May 10, 2019

Volume 13, Issue 19

Feature Article

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Metals - Gold

Red Flags for Gold Bulls

Joshua Graves

June gold futures have had a lot of reasons to rally recently, yet when we look at the price action, the opposite is happening. Let’s look at some of the big reasons. Front and center is the trade war and its ripple effects across the world. Gold futures failed to take out any key overhead levels once the news first broke early in the week, and even after it’s confirmation this morning with the tariffs now in effect we see gold up marginally around 1288. The second reason that might be more minor in nature is the news Iran is looking to ramp up nuclear production, and potentially violate the international deal to abandon its nuclear weapons program. Threats made against American forces with the U.S. response of sending a carrier strike group wasn’t enough to push gold higher either.

We have had good economic data as well as central banks buying in much heavier over the past week given the uncertainty surrounding the trade war as a reason some might not have heard about.  Another reason to be skeptical of an upside breakout in gold is the U.S. dollar index breaking to the downside even as I write. Usually gold and the U.S. dollar index move in opposite directions. Gold has seen no follow through even after all this bullish news. Technically we have not broken the continued down trend that gold has seen since the peak in early February. The downside in gold must be played unless a reversal above 1300, with sustained volume as a confirmation of the buying.

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

Will Silver Futures Find Favor?

Eli Tesfaye

July ’19 silver futures short-term trend remains bearish and trading below $15.00 psychological levels. Silver is trading below short-term 9-day moving average, giving the bears a technical advantage. Any attempt to push silver above $15.00 has been met with formidable resistance. Silver prices have been stair-stepping down since late February highs as precious metals lost favor to high performing equities markets and the U.S. dollar snatching up most of the short term safe-haven purchases.

Physical commodities have been trading cheap and trending lower. Warren Buffet has famously said “Be fearful when others are greedy, and greedy when others are fearful”; With that in mind I feel as the precious metals shrink in price they are growing in potential value for long term investors. Equities are becoming chaotic due to devolving U.S./China trade talk, escalating tension and potential conflict with Iran, and an expectedly ugly 2020 presidential election. Bulls should be patient as economic confidence fades and profits made in the indices start to slip through investing public fingers, money may start to move into “something you can hold onto”.

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: Bearish or Bullish

Phillip Streible

Oil futures are undergoing a capitulation point where arguments for the bull side and the bear side are starting to go head to head. Prices have remained firm since the start of the year rising 36% however over the past two weeks we have seen a pullback down to the 200 DMA which is acting as critical support. Any selloff below this level could trigger a larger washout down to the 100 DMA at $57.23 while a move back above $63 would reignite the next round of buying.

Here are the arguments for both sides

Bullish factors

  • Iran’s output is set to decline
  • Instability in Venezuela
  • Chinese oil imports are at record highs
  • Strategic petroleum reserve is in a drawdown
  • Net imports to the U.S. are rising
  • Instability in Libya

Bearish factors

  • OPEC has spare capacity
  • U.S. production has pushed to record highs
  • EIA inventories are back above the 5-year average

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 Breaks Out To The Downside. Now What?

Joe Nikruto

This week’s comment finds the July sugar contract checking up after dropping below the 12.00 handle. A recent BBC article highlighting 30 million metric tonnes of sugar produced by India may have been the catalyst for the recent downside breakout. Earlier this year, sugar had attempted both downside and upside breakouts only to be dragged back into the range between 12.00 and 13.50. Unlike those attempts this move seems to have the legs to follow through.

Fundamentally, the Indian news and the recent 10-day pullback in energy prices has put sugar on the defensive. This has again put sugar at an inflection point. Trend followers are entering new short positions and increasing the size of the managed money or fund trader category short position. We will see for sure with Friday’s COT report release, but a good guess would place the total short position for the fund trader at or near 100k. Sugar has been very good in recent months at forcing the lumbering Managed money community into positions and then immediately turning the market back on them. A good tell will be how this market reacts around the 18-day moving average. An ability to test, but close below the 18-day moving average can point to lower prices to come.  July sugar will have to be pushed back above 12.65 and 13.68 to force the intermediate and long-term trend followers back to the sidelines.  he 18-day comes in at 12.41.

