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Are we heading into a double-dip recession or not? The economic data has been coming out weaker than expected lately which does not bode well for the longer-term economic trend. Doesn't the economic data tell us that the GDP will likely end up lower than expected for the year? On the flipside, Alcoa kicked off earnings with a higher-than- expected result which has rallied the stock market over the past week on extremely light volume.

The most recent monthly unemployment report showed a decline of 125,000 non-farm payrolls and a decline of the average workweek by .1 hours. Average hourly earnings declined by .1% as well. No matter how you analyze the data, it points to a softer job market. Two other factors that will likely continue to weigh on the employment situation include: a loss of 700,000 part-time census workers between now and September, and the likelihood that Congress will not be extending the emergency unemployment benefits.

The monthly retail sales figures are coming out on Wednesday. The market is expecting a .2% decline compared to a month ago. Wholesale inventories rose .5% last month while wholesale trade fell .3%. According to David Rosenberg with Gluskin-Sheff, this was the first decline in wholesale trade since March 2009 when the stock market bottomed.

Between several economic indicators coming out on the weak side and questions surrounding the future of jobs growth, the trend is for consumers to become more and more frugal. On top of everything else, fewer and fewer households are paying taxes. According to the Tax Policy Center, 46.9% of US households did not pay income taxes in 2009 as a result of credits, deductions, or exemptions. The top two income tax brackets are becoming responsible for a higher percentage of the tax burden, which will likely pressure retail sales.

Even though the near-term trend in bonds has turned lower, the long-term trend remains higher. At this point, we cannot assume that investors will put idle money to work in the stock market and flee from buying treasuries.

Technical Update for September 30-Year Bonds:
Near-Term Trend: Lower
Long-Term Trend: Higher

Support: 125-12.5; 124-19.0
Resistance: 126-22.0; 127-00.0; 128-20.0

If you'd like to learn more about futures trading or the interest rates market specifically, please contact RJO Futures Senior Trading Broker Donna Heidkamp at 800-535-4396 or dheidkamp@rjofutures.com.

Questions or Comments on This Article

The euro FX has broken several technical levels. The short trade is temporarily over. Fundamentally Europe still has problems, but I am cautiously bullish towards 130.00. The euro FX should remain in a 125 to 131 trading range for the next few weeks.

Sell the August 132 call at 20 for a credit of $250.00 versus the August 121 put at 18 for a credit of $225.00 total credit $475.00 per position. Options expiration is on August 6th.

A simple risk management tool/stop loss would be to cover your naked call option when the option inflates to 200% of the credit. If one option inflates the other will deflate which will minimize the loss.

If you'd like to learn more about futures trading or the currency options market specifically, please contact RJO Futures Senior Trading Broker Carlos Aspiazu at 312-373-5316 or caspiazu@rjofutures.com.

We are bearish on the EUR/GBP. Looking at the one-hour candlestick chart you can start to see a channel forming. When the currency pair hits the upper trend line we would sell the pair and look to cover when it hits the lower trend line. We would place a stop loss 30 pips after the entry point on the upper trend line. If you enter a short position and the trade rises to touch the trend line again before you have covered the trade, do not enter another short position. Once the trade is in the money we would recommend moving up your stop loss or adding a trailing stop.

If you would like to receive some of my short-term and day trade recommendations in the currency markets feel free to contact me at 312-373-5881 or jshelton@rjofutures.com.

As of midday Tuesday, the September Comex silver contract, GSIU10, was trading at the 1825 level, up nearly $.34 for the session. Mostly favorable Q2 corporate earnings (CSX) and a weaker US dollar have supported the upward move in world equity and commodity markets throughout the day.

A degree of economic optimism has maintained the day rally, but in the event of additional euro zone sovereign debt anxiety (now Portugal), silver may reemerge as a safe-haven buffer against "riskier" investments.

Pay close attention to the 200-day moving average, as the market has traded above this line since mid-February, but is currently approaching around the 1767 level. A break below this level, along with renewed downward pressure on equities, will provide opportunity to sell.

