May 24, 2019

Volume 13, Issue 21

Feature Article

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Agricultural Grains 2019 Crop Progress

Tuesday, May 29 at 2 p.m. CT

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  • Balance sheet implications from the ongoing planting delays, and associated market risks
  • Fundamental Grain Analysis with RJO analyst, Randy Mittelstaedt
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  • Data on the latest USDA Crop Progress Reports

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2019 Crop Progress


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Metals - Gold

Where is Gold Going Next?

Nicholas DeGeorge

In the early morning trade, June gold traded in a very tight trading range overnight and is currently trading at $1,282 an ounce.  However, it did hold onto yesterday’s gains which has to be seen as a plus along with Teresa May’s resignation because the pound rallied of the news and put pressure on the US dollar. If the US dollar extends its sell-off, it should cause gold to extend on yesterday’s rally and maybe break back above $1,300 an ounce. A few Fed officials have stated that the ongoing US/China trade war will last sometime which can also put the shiny one back into safe-haven category.

If we take a quick look at the daily June gold chart, let’s keep things very simple for entry and exit points. If you’re a gold bull, last week’s May 14 high of $1,304 an ounce will be a critical level. If it breaks and holds last week’s high, then look for much higher gold prices which can even test the old yearly high of $1,356 made back on February 20. However, if you’re a gold bear, then obviously look for it to break roughly $1,267-69 which is has tested and held three times since April 23 including this week. Those prices are also the yearly lows on gold and the 200-day moving average is currently at $1,270 an ounce, so if gold breaks this critical level, look for a big sell-off down the $1,200 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 Jun '19 Daily Chart

Gold Jun '19 Daily Chart

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Metals - Silver

Silver Taking a Break From Technical Bounce

Eli Tesfaye

July ’19 silver futures trading at 14.53 down 7 cents today. The market is soft today after a nice technical run yesterday as you can see on the chart below. The bears hold an overall technical edge, BUT downside pressure is weaning. Trade is working an “inside day” chart set up. Breakout from that could send it to 14.75 or psychological level of 14.00. The technical indicators I use continue to show divergence, please reach out to me to discuss that aspect of it. Also, the dollar is weak this morning, and silver is not getting a kick out of it.

The US/China trade talks have been less than productive, and silver hasn’t taken advantage of that; however, the market still thinks a resolution of some kind between the two economic giants will come sooner than later.  I don’t assure protracted economic “war” is suitable for either country. Stocks are poised for a rebound.

The chart below shows gold/silver ratio on the top of the range. The ratio should give silver a bit of an edge over gold at least for the near-term.  All in all, the short-term technicals are still supportive of silver. One can’t rule out a wash to 14.00. There could be an opportunity for aggressive bulls, but caution advised as the big picture and longer-term trend still appears to be bearish for now.

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

Gold/Silver Ratio Weekly Chart

Gold/Silver Ratio Weekly Chart

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Energies - Crude Oil

Crude Oil Continues to Crumble

Michael O'Donnell

The crude oil market this week shifted from weighing and focusing on demand concerns (related to global trade and growth) and supply concerns (related to tensions on the Middle East) to decidedly bearish on concerns for demand.

While the market looked to be in a range between $60 and $65 for the most part since early April, it seemed the market was facing a trend decision or breakout by early June, pictured in the chart below.  Also, in the chart below, the 200-day moving average and 100-day moving average were breached in this week’s trading.

Clearly, the market and chart below reflect the breakdown in trade talks and the potential for a trade deal between the United States and China as well as the build in inventories in the weekly EIA report which showed a build in crude of 4.7 million barrels as well as builds in gasoline and distillates.

Moving forward, as of yesterday and so far, today, the market has held the $57.50 level for the most part and coincides with late February and early March congestion followed by a run up and the mid November 2018 levels preceding the following sell off.

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 Jul '19 Daily Chart

Crude Oil Jul '19 Daily Chart

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Softs - Sugar

Sugar is Consolidating in Downtrend

Joe Nikruto

This week’s comment finds the July sugar contract consolidating after a recent move to new lows. Burdensome India supplies, weakness in the Brazilian Real and according to a Hightower comment on Thursday morning, increased selling due to the move in that currency. Sugar is seeing an upswing in open interest while commodity trading funds and commercial participants are increasing the size of their respective positions. Wednesday, the July sugar contract traded above then closed below the 18-day moving average, virtually negating the influence of the sweeping outside day up/key reversal from the previous session. While this one-day reversal took place on substantial volume, almost 120 thousand contracts, the inability to close above the 18-day is a bearish signal and a hallmark of down-trending markets.  Every day July sugar is unable to close above that 18-day moving average funds will be emboldened to press the short side and increase their positions. I will be watching open interest to see if the trend there continues to be up. If open interest stalls it feels to me like sugar could have a hard time extending the move lower. For now, the trend is down. 13.08 and 12.41, should the July sugar futures rally, are the levels where funds will be forced to the sidelines. While energy markets melted down this week sugar did not follow. This could be a signal that the market has digested the India supply headline and has come as far as it can for now. Treat the 18-day moving average, 11.85, as a line in the sand for risk management purposes if you are trying to press the short side. It feels like sugar could mark time in a range before heading 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 Jul '19 Daily Chart