The Hightower comment this morning spoke of widely followed forecasters calling for a global supply deficit of 2.5 million tonnes. The markets will keep a close eye on that developing possibility but right here, up front, Indian sugar is going to have to find a home outside of India. This could keep the market under pressure. Bearish traders on the sidelines likely must wait for a rally to sell. Aggressive and bullish traders can fade the momentum look for entries immediately.  Not to lecture on risk, but avid market participants can attest that ‘money flow’ can move markets.  Sometimes they move farther than the market should move based on our view of fundamentals alone. Put the stop into the market if you have a trade on. If the stop gets hit, take a moment and celebrate. You have protected your capital and get to play again when the next market sets up.

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 Collateral Damage

Eric Scoles

July ’19 cocoa futures were pushed down rapidly in price due to negative Chinese trade talk and tariff tweets. Trump’s tweet on increasing tariffs in a fresh trade war assault has wiped away much of the global risk sentiment resulting in market sell offs, of which cocoa has fallen victim. Cocoa futures have experienced significant swings in price since those mid-April highs after a rally of fourteen straight sessions while the market tried to balance fluctuating demand and possible supply threats. The scale seems to have been tipped now in favor of the bears and demand tone has become a casualty in the trade war putting this crop’s price below its 100-day moving average. Volatility is quite likely through the next few sessions so it will be very important to focus on where prices close for the day. Potential is strong for continuing price drops on speculative selling while bears feast on negative headlines. Fear not though bulls; if supply threat based on poor growing conditions for the mid-crop come to light at the end of the tunnel, or a shift to successful trade talks with China hit the headlines there could be a rally worth waiting for.

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

Probing for Short-term Low in Beans; Corn Planting Window and Expecting High Yields

Tony Cholly

Most of the soybean news (dragged out trade war and a large new crop) seems to have been priced into the market heading into the USDA.  In order for beans to avoid some recovery action, it will take a surprisingly over bearish number from today’s report. While logic would suggest that the likelihood of a deal getting done sooner than later is not good, there are plenty of outcomes that can support the market.  Partial deals, extension of talks, or obviously an actual deal getting put in place would help.  Poor weekly export sales with over 400,000 tonnes of net cancellations in the beans. The market has reached new contract lows with the most recent sell off, leaving support at 802 and 794 ½ while resistance comes in at 822 and 834.

Heading into today’s USDA report, the corn market seems to have priced in not only bearish USDA ending stocks and productions estimates, but also a pessimistic outcome to the U.S./China trade negotiations. The market is also being pressured by the 7-day forecast seemingly clearing up, which can help get corn planting up to date, or at least further along than we are. After the 18th of May, the models do show more than 2 inches of rain returning to the Midwest, so this window for planting is a small one.  Resistance comes in at 358 and 366 while support hits at 348 and 344.

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

Crude Oil Jun '19 Daily Chart

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Agriculture - Livestock

Live Cattle Selling Off, Outlook is Bearish

Peter McGinn

We saw some more selling in the June live cattle market yesterday and a close at 112400. During this time of the year, we should be seeing some increase in demand due to the grilling season causing an increase in price. Unfortunately, because of the record NET longs liquidating their positions the past two weeks and the disappointing trade news and tweets from President Trump, we saw the market continue to have a bearish tone early this week. The market is extremely oversold with the RSI at 22 according to the daily chart. The market right now is on support from last November and early December, a close under the 112000 level would lead a continued sell-off to the 111675 level. The Fibonacci Retracement taken from the April high would show a retracement back up to 116000 which is also around the 200-day moving average. If we see a close over the May 6th high within the next week then I believe the market continues to the .382 Retracement line at 116000. USDA boxed beef cutout values were down 98 cents at mid-session yesterday and closed $3.13 lower at $223.87. This was down from $231.84 the prior week and is the lowest beef market since March 4th.

