June 14, 2019

Volume 13, Issue 24

Feature Article

RJO Futures PRO Online Trading Platform


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Echo Follower Video

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Metals - Gold

Gold Continues to Shine

Phillip Streible

Gold futures have forged out another impressive week led by gains coming from the increased chances of a rate cut at the next Fed meeting. The CME FedWatch Tool has the June 19th meeting chances of a rate cut at 22.5% and the July meeting at 86% which could impact the dollar negatively and lend additional support to the gold market. Keep an eye on the inverted yield curve with 3-month treasury yields at 2.18% and 10-year treasuries at 2.09%, if this trend continues for a period longer than a quarter the chances for a recession jump substantially. Generally, the recession happens within 7-24 months after and should spark another wave in gold while the dollar weakens.

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.

Gold Aug '19 Daily Chart

Gold Aug '19 Daily Chart

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Energies - Crude Oil

Crude Rises on Tanker Attack

Michael O'Donnell

As of Thursday, the crude oil market is absorbing the news that there has been another attack near the Strait of Hormuz, the critical strait between the Persian Gulf and the Gulf of Oman. This has naturally led to stronger oil prices with the front month July futures contract trading near $52.10 Thursday afternoon, and as high as $53.45 today.

Comments from U.S. Secretary of State, Michael Pompeo, also noted previous attacks on tankers and pipelines in the region, especially in light of U.S. sanctions and the attacks coming against U.S. allies.

In addition to the implications for increased geopolitical turmoil, there are a number of implications from both a rate and inflation standpoint as well. Given the recent drop in oil prices which has led to lower inflation numbers and discussion of the further divergence between the Fed dot plot and Fed Funds futures, there are equal implications for a inflation and rates should things escalate, especially as further quota and productions cuts have been discussed in addition to today’s developments.

As seen below, barring a break below this month’s lows and a re-test of the lows of late 2018, some may argue a double bottom chart formation has been forming this June.  That being said, there is not much price action below current levels should the market take out recent support, which is actually closer to the current price than the high on June 10th.

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

Weather Forecasts Lean Bearish on Natural Gas

Jeff Ratajczak

July natural gas is in a downtrend. There is a bottom just above the $2.300 handle. Momentum studies are at lows and are starting to turn up, this may increase the price as resistance is broken. The pivot is near $2.340.   Resistance comes in at $2.359 and a close above $2.500 should change the trend.  Support is just above $2.300 with a double bottom at $2.306. 

Natural Gas storage came in below the expected injection for the week, the forecast was 110 bcf the actual number came in lower at 102 bcf. Based on the numbers alone, this should be a bullish scenario, but the total storage is 10% below the 5-year average.  Weather forecasts lean bearish with normal to slightly above average temperatures over the coming week. However, being this near the lows, you may pick the direction of the market correctly, but the reward might not be the greatest.  Letting the market pick a direction might be the safest play right now. You might leave a little on the table to gain a much bigger and safer move to the upside.

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 Daily Chart

Natural Gas Jul '19 Daily Chart

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Softs - Sugar

Continued Sugar Gains Reinforce Bullish Count, Define New S-T Risk



Yesterday and today's clear breakout above recent 12.53-area resistance leaves Tue's 12.27 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to even defer, let alone threaten our broader bullish count introduced in 22-May's Trading Strategies Blog. Per such, this >12.27 >level serves well as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bullish policy and exposure.

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

Sugar Jul '19 240 Min Chart

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Softs - Cocoa

Momentum in Bulls Favor as We Enter the September Cocoa Contract

Peter Mooses

September cocoa continues to move higher. Traders are rolling or reestablishing their positions from July to September in the futures market. Although we are reaching overbought levels, fundamentally and technically, we could see the market move higher. Cocoa has closed higher the past week, making new highs. We haven’t seen these levels since about a year ago. At these levels, traders may consider taking profits and lightening up on long positions. Fundamentally, key areas - mainly North America and Asia, have had a strengthening demand outlook, which is positive for prices to move higher. If demand can hold, this factor mixed with the July to September roll should help the futures contract push towards 2600. If key producers continue to help the bulls on the supply side of the equation, this key level of resistance is realistic in the near-term trade. Although supply and demand are currently supportive for prices to stay at these levels, global uncertainty stemming from the equity markets could cause pullbacks. These pullbacks may create attractive buying opportunities for traders who have staying power. With little support at these points, mixed with an uneasy global tone, traders should remain cautious. Look for the COT report Friday to give some feel for how traders are positioning themselves as well.

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 Sep '19 Daily Chart

Cocoa Sep '19 Daily Chart

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Softs - Coffee

July Coffee Consolidation

Adam Tuiaana

We’ve seen a very strong pullback in July coffee prices, after a rally topped out at the 105-area in drastic fashion. In addition, July coffee prices have violated the 50% retracement level measured from the breakout low of May 23rd 9020 low to the June 4th 10615 rally high. Granted, strong rallies need strong corrections, but we’re quickly approaching the Fib 61.8% retracement level and if violated, longs should consider stepping aside for a bit. Without any major bullish change in the Brazilian crop supply story, I would expect that support will be found at the 100-area and then get boring for a while (consolidation). Expect that a return to the 105 level (and resumption of the intermediate uptrend) will take some time.

