June 21, 2019

Volume 13, Issue 25

Feature Article

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Metals - Gold

Gold Explodes to Six Year High, It Won’t Last

Joshua Graves

August gold futures have exploded higher, and for all the reasons you would expect. The two biggest drivers of the move higher were quite simple and fundamentally correct from what one would expect. First and foremost, the big reason for such a large move higher was a U.S. fed that insists that a rate cut is likely next month, although leaving rates unchanged. The U.S. stock market took off on the news and gold followed suit. The Fed is leaning towards or hinting at a rate cut in their forward guidance, and this is bullish  news for the precious metal and bearish for U.S. dollar. The U.S. dollar is an interest-bearing asset that rises when interest rates are moved higher. The second and most obvious reason for the push above $1400 was Iran shooting down a U.S. drone in a clear and strong message to the U.S. that military options are on the table. Trump resisted the urge to strike back even though reports initially indicated he had in fact given a strike order, before at the last second cancelling such an order.

Technically, gold is in a clear uptrend and has taken out all buy stops that were sitting above the highs in the 1350’s. Gold is likely to now have a new floor around 1325 and a ceiling of around 1500 given the way it is trading. After such a run up, it’s likely that we get a corrective pullback to the 1365 level, before making another move that is sustained above 1400. There are ways to play gold without necessarily taking a directional stance if you are cautious about where it goes from he

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 Aug '19 Daily Chart

Gold Aug '19 Daily Chart

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Metals - Silver

Silver Futures Riding Strength of Gold

Eli Tesfaye

July ’19 silver futures spring up following the strength of gold which has been stacking fundamentals favoring bulls for some time before taking off. While there has been a building case to believe in, rising prices for the precious metals required a strong reaction to dovish fed policy to start this most recent jump, as well as Iran shooting down a $123 million-dollar drone to see it follow through.

Looking at the daily chart for silver, the technicals suggest the bear trend has changed and the bull’s control of the momentum is confirmed. If current tensions between the U.S. and Iran continue to escalate, there could be significant gains in silver while it rides gold’s strength. However, pay close attention to the headlines because if things cool off quickly with Iran and the attack on a U.S. drone is smoothed over, there could be a safe-haven sell-off. Technically, Silver is poised for a profit taking

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

The Classic “W” Pattern in Crude Oil

Phillip Streible

Crude oil is the best performing commodity this week up over 8% and is in no shortage of bullish news. With geopolitical tensions rising in the mid-east and an explosion at an east coast refinery we may see another run up to the 100 and 200 DMA just over $59/barrel. The current chart pattern for August crude oil is one of my all-time favorites being a double bottom “W” shape. With MACD turning bullish and stochastics moving into overbought territory this market appears to be going from a strong bear market to a strong bull market. A red flag would be a close below $55 or is ADX closes below 20 indicating that the strength of the trend is over.

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 Light Aug '19 Daily Chart

Crude Light Aug '19 Daily Chart

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Softs - Sugar

Sugar Rally Over? Watch the 50-day Moving Average

Joe Nikruto

This week’s comment finds the now prompt October sugar contract pulling back from a recent test of the 13.00 level. Healthy pull back as the market gathers itself for a new move higher or withering rally attempt dying on a declining volume vine? Could be too early to call this rally over, but while the Brazilian currency continues to show strength, price weakness casts suspicion on the ability of sugar to maintain an upward tilt.

Fundamentally, the voices calling out for declining production in 2019/2020 are getting louder.  Continued offtake of cane for ethanol in Brazil is supportive and the recent halt to the energy price decline doesn’t hurt either. Technically, sugar is testing the 50-day moving average. If the October contract is unable to hold this level, 12.59, the path of least resistance could be lower. 12.31 looms large as a level the market could gravitate to. While price action has the October contract back in a neutral or a trendless stance, a move below 12.31 in the October contract will have the potential to ignite selling and re-establish the down trend. However, talk of a down trend is premature before we answer the question asked by the 50-day moving average, especially with the funds still short, according to the COT. Stay nimble and don’t be afraid to take profits should you have them.

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 Oct '19 Daily Chart

Sugar Oct '19 Daily Chart

 

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Softs - Cocoa

Positive Demand Tone Drives Cocoa Futures Up

Eric Scoles

September ’19 cocoa futures start the day moving upwards in price off a positive boost in global demand outlook. With the euro zone making up more than one third of all global cocoa processing, 2% daily gains in German, French, and Italian stocks should provide the bulls with demand-based confidence. Adding to that positive note is signs of some progress in U.S./China trade negotiations, or at the very least decreasing tension between the two. With demand having been the most significant factor in cocoa futures prices lately, there can be volatility expected with each headline coming out on trade talks or euro economy. The daily chart shows the trend momentum being up with fundamentals supporting prices, so any pull backs could be potential bullish opportunities.