If you'd like to learn more about futures trading or the metals market specifically, please contact RJO Futures Trading Consultant John Kennedy at 866-397-8194 or jkennedy@rjofutures.com.

We are cautiously bullish on crude oil in the near future. There are several outside factors giving strength to the market: the Obama administration has re-imposed a ban on offshore drilling which will have a direct impact on the supply; there has been a return to riskier assets as the threat of a double-dip recession begins to recede; and the dollar is beginning to turn over and show weakness as safe-haven buying abates.

Although crude has had a decent run up from the July 6 low of 7109, the breakout above the 7650 level foreshadows a move to 7800 and possibly a test of the June 21 high of 7994. If crude breaks above 7800, we will be back in a weekly upside channel dating back to May of 2009. Going forward one could buy a futures contract on a pullback to 7650 and look to take advantage of upside momentum. Trail the stop in case crude fails at the 7800 level, or you could buy a September 80-83 bull call spread for $700 with a potential profit of $3000. That would give you 36 days for crude to make its move to the upside.

If you'd like to learn more about futures trading or the energies market specifically, please contact RJO Futures Trading Consultant Tarik Husseini at 312-373-5461 or thusseini@rjofutures.com.

Supplies of natural gas remain elevated and this has put pressure on prices for the past couple of weeks. In my last commentary I was looking for natural gas to fall back to the $4.285 level before buying. During that time (6/29/2010 – 7/12/2010), the low in August natural gas was $4.339. Above-average temperatures on the east coast and other locations across the country, among other factors, likely supported prices over the past couple of weeks. It would appear that we are trying to put in a short-term base in the August natural gas contract around the $4.350 - $4.330 levels. Weather models suggest that a dome of hot air is set to move in to some of the major natural gas-consuming areas over next couple of weeks, which should continue to support prices. Second quarter earnings season has kicked off in full swing. Natural gas may get some support from third and fourth quarter guidance from companies as well as from potential growth prospects for the second half of the year. If the guidance from companies is positive and demand for natural gas in industrial production picks up, then look for prices to continue to climb. I am looking to buy August natural gas on a pull back to $4.335, risking the trade to $4.225. If natural gas trades back to the $4.75 level I would look to take profit, or move the stop to lock in profit. This week’s inventory report will be a key to the direction of the natural gas market. We will likely see a draw on inventories, which would lend additional support to the market.

If you'd like to learn more about futures trading or the energies market specifically, please contact RJO Futures Trading Consultant Kevin Craney at 312-373-5354 or kcraney@rjofutures.com.

The sugar market continues to be underpinned by tightness in the cash market coupled with decent demand. With the supply of sugar that is coming to market it is difficult to view the long-term situation as anything other than bearish. At this point, however, recent technical action seems to trump any longer-term concerns about abundant supplies. Sugar has been consolidating between the 10-day moving average and the 38% retracement level. An upside breakout of this area should propel sugar to 18.50 and possibly higher. Closes over 17.50 will begin to force funds to take on new long positions to augment the 100k-plus they stayed long from the break to lows in May. It will be instructive to see if funds are aggressive buyers if we take out these levels overheard. It is just as difficult to imagine the sugar market guided by capital flow in this environment as it is to discount the impending supply. But when the large spec traders come for a market it can be expensive to stand in the way.

If you'd like to learn more about futures trading or the sugar market specifically, please contact RJO Futures Senior Trading Broker Joe Nikruto at 800-453-4494 or jnikruto@rjofutures.com.

Supply uncertainties seem to be the driving indicator in the cocoa market. The major concerns over the weather conditions in the Ivory Coast appear to be adding some additional pressure to the supply and lending support to the cocoa bulls. The heavy rains and additional moisture continue to wear on the beans. The major harvest season isn’t until October, but if the tightness continues, significant price movements may take place.

A significant amount of long positions still remain on the London exchange, raising some alarm over the larger amount of contracts that will be looking to take delivery.

