RJO Market Research and Trading (RJO MRT) provides commodity futures and options traders the latest technical analysis and fundamental research on the financial, agricultural, energy, foreign exchange, soft and metal markets.

RJO Futures has teamed up with RJO MRT to bring you a sweepstakes for a chance to win a 1-yr subscription to their comprehensive research. Sign up for a free trial of their futures trading research and you will be automatically entered to win. An RJO Futures broker will email you to answer any questions you have about the research or to discuss your trading needs. One winner will be notified at the beginning of next month.

To see the value of the research and specific trade recommendations provided by RJO MRT, you can read below their Monthly Performance Summary.

GoalIn our RJO Market Research & Trading Trade Strategies blog we attempt to address the challenge of advising clients not only of trading opportunities presented by specific technical "set-ups" that possess acute risk/reward conditions, but also of strategies a client might use to hedge against adverse market moves resulting from economic or crop reports in the absence of such a preferred technical set-up. Performance Facts Total Return (since May 2009) 47.46% Average Monthly Return 2.9% Average Monthly StdDev 8.0% Average Annual Return 34.9% Average Annual StdDev 27.7% Average Trades/Month 8.1 % Winning Trades 35% % Losing Trades 65% Worst Drawdown -9.9% Sharpe Ratio 1.21		Trading ApproachMost trade strategies result from specific and required technical conditions that present favorable profit potential and very specific risk parameters. When the required risk in an outright futures position may be too high for many traders' practical purposes, an option strategy is advised where the risk of the trade can be tailored more appropriately to those tighter risk profiles. Open Positions 7/15 Long SBV @ 17.42 w/ 18.08 sell-stop Recently Closed Trades 7/22 Long GCQ @ 1186.5 stopped @1184
Monthly Performance* *Performance results are based on a hypothetical 1-unit futures or options positions and are net of a $50/round turn deduction for commission and market slippage. Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2009 22.11% -9.85% -9.72% 2.74% 7.43% 1.05% 12.61% 7.94% 34.71% 2010 -1.11% -1.44% 5.37% -1.47% 3.06% 2.49% 2.41% 9.46% HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. The information contained in this article is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed, constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Any opinions expressed herein are subject to change without notice. Any reproduction or other use of this information and thoughts expressed herein without the written permission of the author is strictly prohibited. Commodity trading may not be suitable for all recipients of this information. The risk of loss in trading commodity futures and options can be substantial.

Questions or Comments on This Article

During the month of August, the trade volumes are typically a little lighter as a result of the peak vacation season. We know that volume typically follows the trend in a market. Therefore, the recent equity and treasury rally, on light volume, makes it even harder to judge. We have settled in "the box" of the September e-mini S&P contract. "The box" is the 50 – 62% retracement level of the April high to July low. To break out of the box, the September emini S&P would need to rally above 113200 or below 110700. Secondly, the fact that both the equity and treasury markets have rallied simultaneously is leaving mixed messages.

The bond market has rallied as a result of several "unusually uncertain" economic readings according to Fed Chairman Ben Bernanke. Recent bond auctions have been met with higher than expected demand as well. A significant percentage of the volume is believed to come from foreign Central Banks. By the time this report comes out, we will know the results of today's FOMC meeting. I believe that the Fed will err on the side of remaining neutral. At the moment, we have not seen a failure of the near-term trend in equities and expect the statement to remain similar to the last one. On June 23rd, the FOMC statement said:

"Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level."

According to a report from the San Francisco Fed, the Leading Economic Indicators are indicating that near-term risks of a downturn in the economy are contained. However, the risk of a double-dip recession increases for summer 2011. This is just another reminder that long-term growth expectations will likely remain low for quite a while.

As we continue to evaluate the health of the economy, we are constantly monitoring the employment situation. The monthly employment report came out last Friday weaker than expected. The report showed a much larger loss than expected of -131,000 jobs versus market expectations of -70,000. June payrolls were also revised lower to -225,000 from -125,000. Even though we lost jobs during the month of July, the unemployment rate remained steady as a result of fewer people actively seeking employment. On the bright side, the average hourly work week rose .1 hours.

August is typically a strong sales month as a result of back to school shopping; unlike July. Last month's Factory Orders declined 1.2% and durable goods orders fell 1%. For this month, we do expect the durable goods to show some improvements as a result of potential Boeing orders. However, the current jobs situation will likely keep future sales forecasts in question.

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

Look to enter a short position in the EUR/USD below the 1.3133 support line. The EUR/USD broke a trend line that has been holding since July 22 and broke support at the 1.31338 level. We are looking to take profit at 1.29613 (61.8% Fibonacci level) and place a stop at 1.31916.

