July 3, 2019

Volume 13, Issue 27

Feature Article

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Trading Agricultural Futures

Wednesday, July 10 at 11 a.m. CT

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  • What to consider before trading this market
  • Basic technical analysis techniques on the ags

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Metals - Gold

August Gold to Extend Gains if $1400 Holds

Joshua Graves

August gold futures have seen whipsaw trading with moves as high as $40 in intraday trading as investors digest world trade news and economic data. In my opinion, there is one real driver of the gold run-up and it’s not hard to understand. Looking at the U.S. trade war with China, you can see that we are going nowhere fast. A trade truce at the G20 is kicking the can down the road with no end game in sight, and a strong headwind for the economic engine of the world that is global trade. The U.S. just ratcheted up trade tensions with the EU recently, and today it was announced 400% tariffs are to be implemented on Vietnam Steel. Steel shipments from Asian countries are routed through Vietnam to avoid extra costs. The fact that tariffs are now being increased on other countries and with more frequency has investors worrying about the health of the global economy in the future, hence the flight to safe havens such as gold.

Another thing to consider is that Indian gold imports rose by 12.6% vs a year ago. India is the largest consumer of gold in the world, hence why investors pay attention to this. I believe that there are enough bullish fundamentals regarding the supply/demand balance to keep gold elevated but think that $1400 needs to be the new floor for further buying to be justified. Look for the possibility of “blow off tops” that could be made on June 25th, and July 3rd (today) as we test this new unchartered territory.

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

Momentum Shift in Silver

Eli Tesfaye

Front month September silver is enjoying a nice ride above the key support of $15.00 and trading around 15.31. The trend is clearly your friend here. With a move and a close above 15.00 key level, the next upside target will be the February 2019 highs of Mid 16.00. The bulls are enjoying comfortable momentum, any pullback would be probably seen as a buying rather than a selling opportunity.

With a potential trade deal between U.S./China looming and Australian rate cut, the dive towards currency depreciation leaves the metals the needed upside lift.

Below is the weekly chart in silver. The market could retrace back to 14.80 and would still hold upside momentum; however, pay close attention to the headlines because any economic data that shows cooling global growth, could derail silver momentum. I prefer to recommend credit spread to approach this current market condition.

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 Sep '19 Weekly Chart

Silver Sep '19 Weekly Chart

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Energies - Crude Oil

Crude Oil Uncertain as Driving Season Picks Up

Phillip Streible

Crude oil futures have completed the latest double bottom pattern and is now creating a rising wedge pattern leaving $60.28 as a breakout point on the chart. With OPEC extending cuts for another 9 months, this leaves the market open to a contraction in current supply versus the five-year average if the driving season picks up. The red flag is a close below $57.20 where we could see a quick break back down to $55.00. This could happen on the lighter volume into the holiday market and slumping economic data leaving the market more of a coin flip at this point. Continue to watch the technicals and enjoy your holiday.

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 Aug '19 Daily Chart

Crude Oil Aug '19 Daily Chart

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Softs - Sugar

Sugar Fundamentals Read Bullish, Chart Action Markedly Bearish

Joe Nikruto

This week’s comment finds the October sugar futures contract under pressure technically. Fundamentally, the bullish case is well known and on display in the wire services. Hightower today, laid out how sugar cane continues to be converted to ethanol in Brazil. Also, dryness in sugar producing regions in India could likely impact totals for the year there.  The wild card in this well-defined fundamental picture is near record large deliveries of physical sugar against futures contracts, according to Hightower. For  long time sugar watchers this is a familiar scene. Projections for less sugar in the future countered by ample sugar supplies in the present.  Pressure from the energy markets rolling over today did not help buoy sugar prices. At last glance crude oil was down well over 2 full points on the day.  Technically, sugar has been bouncing around the 50-day moving average, 12.49.  The October sugar futures contract appeared to be on the verge of an upside breakout but is now taking out swing lows three sessions later. We will see for sure in coming sessions, if sugar is just under the influence of this large physical delivery or a new down-trend is in the works.

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 - Coffee

Are Coffee Futures Set for a Price Surge?

Eric Scoles

September ’19 coffee futures gap up in price to 113.95 this morning after last week’s 8.7% gains! These gains are due to positive demand and easing global trade tensions support with a potentially large global deficit in production due to weather related issues. This weekend saw the U.S. and China agree to resume trade talks which has removed a significant amount of pressure from many markets and brought back a sense of confidence in investors. Managed money funds are still net short 30,855 contracts per the June 25th Commitments of Trader's Report so there is still plenty of potential for short covering and buying momentum. Weekly chart suggests the long-term trend is looking to turn in favor of the bulls. There is risk of a near term pull back so it may be advantageous to lock in profits on any long positions, or it could be a bullish opportunity to get in at a cheaper price.