The same outside factors continue to add the remaining strain. Look for correlations between the dollar and British pound. When the dollar fails it tends to be a bullish indicator for cocoa, while other commodities tend to get cheaper.

On Tuesday September cocoa had a significant jump, closing up almost 2%. Look for the breakthrough level of 3057 as possible confirmation that the market is heading higher.

If you'd like to learn more about futures trading or the cocoa market specifically, please contact RJO Futures Trading Consultant Kathryn Fischer at 800-453-4494 or kfischer@rjofutures.com.

Cotton has fallen precipitously over the last few weeks, building support at the 7355 level until breaking through today to a low of 7330 as of this writing. Technically we would suggest cotton has more room to the downside, but a small pop up shouldn't be out of the question.

This week's crop condition is rated 67 compared to 65 last week, 43 last year and 53 at the 10-year moving average. These numbers sound good for the crop and the chart is responding likewise.

If this break below the support is real, a sell limit order for December cotton at 7460 would be ideal, risking to above Friday's high of 7538 (78 points x $5 = $390). If you'd like more technical confirmation, a sell stop at 7329 and risking to 7538 is a $1045 risk. If you're a bottom picker and want to see Cotton trade back to resistance, buy in this area and risk to 7329. A 7440 entry would risk an estimated $555.

If you'd like to learn more about futures trading or the cotton market specifically, please contact RJO Futures Trading Consultant Mike Rataj at 800-453-4494 or mrataj@rjofutures.com.

Coffee prices continued their downside correction to a two-week low from last month’s 12-year high. Lack of the anticipated frost threats for Brazil’s coffee crop could be bearish, but the reported tight coffee supplies, -28% this year (reported to be an 8-year low by RJO MRT), could add to bullish sentiment. The ICO’s report that May world coffee exports slid -4.4% y/y to 7.97 million bags could also contribute to the bullish outlook. It has also been reported by the Hightower Group that "recent dry weather in Columbia and Vietnam are likely to have a negative impact on this season’s production."

If you'd like to learn more about futures trading or the coffee market specifically, please contact RJO Futures Trading Consultant Adam Tuiaana at 800-453-4494 or atuiaana@rjofutures.com.

Tuesday morning we are seeing September wheat up 10.0, December corn up 1.0 and November soybeans up 10.0. This is impressive considering the overnight weakness, an improvement in US corn ratings, and continuing near-record high spring wheat ratings. A forecasted dome of high pressure in the southern United States will bring chances of rain for the Corn Belt this week and next. Temperatures are expected to be above normal but not extreme. The exact positioning of the dome and rainfall potential will drive day-to-day price sentiment. The best corn growing scenario is 86º F and corn grows best when nights are cool. The cool Corn Belt temperatures, the hallmark of high corn yields which were an occurrence last year and in 2004, appear not to be repeated this year. How is this going to affect the corn and soybean yields?

The newswires report that commodity fund investors disappointed over poor performance with carrying charges are thwarting expected returns in many commodities. Fund traders are technical in nature and it is important that December corn be sustained above its 50-day moving average at $3.85. September wheat also needs to stay above $5.28. Ocean freight continues under pressure with China iron ore imports down 9% last month. Wires are reporting better China corn conditions with more acres planted and private analysts cite varying ideas on US corn yields almost on a daily basis. This is all about weather, how hot it gets, how much it will rain, and where it rains. Sit back and watch this unfold; what the market does from day to day is anyone’s clue. In the short term, the dollar looks very weak. This may continue for 72 hours, and it is supportive. In the longer term, there is real value in our agriculture markets. We will need 3 to 5 million more acres in corn in 2011, and at the end of the day no matter what calamities the world finds itself in, the world needs to eat.

If you'd like to learn more about futures trading or the agricultural market specifically, please contact RJO Futures Senior Trading Broker Stephen Davis at 800-367-7181 or sdavis@rjofutures.com.

