July 12, 2019

Volume 13, Issue 28

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Metals - Gold

Will Gold Make it to $1,500?

Nicholas DeGeorge

In the early morning trade, August gold is currently trading at $1,411 and trading in the green up $4 an ounce. After the two-day dovish Fed testimony ended yesterday, gold has continued its pursuit of $1,500 an ounce, which many gold traders and investors alike believe will happen when they cut rates at the end of this month. The aggressiveness of the upcoming Fed rate cute will decide how far the shiny one can rally. Moreover, depending on how aggressive they cut rates will also affect how far the dollar will fall, which will only help gold bulls enjoy higher prices. Lastly, with President Trump tweeting out yesterday that China has not lived up to their part of the deal that was agreed upon the two world super powers at the G-20 summit in Japan last month, that it would be buying large amounts of grains from our great farmers. This failure by China to live up to their part of that agreement and for our president to call them out on it will only cause more anxiety buying and eventually help gold reach that $1,500 a troy ounce target. `

If we take a look at the daily August gold chart, you’ll see that it has held to $1,400 an ounce handle this week and if it holds, that will be bullish for higher gold prices. The support on gold is the July 1st low of $1,384 and if that breaks, look for gold to fall back roughly to its 50-day moving average of $1,341. I have highlighted these support levels below on my daily August gold chart.

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

Silver Futures Just Maintaining

Frank J. Cholly

While I do believe that silver futures have based a long-term bottom in the mid fourteen-dollar range, I am also disappointed with silver’s inability to take out the January swing highs at $16.47. I do remain long-term bullish, but if September silver futures fail to punch through the $16.00 soon, like while gold futures are trading multi-year highs, then we are likely to see a retest of the $15.00 range.

I am encouraged that September silver futures did manage a close above the 200-day moving average yesterday, but we need to see some follow through today. A close above $15.32 would be considered bullish.

I do still see silver as being extremely under valued at these levels and I don’t see or understand why, but I also know that certain levels on the chart need to be taken out before the buyers get more aggressive. The higher the price of silver goes; the more traders will want to buy!

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 Sep '19 Daily Chart

Silver Sep '19 Daily Chart

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Energies - Crude Oil

Crude Cracks $60

Michael O'Donnell

The August crude oil contract has had a strong week opening at $57.77 and is trading at $60.28 per barrel. Wednesday’s EIA had a much stronger than anticipated draw in inventories of 9.5 million barrels along with stronger equities and a risk on tilt this week.

As the market is now above the $60 per barrel level, it will be of interest to see if the market is able to sustain this level as yesterday’s candle has the potential to be an island reversal should today continue to trade lower than yesterday’s close.  The chart below also shows a trendline break to the upside, potentially leading the way for a re-test of the highs of April this year.

While the technical action this week has taken the market above a number moving averages, and it could be possible to see some chop around the $60 per barrel level, akin to late March. The market should be facing a trend decision regarding the $60 level as well as the typical supply and demand factors.

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 Aug '19 Daily Chart

Crude Oil Aug '19 Daily Chart

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Energies - Natural Gas

Natural Gas Receiving Support From Weather Reports

Jeff Ratajczak

August Natural Gas is above the $2.400 mark, a key point of resistance turned support over the last week. Momentum indicators (RSI and MACD) are both turning up showing that prices may increase on a move to the bullish side. If yesterday’s high is broken, the $2.600 mark is the next level that needs to be penetrated.  $2.568 is the first resistance, above that we are looking for a breach of May 20th’s high of $2.745.   Support is at $2.400, to change the trend a close below $2.263 is needed to turn the trend negative. 

Much of the support in natural gas comes from the weather reports over the coming week.  The first storm of the 2019 hurricane season is brewing in the gulf.  The storm in the Gulf of Mexico is slow moving and by the time it makes landfall should be classified as a hurricane. The track may be the same as Harvey back in 2017. New Orleans is already experiencing a storm surge and is under water. The city is protected up 20ft, the predicted levels. This will disrupt the supply to the country. Weather is also turning toward normal to slightly above normal temperatures which will increase cooling needs.  Over the coming days I would choose the long side.