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.

Coffee Sep '19 Daily Chart

Coffee Sep '19 Daily Chart

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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 07/03/2019

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

Recent Uptick in Live Cattle Demand

Peter McGinn

We are seeing an uptick in the demand for U.S. beef lately, along with a positive indication in world trade, there continues to be some support in the cattle market. In the August contract there was a 100 point lower close on Friday finishing with an outside down day. If you view the market on a weekly basis, you would see there was a new contract low that was made on Monday, but finished 212 points higher by weeks end. This is a good indication that there was a key weekly reversal adding additional support to the market.

Fundamentally, the market has a lot of supply and weak prices, further hurting the cattle market but technically it is showing signs that a low is indeed in place. The last commitment of the Trader’s Report showed managed money traders are net long 29,000 contracts. CIT traders reduced their net long positions by 1,695 contracts to a net long position of 116,808 contracts. The USDA estimated cattle slaughter came in at 120,000 head Friday and 60,000 head for Saturday. This brought the total for last week to 665,000 head, up from 662,000 the previous week and up 2.5% from last year. With lower weights, however, beef production for the week was up just 0.8% from last year. USDA boxed beef cutout values were up 89 cents at mid-session Friday and closed 63 cents higher at $219.66. This was down from $219.82 the prior week. Cash cattle traded at $109 in Texas and Kansas on Friday with Nebraska at $109 to $111.50 for a weighted average of $110.90. The positive global trade talks along with a positive tone for the global economy should have this market move to the upside for the upcoming month. The first level of resistance that the market should reach in the coming weeks would be to the $106.457 level where I believe it will break through there and make a move to the 50-day moving average around the $107.500 price 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 pmcginn@rjofutures.com.

Live Cattle Aug '19 Daily Chart

Live Cattle Aug '19 Daily Chart

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Currencies

USD Bounces After G20: Slides Off Highs

Ian Bannon

The Sep USD index opened Wednesday at 96.27 and is trading slightly lower this morning after coming off its high at 96.435. Monday’s leg up can be credited to the wave of optimism that came out of the G20 last weekend. Markets were largely expecting a trade truce between the U.S. and China and was satisfied to see an extension of good faith beyond just halting tariffs. China agreed to buy U.S. agricultural products while Trump agreed to ease the bans on U.S. firms selling technology to Huawei. After stopping in to see his old pal, Kim Jong Un, in North Korea, the U.S. president boasted warm relations between the U.S. and its Asian counterparts. This elevated the greenback at the expense of foreign currencies around the world, particularly the Swiss franc, the euro, and the Aussie dollar. However, dollar gains are eroding as the week progresses. The larger macroeconomic picture always beats short-term excitement.

The Fed is still planning a path to rate cuts into the back half of this year. As the market prices in these expectations, the dollar will weaken. A July rate cut is largely priced in, while the stock market is pushing into all-time highs. Typically, stock levels are the main factor in central bank rate cuts. If equity strength persists into the FOMC meeting this month, the Fed may decide to hold rates at these levels until later in the year. This will inflate the dollar and cause retracement in foreign currencies. I am still very bearish on the USD going into Q3 and Q4. Any delay of rate cuts will provide opportunities in the realm of foreign exchange. Particularly the currencies that sold-off on Monday’s action have space to inflate if the dollar comes off later in the year. Given that the Australian central bank just implemented their last installment of rate cuts, it seems the Aussie dollar is in the process of bottoming. Additionally, Australia is in a period of economic growth compared to the slowing seen in other developed economies. I believe the Aussie dollar, the Swiss franc, and the Japanese yen have the largest upside potential when the dollar finally rolls over and establishes an entrenched downtrend.

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.

Australian Dollar Sep '19 Daily Chart

Australian Dollar Sep '19 Daily Chart

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Equities

Stocks Climb Into the 4th of July

Jeff Yasak

U.S. stock futures are pointing higher on today’s open ahead of Thursday's market close for the celebration of Independence Day. The S&P 500 closed Tuesday at an all-time high, and it looks like the index will climb higher in today's abbreviated session, the stock market will close at 1 pm ET.  That would make it a third record breaking day in a row. Stocks climbed at the start of this week after President Trump met with China’s Xi Jinping and agreed to a tariff halt and to resume trade talks, this took place in Japan at the G20 summit. The switch to a more relaxed monetary policy is also helping stocks as lower interest rates make it cheaper for companies to take on more debt.

Resistance is checking in today at 299000 and 299500, with support showing around 296800 and 295000.

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 500 Sep '19 Daily Chart

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

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