Sugar Jul '19 Daily Chart

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Softs - Cocoa

Cocoa Supply Deficit Could Push Prices Higher

Eric Scoles

July ’19 Cocoa has seen solid gains since it’s breakout last week with strong potential to keep rising in price. Cocoa futures are experiencing an inside day currently and have some vulnerability to a pull-back, but technical indicators suggest the over-all trend may continue bullish and fundamentals should support this. While US/China trade talks have caused volatility on market confidence, demand seems to be resilient and may maintain despite recent tension. The supply side concerns of a deficit increase as Ghana’s cocoa regulator Chocobod is currently unable to meet sales commitments as “swollen shoot disease” has affected a larger amount of the crop than expected and The International Cocoa Organization has lowered their production forecast accordingly. First-quarter grindings have set a strong pace and are expected to follow through into the second and third quarters. If this pace remains and production continues to suffer we could see a sizeable deficit this season and this market may provide good opportunity for 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 escoles@rjofutures.com.

Cocoa Jul '19 Daily Chart

Cocoa Jul '19 Daily Chart

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Softs - Cotton

Tighten S-T Cotton Bear Risk "Down Here"



On the smallest of scales Mon's recovery above 15-May's 67.27 initial counter-trend high confirms a bullish divergence in very short-term momentum as detailed in the 240-min chart below.  But against the backdrop of Apr-May's preceding collapse, this momentum failure is of too small a scale to conclude anything more than an interim (4th-Wave) corrective hiccup ahead of resumed (5th-Wave) losses.  This could even be the case if the market continues its recovery above Tue's 68.24 high. But traders are nonetheless advised to pare or neutralize bearish exposure on such 68.24+ proof of strength because of 1) historically bearish sentiment conditions that could leave the market vulnerable to a steeper recovery and 2) the uninterrupted nature of late-Apr/early-May's meltdown that level nothing in the way of former consolidative battlegrounds that now may be looked to as resistance candidates.

A relapse below 17-May's 65.83 low and micro risk parameter will confirm this recent recovery attempt as a 3-wave and thus corrective affair that would re-expose the downtrend to new lows below 64.50.

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Cotton Jul '19 240min Chart

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Agriculture - Grains

Beans reached extreme oversold, can’t rule out minor bounce

Tony Cholly

For whatever reason, traders seem to be hopeful that a solution to the trade war may come sooner than later, but this thought may be short lived.  Trade tensions continued to weigh on the markets yesterday, with equities and energy markets taking the biggest hits.  More details of the second round of Market Facilitation Program (MFP) payments were announced but caused more confusion than clarification for the producers.  MFP will be made based on a single county rate multiplied by a farms total planting to those crops for 2019.  Farmers will need to plant crops to get a payment and PP acres will not be eligible.  The 10-14 days forecast is still showing a wet pattern for the Midwest and Great Plains.  China soybean imports for April reached 7.64 million tonnes from 4.92 million last month and 6.92 million tonnes last year.  As mentioned earlier, the forecast remains wet moving forward, which could further delay corn planting for producers.  If we see farmers start to bypass corn and start planting beans, this could be devastating for the soybean market.  Resistance comes in at 830 and 840 while support comes in at 812 and 805.

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

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Currencies

Shifting Momentum in Global Currencies

Ian Bannon

The US dollar recorded a new high year-to-date early Thursday morning before erasing all its early gains and finishing 22.5 points below the open. Contributing to this reversal was weaker than expected new home sales, down 50,000 from the prior reading. The selloff continued Friday morning, as new orders of durable goods decreased 2.1% vs a gain of 1.7% last month. In addition to weak home sales and durable goods numbers, the correction in equities is stirring rumors of a possible rate cut by the Fed later in the year. A rate cut weakens the dollar and forecasting one will drive investors away from the greenback and toward foreign currencies. As of Friday morning, resistance in the USD is observed at 98.03 while first support is seen at 97.46.

The Japanese Yen has gained momentum as the dollar appears to be in the topping process. From a technical perspective, the JPY hit resistance near its previous high around 91.84 and has formed a bull flag in a recent pullback, giving way to more bullish momentum again in the second half of this week. If the dollar continues to pull back, the yen looks to have more upside from safe-haven buying, in addition to last week’s Japanese GDP number being higher than expected. The British pound has seen a record number of consecutive down days over the previous 14 sessions, with slight support finally being found Friday morning. This comes on news that Prime Minister May will be stepping down in early June given her inability to formulate a working Brexit strategy. Should the new minister see more success in advancing the exit, bullish momentum could return to the pound. The euro continues its downward dance, with lower highs and lower lows over the last 4.5 months.

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 Jun '19 Daily Chart

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Equities

Good End to a Bad Week for Stocks

Jeff Yasak

The U.S. stock market is up this morning along with European stock ending on a good note to a challenging week where trade tensions dominated the market.  S&P futures rose 0.6 percent earlier today after President Trump said that there remained a “good possibility” that the negotiations with Beijing could get back on track.  He also noted that Huawei, the Chinese tele-com giant, might be involved in a trade deal with China.  Durable goods orders fell 2.1 percent in April as transportation equipment orders slid again.  Excluding the transportation numbers, orders remained nearly the same as March.   UK markets traded higher as Theresa May announced she would be resigning her post as prime minister in a few weeks’ time.  This market was also fueled as the UK retail sales came in above the forecasts.

Support in the E-mini S&P is coming in today at 279200 and 277500, with resistance showing around 284500 and again at 288000.

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 Jun '19 Daily Chart

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

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