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 Aug '19 Daily Chart

Natural Gas Aug '19 Daily Chart

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Softs - Cotton

Cotton Bear Continues, Defines New S-T Risk Level



Yesterday and today's continued weakness below Wed's 63.06 low reaffirms the developing downtrend and leaves Wed's 64.20 high in its wake as the latest smaller-degree corrective high this market needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm a bullish divergence in short-term momentum and expose at least a correction of the portion of the major downtrend from 01-Jul's 68.35 high detailed in the 240-min chart above where the prospect of a complete 5-wave Elliott sequence is clear.

But even if the market were to confirm such a divergence, the daily log chart below shows the market would still be below a ton of former support from the 64.70-to-65.50-range that, since demolished on 09-Jul, now serves as a huge resistance candidate.  Strength above at least this 65.50-area in general and above 01-Jul's;68.35 larger-degree corrective high specifically is required to threaten or negate a broader bearish count.

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

Cotton Dec '19 Daily Chart

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Softs - Cocoa

2600 Cocoa Prices?

Peter Mooses

On the chart, cocoa prices have entered a new range. After Monday’s rally, traders have seen two down days. Profit taking and volatility in the currencies have weakened the market. Strong supply and demand news had the September contract headed to 2600 – but now that target is in question. Will the weather front headed to key growing regions in Africa hurt or help prices? If the rain is followed by dry heat, longer term production could be affected. In the short-term, bullish traders should consider buying calls if they want exposure. The chart looked to be forming a bullish flag, but Wednesday’s close may be showing us that this market has another idea in mind. Look for opportunities to enter the market on pullbacks and keep key levels in site, 2510 for support, 2585 for resistance.

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

September Coffee at Support

Adam Tuiaana

Much of the frost news has been mitigated by the reality that the damage done was not as bad as traders had earlier anticipated. The Hightower Group has reported that “Brazil’s largest co-op Cooxupe reported little impact from the freezing temperatures over the weekend. Most of Cooxupe’s growing areas are in the state of Minas Gerais, which could indicate that the key Arabica growing areas in that region have escaped with little to no frost damage.” In addition, it actually looks as though favorable weather is on the horizon for key growing areas of Brazil, which could add additional pressure to September coffee prices.

From a technical perspective, it would seem this recent steep selloff in September coffee prices could be nothing more than a strong corrective pullback, allowing the bulls to take profits and re-enter from the long side. We’ve seen the recent selloff in September prices retrace approximately 60% from the last major rally (measured from the June lows to the July 5th high of 11565.  September coffee prices have also retraced violate the last major rally high (10860) and are currently trading below this area. This area should have held strong support. Although we are trading below this area, the consolidation of price action may suggest a re-grouping of the bulls at this level. Until a major threat of the large supplies are realistically threatened, I remain neutral on September coffee prices and would expect some support to be held here at the 106 level in the near term.

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 Sep '19 Daily Chart

Coffee Sep '19 Daily Chart

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Agriculture - Grains

Grain Futures Update w/Stephen Davis - 07/12/2019

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

Threatening Weather Forecast, Time to Build Premium?

Tony Cholly

Closing sharply higher off a bearish USDA report is a bullish development, it will not take much in the way of weather problems to spark further rallies. After dealing with flooding and too much rain during planting, farmers are now seeing extreme heat with zero precipitation in certain areas, and this is going to be a big issue. The eastern corn belt still has some rain in their 6-10 day, but Iowa is now going to run into issues after avoiding the flooding during planting. 10-straight days over 90 degrees with minimal rain and a shallow root system, the crop could see some stress going into pollination. Don’t forget, the USDA is also re-surveying 14 states about planted acreage which will be included in August report. This should add more support to the corn market.  Close in buying support for Dec corn is 440.  Resistance comes in today at 453 (which has been broken before I was able to publish this article), which could leave 490+ as a new target.

