking and fund selling pressured the market and ended the month with some volatility. The euro and pound provided support for the longs in the market - that was also not enough to push prices higher. Heat and dry weather from key growing regions is also in the forecast, another signal to stay long the market. With all these signs, a close below the 9-day moving average is a short-term negative indicator. A close above the 200-day moving average is a positive indicator in the long-term though, which is part of the reason we are seeing bigger swings over the last few trading sessions. Technicals have been important for prices. There has been support at 2300, 2315. Resistance is strong at 2360 and 2375. Monitor COT data, demand news and short-term production levels – but in the near trade, longs liquidating, and profit targets being hit has lead the trade.

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 Jul '19 Daily Chart

Cocoa Jul '19 Daily Chart

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Softs - Coffee

July Coffee Ready for Sell-Off

Adam Tuiaana

July coffee prices have seen a strong short covering rally extending over 61.8% retracement from the last major selloff stemming from April 4th. July coffee prices dropped with volatility from the 97 level to the 86 level in a hurry, so a strong pullback was due to take place. The Hightower Group has also reported that “lower coffee prices of late have prompted farmers in Brazil and Vietnam to hoard their inventories and not sell beans to roasters.” This may continue to add support to July coffee prices, but as always, strong bullish supply/ demand news is paramount to a recovery in this commodity. As I’ve written many times prior, we have yet to see any solid bullish supply news to reverse this falling market.

A strong U.S. dollar is still holding support above the 9700 level and remains in an uptrend, adding selling pressure many of the worlds commodity prices. I remain bearish on July coffee prices and would expect formidable resistance at the 9400 level in the near term. 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 - 05/03/2019

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

Soybeans Extremely Oversold While Corn Gets Supported by 7-Day Forecast

Tony Cholly

The soybean market is probing for a short-term low right now.  For eight straight days the market has failed to make new highs from the previous session, while also make new contract lows for four straight sessions.  Poor export numbers combined with concerns for an increase in acreage are the main causes of this.  Net weekly export sales for soybeans came in at 313,400 tonnes for the current marketing year and 23,500 for the next marketing year.  Cumulative sales stand at 88% of the USDA forecast vs. 5-year average of 95%.  RSI levels reaching under 20, so look for active selling to slow heading into the weekend.  Resistance comes in at 849 and 857 while support is at 837.

There are many short-term factors which could support a significant jump in the corn market, including loss of planted acreage, stronger than expected demand from China and yield expectations being lowered.  These are just a few factors that could result in a large short covering rally from the managed funds.  Heavy rains, as much as 3-6 inches, is expected for Louisiana, Arkansas, Missouri, and southern Illinois over the next 7 days.  The northwest looks to remain dry, but cool temps will still support.  Resistance comes in at 372 and 374, while first support hits at 368 and 365.

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 Jul '19 Daily Chart

Soybeans Jul '19 Daily Chart

Corn Jul '19 Daily Chart

Corn Jul '19 Daily Chart

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Currencies

Global Currencies: A Monetary Tug of War

Ian Bannon

Currency futures have been in a tug of war this week as investors are searching for direction amid mixed corporate earnings and ambiguous economic data across the globe. Thursday morning, the USD opened at 97.355 and has inched up in early trade. As the U.S. labor market remains strong and investor sentiment has been positive lately, the Fed report yesterday took a more neutral stance opposed to their recent dovishness. Despite this, the dollar continued to extend its downtrend on what appears to be safe haven liquidation after last week’s upsurge. Support in the June USD is seen at 97.015, and if morning strength persists, then target resistance will be observed at 97.62. Any extension above this level could cause a run back to last week’s highs based on relative U.S. economic strength. Tomorrow’s jobs report will be impactful.

 Across the globe, other developed economies seem to be mixed. Recent Chinese weakness and the lack of a trade deal thus far is providing support to the Japanese yen. The June yen has broken out of its consolidating low pattern last week and crept upward. There appears to be a bottoming pattern in the yen, but it will not turn around overnight. Due to foreign currencies trade against the dollar, weakness in the USD will need to be observed to see a thorough reversal in the yen or the euro. We expect to see this develop throughout the latter half of this year, as U.S. inflation is low, but accelerating, which will weigh on the dollar. As for the British pound, this week’s strength is likely to dwindle, as UK mortgage approvals came in lower than expected in addition to soft consumer credit readings. Technically, the pound is entrenched in deep bear tracks over the last 3 months. Keep in mind, the dollar is the reserve currency of the world, and its movement is inversely related to other currencies.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-669-5354 or ibannon@rjofutures.com.

Japanese Yen Jun '19 Daily Chart

Japanese Yen Jul '19 Daily Chart

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Equities

Jobs Number Impresses

Bill Dixon

This morning’s nonfarm payroll data came in strong at 263K versus and expected 181K. The biggest news of the release was that the unemployment rate dropped to 3.6%.  That is the lowest reading since December of 1969.  As you might have expected, stocks have rallied on the news.  The Dow and S&P are up over 0.5%, while the Nasdaq is currently 0.8% higher.  We’ll see if the number will allow us to make another run for all-time highs, but for now it has at least pumped the breaks on the downside momentum that began on Wednesday. 

This reading should help fuel the debate about interest rates.  President Trump and others in the administration have been very forthright about their desire for lower rates.  However, many are arguing that with data continuing to come out without a whole lot of cause for concern, a rate cut is not warranted.  We’ve got a fairly active news slate for a Friday to fill out the remainder of the trading session.  Along with several speeches from FOMC members, ISM will be released shortly.

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

Bonds Bounce Following Jobs

Alexander Turro

U.S. government bond prices are bouncing back in the early session following a better than expected jobs report with the U.S. economy adding another 263k, above expectations of 190k with wage growth largely muted.  This comes amidst a downturn in prices following Federal Reserve Chairman Powell’s pressor in which he stated that the recent weakness in inflation was ‘transitory’ in nature. Yields initially declined after the Fed released its latest policy statement starting that inflation was operating below its 2% target, which was largely undercut by Powell’s remark. The Fed views the job market as strong, with wages expected to rise without a ‘strong case’ for raising or lowering rates. The benchmark 10-yr yield remains bearish trend with the today’s range seen between 2.44 - 2.63%. Near term resistance on the 30-yr bond is seen around 147-19 with support around 146-19.

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 Jun '19 Daily Chart

30-Yr T Bond Jun '19 Daily Chart

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