The hog market took a huge blow from the breakdown of the trade talks and tariff threats which has ignited some more aggressive selling. This market still has problems with its tight supply which would drive prices up but as soon as there is confirmation that a trade deal is complete with China, until that point this market will trade sideways with maybe a slight upturn due to the tight supply. Along with the tight supply, we are coming into grilling season further increasing demand in the market. If there is anything other than bad news, I see this market forming a near term bottom and start to slowly turn to the upside.

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

Currency Momentum Shifts Amid Trade Tensions

Ian Bannon

Obviously, President Trump’s trade war with China is taking the spotlight this week and has been the primary mover of the currency markets. The USD bull camp is facing some discouragement that the dollar has been replaced by the yen as the safe-haven currency during global economic uncertainty. This morning’s CPI number adds to ‘bearishness’ in the dollar. A minor down tick from 0.4% to 0.3% in m/m inflation gives reason to believe that the Fed will look to take dovish measures to stimulate inflation going forward. Technically speaking, support in the June dollar will likely be seen around the 97 level, but I believe the dollar is in a topping process, as foreign currencies begin to bottom.

 Motivated by U.S./China trade tensions, the June yen has vivaciously moved out of its recent consolidation pattern and marched forward to position itself in a new bull trend. It has advanced into immediate-term overbought territory with first support being seen at 91.14 and below there at 90.96. The euro too has been elevated this week in the face of a weaker dollar, although less extensively. Given weak data coming out of the euro zone, a downgrade in growth expectations for 2019, and an increase in the Italian budget deficit, the euro seems to be the most vulnerable if global anxiety remains in place. Additionally, the British pound seems to be discounting negative scheduled data, as lows are being held this week around the 1.30 level. Although it is still entrenched in bear tracks, the pound is showing relative strength compared to the euro from a technical perspective. If foreign currencies continue to move higher into the summer, the pound could have the most to gain as its chart would suggest. For now, support is seen at 1.3008 in the pound while resistance should be observed at 1.3066.

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.

British Pound Jun '19 Daily Chart

British Pound Jun '19 Daily Chart

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Interest Rates

Bunds Render Sell-off Corrective, Look to Resume Major Bull



Yesterday and overnight's recovery above 10-Apr's 166.00 high and our short-term risk parameter renders Mar-Apr's sell-off attempt from 166.75 to 164.06 a 3-wave affair as labeled in the 240-min chart below.  Left unaltered by a relapse below 16-Apr's 164.06 low, this 3-wave setback is considered a corrective/consolidative affair that warns of a resumption of Oct-Mar's major uptrend that preceded it.  While 28-Mar's 166.75 high remains intact as resistance, we have to acknowledge the prospect for further intra-range lateral consolidation, but former 166.00-to-165.90-area resistance over the past few weeks, since broken, is now expected to hold as new near-term support per any more immediate bullish count, like a breakout above that 16.75 high.

This week's resumption of the mid-Apr rally leaves 03-May's 164.84 low in its wake as the latest smaller-degree corrective low the market is now minimally required to fail below to negate a more immediate bullish count.  In this regard this 164.84 low is considered our new short-term risk parameter from which shorter-term traders can objectively rebase and manage the risk of a still-advised bullish policy.

To read the full article RJO Futures clients may login here to the client portal and access all RJO Market Insights.

Euro Bund (10Yr) Jun '19 240 Min Chart

Euro Bund Jun '19 240 Min Chart

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Equities

Equities: Trump, Trade Talks, Twitter, Tank

Jeff Yasak

The stock market is set to open lower this morning after President Trump said there is no need to rush a trade agreement with China and new tariffs will make the United States stronger.

On May 10th President Trump tweeted “Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.... Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!”. 

The market continued this week’s sell-off with the S&P 500 losing 2.5% and the Dow dropping more than 650 points.  If these losses hold it would mark the worst weekly return of the year. Items to watch today include-New York Fed President John Williams will make remarks at the annual Bronx Bankers Breakfast 10a.m -The Treasury Department will release the April deficit or surplus of the federal budget at 2p.m- Uber’s long-awaited stock offering on the NYSE.

Resistance today is checking in around 289700 and 291500 with support at 284800 and 282000.

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 Jun '19 Daily Chart

E-Mini Jun '19 Daily Chart

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