May 31, 2019

Volume 13, Issue 22

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Metals - Gold

Geopolitical Tensions Put Gold Back into Bull Market

Nicholas DeGeorge

In the early morning trade, August gold is currently up big at $1,303 an ounce extending its two-day rally largely due to President Trump’s evening comments which state, “On June 10th, the United States will impose a 5% Tariff on all goods coming into our country from Mexico, until such time as illegal migrants coming through Mexico, and into our country, STOP. The Tariff will gradually increase until the illegal immigration problem is remedied”. This tweet has created fresh new tensions between U.S. and Mexico relations. Furthermore, after the US Border Patrol agents apprehended the largest group of illegal immigrants ever, consisting of 1,036 at the EL Paso border crossing around 4:00 AM this morning, I would take this President at his word as he is in his right to protect the sovereignty of a free nation, so this situation could keep gold above $1,300 an ounce. Other geopolitical news that could keep the gold rally going also is the escalating U.S./Russian tensions over nuclear testing activities and election meddling.

For the bulls, let’s keep the technical as simple as possible, below I highlighted on my August daily gold chart the May high of $1,310. August gold is currently trading at $1,303, so if the shiny one can close above this level today or next week, then it has a likely chance of rallying all the way up to its yearly high of $1,361 a troy ounce. Furthermore, you can see if it closes above this level I mentioned above, then you can see by analyzing the chart that gold will be back above all its down trends and start a fresh new strong bull rally back by many geopolitical tensions.

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 Aug '19 Daily Chart

Gold Aug '19 Daily Chart

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Metals - Silver

Time to Look for a Bottom in Silver?

Frank J. Cholly

I’m going to go out on a limb here and call a bottom in silver. I firmly believe, and most commodity traders would agree with me, that it’s almost always just a level on the chart that stops or turns around a market’s direction. So, the first thing I see now is that silver has tested long term support at the $14.30 range. Value is a range, not one specific price. I believe silver is in the “value” range now and that from here there is very limited downside.

We also must look at the silver to gold ratio. Today it is roughly 90 to 1. I don’t necessarily recommend selling gold and buying silver as a spread, however, silver is very attractive at these current levels for long term investment. I’m targeting $16.00 as a new trade objective.

I’m also looking for July copper to find good support in the $2.60 to $2.65 range.

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 Reacts Holiday Delayed Reports

Michael O'Donnell

As of Thursday, the July crude oil contract is trading on the lows of the day in the $58 area. This comes on a morning featuring delayed energy reports due to the Memorial Day Holiday Monday as the July contract yesterday traded down to $56.88, the lowest level since March 8th of this year.

As I noted last week, the market has continued to test the $57.50 level, having probed lower yesterday and trading lower so far today amid a smaller than expected draw in inventories of -0.3 million barrels.  In addition to yesterday’s API numbers and today’s EIA number, there are conflicting factors with several bearish developments from outside markets recently and possible increased geopolitical tensions which could disrupt supply in the Middle East.

Consider the levels on the chart below in addition to the EIA reaction and developments in outside markets.  As the API yesterday showed a larger than expected draw and this morning’s EIA a smaller than expected draw.  Also, of note, gasoline with a build of 2.2 million barrels and distillates with a draw of 1.6 million barrels.

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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Energies - Natural Gas

Natural Gas Neutral Heading Into Cooling Season

Jeff Ratajczak

Right now, the trend in natural gas for July is neutral. For the past week gas prices have stayed in a range, with support near the $2.550 mark seems to be a near term bottom. Lower lows and lower highs from yesterday may speed a move to bottom, the low at $2.340 should be the low of the move. MACD and RSI are both around mid-level.  A close below the lows can open the gates for a sell-off to uncharted territory. A close above yesterday’s high at $2.650 should turn the tides back to bullish forces.