Dollar Index, Daily

Source CQG, Inc. (c) 2009. All rights reserved worldwide. www.cqg.com

The USDA's corn and soybean supply/demand revisions for the US were generally on track with trade expectations. However, the US overall wheat crop was larger than trade estimates when this year's spring and durum varieties were 30 million bu. over expectations.

Corn's June 30 quarterly stocks and acreage reports had already set a positive tone for this month's updates, so the USDA's 125 million smaller stocks – reduced to 1.478 billion bu. - were not a surprise, with a 175 million increase in feed/residual while ethanol demand was cut 50 million from last month. Talk continues about the latest stock level, but a hefty seasonal decline in on-farm storage levels suggests to us that this year's low test weights and higher harvested moisture lead to fewer bushels being retrieved from bins than producers expected last fall. Exports were left unchanged with shipments lagging a bit, but the cut of new-crop exports based on higher price was a bit surprising since world feed wheat supplies will be reduced in 2010/11. The USDA's 1.37 billion new-crop ending stocks are the smallest since 2006/07's 1.3 billion carryover. This year's stronger demand also brings the current stocks to use levels just above 2003/4 9.4% levels when the carryover was just 958 million bu.

In soybeans, the USDA raised both old and new crop exports by 5 and 20 million bu. because of ongoing Chinese export sales (two cargos for 2010/11, announced the morning of the report). They also upped the US crush by 5 million bu. in both years, resulting in a 10 million bu. decline in old-crop stocks to 175 million bu. New crop stocks remained unchanged despite last month's 770,000 increase in soybean plantings. Concerns about the last month's rains, which could prevent plantings and curtail new-crop yield potential as the crop enters its important yield- determining period during August, also limited the impact of the USDA's 360 million 2010/11 ending stocks projection this month.

July's overall wheat production update increased 149 million to 2.216 billion bu. and 60 million higher than expected. This increase came when spring and durum wheat's output were boosted 125 million bu. over the USDA's previous projected levels to 710 million bu. Hard red wheat crops were also increased by 32 million this month, with higher yields (Kansas and Colorado) and higher harvested areas (Montana, Nebraska, and Texas) boasting this variety. White wheat also rose by 7 million this month because of better yield ideas in the Pacific Northwest, but soft red wheat's output declined due to disease and wet weather problems in the Midwest and heat/dryness in the Southeast. This resulted in a 16 million drop in soft red to 268 million bu., which is 56% smaller than two years ago crop of 614 million.

After increasing sales to 60-65% in wheat and 50-55% in corn and beans on recent strength, hold sales while awaiting late July weather.

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OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February. - Mark Twain- Pudd'nhead Wilson's Calendar

VIX Volatility futures are most often viewed as a tool for managing volatility expectations directionally, purchased as a way to hedge or speculate on an increase in volatility expectations or sold to capitalize on a decline in volatility expectations. However, VIX futures and options also provide a vehicle to express an opinion on the relationship between volatility expectations for different time periods, as each future represents a single month's worth of S&P 500 volatility.

Normally, the VIX forward curve, or time series, is upward sloping over time, or contango. Typically VIX futures decline in value over time. In periods of extreme volatility or investor anxiety, the curve will invert or be in backwardation. Currently we have a unique shape to the time series. It is peaked, contango from the front-month July to October, and then it declines in backwardation.

The October VIX future is at a premium, suggesting that investors expect the greatest volatility. Recall that the October VIX future represents the 30-day period from October VIX expiration to the November SPX expiration, on the third Friday of November. The shape of the time series is suggesting that volatility expectations are the greatest for that period of time which will include this year's hotly contested mid-term elections.

Traders who believe that November (7/12/2010 close $33.05) volatility expectations will not increase relative to other months may consider selling the October future and buying December (7/12/2010 close $32.05). They will be looking to capitalize on a steeping of the time series, with the October futures trading below December, possibly as the mid-term elections become clearer. Traders looking for greater anxiety surrounding the election may choose to buy October and sell December.

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