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 Sep '19 Daily Chart

Cocoa Sep '19 Daily Chart

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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 06/21/2019

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 - Livestock

Cattle Market Sliding Downward

Peter McGinn

It looks like cattle is in a bear market at the moment, but if we see a close over 106.900 in the August contract, that would signal a bottom turn around in the market and eventual follow through to the May highs around 110.000. If the price fails to break through the 106.900 price, then we may see a rejection that would follow through to 103000 levels. For the upcoming cattle-on-feed report this Friday, the expectations have placements coming in around 4.2% lower than last year. Marketings are expected to have a slight bump of .8%, and the On-Feed supply is supposed to come in around 1.3% above last year.

One thing to consider is that there may be a feeling that protein will become tight in supply early next year because of the smaller than expected pork supply. Slower placements coupled with excellent pasture and range conditions should eventually lower the Q1 production outlook. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 240,000 head, down from 243,000 last week, but up from 234,000 a year ago. USDA boxed beef cutout values were down 3 cents at mid-session yesterday and closed $1.29 lower at $220.53. This was down from $222.39 the prior week and the lowest beef market since May 22nd.

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 Aug '19 Daily Chart

Live Cattle Aug '19 Daily Chart

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Currencies

Currency

Ian Bannon

Currencies were in a dance this week on news that the Federal Reserve is prepared to ease monetary policy should growth continue to slow into the back half of the year. On Wednesday, the FOMC announced a lack of patience regarding rate cuts and said the Fed is ready to act as they see fit when it comes to stimulating the economy. While the attitude of the Board of Governors was generally dovish, specifics among the officials were more ambiguous. A handful of members warranted one 25 bps rate cut while others pushed for two quarter point cuts. Some wanted to remain neutral while one official said a rate hike may be necessary. This ‘dovishness’ was mostly priced into markets, but certainly was a catalyst for fluctuations following their announcement.

The Sep USD completely erased last week’s gains, as interest rate cuts open the door for inflation and add fuel to the bear camp in the dollar. We have been forecasting this topping process in the dollar, as slowing global growth eventually calls the Fed to action. As the greenback fluctuates, it sends ripples throughout global markets. Foreign currencies, particularly the euro, Swiss franc, and Canadian dollar, had a strong week as they all trade against the USD. The euro is in a win-by-default position, as European data has been weaker than that of other slowing economies, and the ECB is forecasting rate cuts as well. The euro pushed up against resistance Friday morning, while a close under 1.1312 would rekindle bear forces. Safe-haven assets around the world are heavily elevated this week, hinting at global nervousness as this train of a bull market may be running out of tracks. I believe any bounce in the dollar would be a result of simply being oversold, as the topping process in the dollar has been triggered by the Fed’s call to action (the probability of a rate cut in July is now above 70%).

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.

U.S. Dollar Index Sep '19 Daily Chart

U.S. Dollar Index Sep '19 Daily Chart

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Interest Rates

Breaking - Fed Staying Put on Interest Rates

The Fed had its monetary policy meeting this afternoon and the big news out of Washington is the Fed has decided keep interest rates where they are. Federal interest rates have remained at 2.25-2.5% since December and will stay there for the time being. It should be noted that the Fed expects inflation to finish this year below 2% which could potentially lead to the Fed cutting interest rates to preserve the economy.

According to the AP, Fed policymakers are now expecting inflation to increase by 1.5% by the end of 2019, which is down from the March projection of 1.8%. The unexpected slowing leads to a lot of uncertainty in the economy as we don’t know how businesses will react to this news. In a survey of the 17 Fed officials that participated in today’s meeting, the AP is reporting that nearly half of them still expect a rate cut at some point this year, which contradicts March when nobody was expecting a rate cut. Only time will tell, stay tuned for updates.

If you would like to learn more about interest rates, please check out our free Interest Rates and the Economy Guide.

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Equities

Fed’s Support Pushes Stocks Near New Highs

Tyler Herrmann

Stocks got a positive boost on Wednesday with the Fed’s dovish statements and outlook of continued stimulus along with positive outlook on U.S./China trade progress. The possibility for a rate cut as soon as July, coupled with additional cuts by the end of the year, pushed the market back towards all-time highs. On the other hand, the market looks to have priced in support from the Fed and escalating tensions between the U.S. and Iran with a U.S. drone being shot down this week.

Today, we end the week with speeches from the Fed. If the majority of those speeches show intentions of continued support of the economy, the trend higher should continue. The S&P started the session pulling back on news that the U.S. launched an air strike before calling it off last minute. Momentum studies show the market is at overbought levels, but the short-term trend remains to the upside until fundamental news shows otherwise. In the September contract support comes in at 2930 and if that is broken the next downside target is 2894. A push over the May highs of 2976.75 would accelerate the rally higher.

If you have any questions or would like to discuss the markets further, please feel free to contact me at 800-826-2270 or therrmann@rjofutures.com.

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

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

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