Today’s bearish storage number (114 bcf actual v 98 bcf expected) moved the market when it was released.  The market has been fighting back all day making gains and a new high since 9:45am. Cooling season is right on the horizon, but not yet.  The rainiest May that can be remembered isn’t over and the weekend is a mixed bag when it comes to forecasts. Weakness in the energy sector is weighing on the price of gas. Given the weather and other energy prices, the best move may be to be on the sidelines.  Wait until a clear pattern is in place.  You may leave some money on the table, but you won’t lose your shirt in the process. 

If you have any questions or would like to discuss the markets further, please feel free to contact me at 888-874-8110 or jratajczak@rjofutures.com

Natural Gas Jul '19 15 Minute Chart

Natural Gas Jul '19 15 Min Chart

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Softs - Cocoa

Uncertainty in the Global Markets Have Cocoa Traders Waiting

Peter Mooses

Due to the uncertainty in the global markets, many cocoa traders are taking the wait and see approach. With trade tensions stemming from the U.S. and China talks, the futures markets, specifically the softs and grains, are being affected. Unlike the grains, cocoa is consolidating. Many other markets have seen volatility, but the soft has decided to do the opposite. With demand weakening, and Asian demand potentially being weaker due to the unknown, some traders are staying on the sideline. The pound and euro are also causing this recent trend as well. The chart is showing that small pullbacks could be good buying opportunities. We are seeing higher lows and tightening on the chart. If consolidation continues, a breakout is due. With a potential new range in the July contract of 2430 to 2480, 2500 is insight again. If this resistance could be broken and bullish demand news breaks, look for new highs in cocoa.

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 Showing Strength

Adam Tuiaana

July coffee prices have rallied 38.2% retracement from the last major sell-off on April 30th, at the 9950 area. This same area should provide formidable resistance, but outside forces are providing some level of support to this move. Although July coffee prices have been trading in a well-defined range between 9500 and 8800, we have broken above this range and are currently trading around the highs of April. The Brazilian currency is strong, while the June U.S. dollar continues to struggle to break above the 9825 resistance level.

The Hightower Group reported today that “a cold front moving across Brazil’s coffee regions brought storms with reports of damaging hail in some of the Brazilian state of Parana’s western coffee areas over the weekend”. If in fact the hail damage turns out to be serious enough to affect the crop, we will likely see July coffee prices hold some support above the 9500 level and prior range.

We will all keep in mind that while the U.S. stock market continues to struggle, with the S&P trading below the 2800 level, we will expect demand will continue to be slow for a little while.  

The outlook on July coffee prices remains bearish and I would expect some resistance at the 9900 level in the near term. With such volatility on the horizon, I would advise using options to manage risk and gain exposure to the potential resumption of the current downtrend in July 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 Jul '19 Daily Chart

Coffee Jul '19 Daily Chart

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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 05/31/2019

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

Grain Markets to Continue Focusing on Planting in the Near Term

Tony Cholly

Corn has seen some pullback action overnight and into this morning.  A lot of this can be “profit taking” before the weekend from traders who have been long corn this week. On top of that, news of a possible trade war issue with Mexico should keep the corn market from moving higher today.  Although, the market is showing signs of a possible 7-10 million acre drop in planting this season, which will eventually come back into play and support. December corn has now broken above $4.50 a few times but has failed to hold each time. To me, this is an indicator that producers like selling at these levels and locking their hedge. December corn has gained 32 cents this week and over 70 cents on the month.  The weather forecast looking out to June 16th> is showing most areas of the plains and Midwest receiving 4+ inches of rain still. The 14-day RSI reaching overbought levels at 80% should also keep the corn market contained most of today, but expect pullbacks to be shallow until we get a better handle on planting and weather moving forward.  Resistance comes in at 448 and 454 while support hits at 425 and 408.

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.