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 Dec '19 Daily Chart

Corn Dec '19 Daily Chart

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Currencies

Powell Testimony Devalues the Dollar

Ian Bannon

Currency markets have been some of the most volatile lately, as investors price in a Fed rate cut at the FOMC meeting in late July. Chairman Powell’s testimony this week reinforced the prospect of rate cuts, sending ripples throughout currency markets. In summary, Powell credited below-target inflation and soft economic data to justify why the Fed is prepared to use “every monetary tool necessary to continue this expansion”. Last week’s strong jobs number was discounted by Powell, who said the labor market is just one of many factors the Fed must consider. The Sep dollar fell 45 points on the day and continued selling off Thursday morning. Foreign currencies traded up on the news, most notably the Japanese yen, the Swiss franc, Australian dollar, and the Brazilian real. Versus the USD, the Japanese yen, Swiss franc, Canadian dollar, and Brazilian real are all in a bull trend over the last 6-8 weeks. The euro, and more significantly the British pound, continue to struggle given Europe’s damaged economy.

 I believe the USD has entered a newly-established downtrend. Being that commodities and foreign currencies are priced against the dollar, there is reason to believe big opportunities are on the horizon going into the back half of this year when rate cuts are realized. Thursday morning’s CPI number came in at 0.1% m/m (beating expectations) and 1.6% y/y (in line with consensus), but still below the 2% target. The dollar traded off its lows on the news, but the fundamental picture remains the same: low inflation and slowing growth are moving the Fed to cut rates, weakening the dollar, and pushing currency investors to reallocate funds.

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 Sep '19 Daily Chart

Japanese Yen Sep '19 Daily Chart

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Interest Rates

U.S. Treasury Prices Rebound Following Powell’s Testimony

Alexander Turro

U.S. government bond prices are rebounding after a three-session decline following Fed Chairman Powell’s testimony to Congress in which he stated that the U.S. economic outlook remains clouded despite the strong nonfarm payrolls number last week and that the Federal Reserve will act as ‘appropriate’ to sustain the recovery – signaling a near term rate cut. Since last month’s meeting, Powell noted that “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook” adding that “inflation pressures remain muted” with core inflation up 1.6% in May, down from 2% in December. Latest projections are for a quarter basis point cut with the market beginning to price in a 58% chance of 50 basis point cut. Yields on the benchmark ten-year note remain bearish trend with today’s range seen between 1.94 – 2.09.

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 Note Sep '19 Daily Chart

30-Yr Note Sep '19 Daily Chart

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Equities

U.S. Stocks Climb to All-Time Highs Despite Slowing Growth

Ian Bannon

Global equity markets were mixed overnight, while the Sep S&P pushed through resistance at 3006 to another all-time high. This week’s move higher comes on the heels of Chairman Powell’s testimony, which reassured market beliefs that a rate cut will occur at the July FOMC meeting. Why? Inflation lingers below the Fed’s 2% target. Manufacturing data around the world is lagging. The probability of recession occurring within the next 12 months has moved past 30%, and developed economies are reallocating funds into safe-haven assets... not to mention the need to counter a U.S. deficit through dollar injection. Economic warning signs are flashing, and Powell is prepared to use the tools of the Federal Reserve (i.e. rate cuts) to continue this expansion. The disconnect between the U.S. stock market and foreign indices is clear. U.S. equities push into all-time highs while Chinese and European shares are selling off. This tells me that foreign investors are flocking to lower-risk U.S. markets. I believe markets have a bit more upside into next week, when the corporate earnings carpet really rolls out. What are we expecting? I believe Q2 earnings will be weak compared to last year, given that 2017 tax cuts created accelerated growth into 2018. It does not seem plausible for growth to continue accelerating given the effects of Chinese tariffs and slowing economic growth. This earnings season could be the catalyst the market needs to sell-off. The most recent rally was fueled by defensive stocks, with utility ETFs lighting the path to fresh highs. Tech stocks, which led the decade-long bull market, have the most exposure to a sell-off. Apple stock - often viewed as a general market indicator - has been downgraded to a sell by several small houses. Will investors continue to pile into a saturated stock market in the face of global warning signs? One this is clear, institutions are diversifying to hedge downside risk in stocks.

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 Sep '19 Daily Chart

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

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