Recent strength in the Brazilian currency prompted underlying support for July coffee prices, but The Hightower Group has reported today that “coffee found little benefit from a more than 1% gain in the Brazilian currency as Brazil has significant old crop supply left to market while their current harvest is nearly 20% complete”.

In nutshell, very sluggish supply news for coffee prices, coupled with demand uncertainty evidenced by the ongoing struggle for the S&P 500 to break above (and hold) the 2900 level.

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 - 06/14/2019

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

Beans Continue to Focus on Wet Weather

Tony Cholly

The wet forecast continues to support grain markets, and especially beans the last 2-3 days. Traders remain concerned that planted acreage will continue to decline as most of the Midwest is looking at a very wet weekend. The latest 7-day forecast shows 2-4 inches over Illinois, Indiana and Ohio, with even more widespread rain through other parts of the Midwest mid-next week. These sates have nearly 17+ million acres left to plant as of June 9th. July soybeans are up over 31 cents on the week so far and November beans are up 32.  The soybean market is looking to close higher on the week for the fourth out of five weeks.  Resistance comes in at 893 and 896 while support is at 882 and 874.

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

Currency Markets Mixed as Investors Search for Direction

Ian Bannon

The June dollar opened Thursday morning at 96.94 and continued its move up after Wednesday’s larger reversal higher. The USD is trading near the middle of its June range, and is just shy of its weekly high, despite higher than expected jobless claims this morning. It appears the dollar is benefitting from safe-haven buying this week, but more likely the bounce is a result of being technically oversold, as last week’s decline was the largest the greenback has seen since June 2018. Going forward, I believe the dollar will see another leg up before moving lower in the back half of this year, as the Fed positions itself for rate cuts, weakening the dollar and bringing safe-haven buying to foreign currencies around the world.

The euro is lower Thursday morning, as it tends to trade opposite the dollar. From a technical standpoint, the bear camp is gaining momentum. Fundamentals support the same, as industrial production numbers overnight showed further signs of slowing. The yen has benefited in recent weeks as the safe-haven currency choice for investors. Technically speaking, the yen is forming a bull flag on its chart, which could provide the right set-up for a breakout if market anxiety is sparked in coming weeks. The British pound has finally found support after its avalanche over the last two weeks. If there are any signs that Brits are closer to finding a new prime minister and avoiding a no-deal Brexit, the pound could rally. Until that happens, the bias is favoring the downside.

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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Interest Rates

U.S. Bond Yields Extend Lower to 2%

Alexander Turro

As of Wednesday morning, U.S. government prices have come off yesterday’s low and a two-day slide following softer than expected inflationary data. Consumer prices excluding food and energy products slowed to +1.8% YoY (same as headline PPI) and just 0.1% in May from the previous month, which was below expectations. This falls below the Fed’s target of 2.0% as the Federal Funds futures indicated an 84% chance of a rate cut by the July meeting. Muted inflation, coupled with concerns involving global and domestic growth, have boosted prices with the benchmark ten-year yield falling to a 20-month low last Friday. The U.S. 10-year yield remains bearish trend with the current range seen between 2.04 – 2.22% with near term resistance on Sept t-bonds coming in around 154-07 and support around 153-04.

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 Sep '19 Daily Chart

30-Year T Bond Sep '19 Daily Chart

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Equities

Stocks Rally on a Dovish Fed: Now Looking for Direction

Ian Bannon

Global stock markets were mostly lower overnight, led by Chinese equities declining nearly 1%. The June Nasdaq opened today at 7503.25 and has led U.S. equity futures lower during morning trade. Stocks are in a period of consolidation this week after last week’s massive move up being the largest of the year. Investors are searching for direction as global sentiment breaks down and scheduled data out of the U.S., Europe, and China has been soft lately, pointing at signs of a global economic slowdown. However, Friday morning’s data showed relative strength. Retails sales were up 0.5% m/m vs 0.3% growth last month, but still missing expectations. Industrial production beat expectations, gaining 0.4% m/m vs -0.4% last month. These figures are in the “middle of the road”, not strong enough to rally stocks, but not weak enough to cause more dovish Fed dialogue.

Last week’s rally was fueled by a dovish Fed. Stocks bounced hard off correction lows, attempting to price in the probability of 3 rate cuts in the back half of this year. With stocks near all-time highs, I believe this rally is a bit overdone. The probability of a rate cut in July has moved toward 80%. Markets are pricing in extreme dovishness in the back half of this year, but what if the Fed is not dovish enough? FOMC meeting minutes will be released next week, and if they hint that they will not cut rates in July, or perhaps that they won’t cut rate sharply enough, stocks could be pulled back into the grips of downside action. With utility funds at all-time highs, and analysts forecasting more slowing growth ahead, it begs the question; can central banks prevent recessions… or simply postpone them? One thing is clear - markets are feeling anxious and if the Federal Reserve dials back their level of dovishness, the recent rally is likely to falter.

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.

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

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

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