Corn Jul '19 Daily Chart

Corn Jul '19 Daily Chart

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Currencies

Foreign Currencies Look to Bottom in Back Half of 2019

Ian Bannon

The U.S. dollar opened at 98.04 on Thursday and has inched up in morning trade. Trading near its weekly highs, the USD remains in a bull trend as safe-haven buying interest continues to elevate the reserve currency of the world. As long as anxiety persists in global markets, the bull camp in the dollar is unlikely to be discouraged. Currency investors worldwide rely on the American economy when risk sentiment is high, especially in an environment where other developed economies are not holding up as well in the face of slowing growth worldwide. U.S. scheduled data is unlikely to reverse this trend, despite an uptick in jobless claims (215K vs 212K last week) and an expansion of the trade deficit coming from this morning’s data. Furthermore, Q1 GDP was revised to 3.1%, down 0.1% from the initial reading. This supports the simple fact… growth is slowing. This is reflected in the current U.S. stock market correction as well. Clearly investors are skeptical, and a continued “risk-on” mindset will likely stir the Fed to move from neutral to dovish. There is increasing potential for a rate cut later in the year, which would weaken the persistent greenback. As other currencies trade against the dollar, there is reason to believe certain currencies are in a bottoming process and the dollar appears to be topping. The Japanese yen broke out of its consolidation pattern earlier this month and has moved to bullish trend vs the USD, aided by impressive Japanese GDP numbers. As deep bear tracks persist in the euro, largely due to a growing Italian budget deficit, and the British pound falls to its lowest levels of the year, safe-haven buying interest may be observed in the Swiss franc as an alternative currency. Technically speaking, the downtrend in the franc appears to have found a bottom, as an early May reversal seems to be holding support.

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.

Swiss Franc Jun '19 Daily Chart

Swiss Franc Jun '19 Daily Chart

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Interest Rates

U.S. Government Yields Press Lower

Alexander Turro

U.S. government bond yields continue to press lower amid an announcement of U.S. tariffs on Mexican goods with the yield on the benchmark 10-yr declining to 2.158% from 2.227% on Thursday, falling to a 20-month low. Concerns involving global growth were only further exacerbated this morning following a negative print in Brazilian and Italian GDP, a decline in South Korean and Japanese Industrial Production growth as well as a miss in Chinese manufacturing PMI data as New Orders fell below 50.  Treasury yields are now down 33 bps for the month, with the 3M-10Y yield was inverted as much as 21bps. Geopolitical safe haven buying continues despite being immediate term overbought with the U.S. 10-yr remaining bearish trend with the current seen between 2.18 – 2.41%. Near term resistance for Sept t-bonds comes in at 153-20 with the larger upside target seen perhaps near the 2017 highs.

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-Year Bond Sep '19 Daily Chart

30-Year Bond Sep '19 Daily Chart

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Equities

Talk of Tariffs Cause Stocks to Tumble

Ian Bannon

The E-mini S&P opened at 2788.75 on Friday and has moved lower in morning trade, and the other indices have made similar moves. Today’s action can likely be attributed to President Trump’s proclamation that the U.S. is going to impose tariffs of 5% on all goods imported from Mexico. Mixed scheduled data this morning is not doing anything to support markets, with an uptick in personal income (0.5% growth vs 0.1% prior) counterbalanced by a larger decrease in consumer spending (0.3% growth vs 1.1% prior). Global sentiment currently has a “risk-on” attitude. Illustrating this point is that equity markets worldwide were lower overnight, apart from the Australian market clawing higher. Lack of progress with China on trade is causing a market overcast as well. With rapidly diminishing sentiment in the short-term, and hope growing for a rate cut by the Federal Reserve later in the year, there is reason to believe a bottom may not yet be in place. Momentum clearly favors the bear camp, particularly with the Russel index, whose technical indicators have not signaled “bullish trend” since February. With a plethora of negative geopolitical events, the question is not over the direction of equity prices, but rather the magnitude of the downward shift. For now, downside support in the June S&P is seen at 2753, while upside resistance is observed at 2801 in the event of a bounce.

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 Jun '19 Daily Chart

E-Mini Jun '19 Daily Chart

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