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 mid-morning Tuesday, the December Comex Gold contract, GCZ0, is trading down $7.50 at 11955. The markets await the much-anticipated FOMC announcement at roughly 14:15 EST. Global equities are lower early in the session, and energy prices have receded with additional pressure coming from a significant drop in Chinese crude oil demand in July.

A sense of anxiety has returned to the markets ahead of this afternoon's Fed report, volume is low, and bearish sentiment may push the “flight–to-safety” status back upon gold futures. Also of note is the onset of Indian marriage season, due to begin in September.

As for today's trade, though, pay particular heed to the Fed this afternoon, while closely monitoring the gold market as it heads toward the 1220 level. This point presents breakout potential, but more likely an opportunity to short if failure occurs again.

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.

Natural Gas for September peaked on Monday, August 2nd at $5.007 and has made lower highs and lower lows on the charts since that time. Several portions of the country have already experienced some of the warmest temperatures of the summer, which spurred demand for natural gas and lent support to the market. Looking forward, the 6 – 10 day and 8-14 day weather models show a mix of normal to above normal temperatures with above-normal precipitation in many areas of country. This suggests that demand for natural gas during the peak summer cooling season could be tapering off.

We are approaching an abbreviated season in the natural gas market where demand from power plants to run air conditioners begins to slow and before cold weather spurs demand for heat. In addition to this shoulder season, the National Oceanic and Atmospheric Administration (NOAA) lowered its storm forecast for the Atlantic hurricane season due to less-than-anticipated activity in the first two months of this season. NOAA is now forecasting 14-20 named storms for the year, which is down from 14-23 storms. I believe that these two factors, along with data published last week by Baker Hughes showing that the number of natural gas rigs increased by 11 last week - which puts the total rig count at 983 - will continue to put pressure on the natural gas market. The addition of natural gas rigs can be a future indicator of supply coming to market. With natural gas supplies already running well above the five-year average, any new supplies are sure to keep a lid on prices.

I am looking for a move in September natural gas prices back to the $4.450 - $4.500 range. Should that occur I would be selling natural gas at $4.450 risking Monday's highs of $4.548 in case we see natural gas break out above these levels. I believe we could see natural gas try to test the low $4.000 range, and I would be looking to take profit at this level. As an alternative to stop-loss and limit orders, traders could also use options to protect the trade. While buying a call to the upside and selling a put below would increase the cost of the trade, a collar position like this protects the trade should the market reverse and go higher. Selling the put below will cap profit if natural gas continues its trend down.

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.

Cocoa still finds fundamental pressure in the problems that I have mentioned in the past: lack of investments into the trees, depleting/aging trees, political turmoil, and the continued movement away from cocoa into rubber all add pressure on the markets.

Other pressures this week include the following: on Monday custom agents in the Ivory Coast have gone on a 72-hour strike halting the largest exports of cocoa. There are also rumors that a Brazilian business team will hold talks in the next few weeks to help Cameroon develop and improve its cocoa industry.

Liffe cocoa futures traded lower on Tuesday as expectations for the 2010-2011 crop from the Ivory Coast and Ghana have improved with weather. It is believed that the US cocoa markets are following this as well.

The market appears to have broken out of its consolidation period. Technically the short-term outlook appears to have turned downward, and new lows have been set. Taking out the previous lows set back in May, watch for the next critical level around 2840. Continue to look for opportunities with options.

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.

As forecasted, cotton was momentarily hanging between the 50% - 61.8% retracement level before the news of hot weather and fires blazed out of Russia. Cotton was seemingly tagging along with the wheat and other grain markets with the initial rally on July 30th, the day the papers were reporting this as a big concern. It made the most recent high of 8178 - the same day wheat went limit up. With such a big wick up, the fact that cotton now appears to be trading no higher than 8071 over the past three sessions lends credence to the idea that the emotions took control and possibly brought cotton to technical levels for which it is just not ready. Yet.

This week's crop conditions report 65% good/excellent compared to 66% last week and 68% on July 25.

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.

Monday's late-day sell-off continued overnight as the bullish traders are retreating to the sidelines ahead of Thursday's USDA August crop production report. We expected the market to open better Tuesday morning than the overnight closes in the wake of 680,000 US soybean sales to China, Egypt and an unknown destination, and 120,000 of US wheat to Egypt.

Technically in the short term it is important that September wheat holds the 685 levels, December corn holds the 409 level, and November soybeans hold the 1020 level. The overnight Global Forecast System weather model has backed away from some of the heavier rainfall totals that are expected by the EU model for the drought-stricken areas of Russia. There will still be a few widely scattered thunder storms and most of the rain totals look to be less than .50”, not really enough to help the dry soil moisture. The good news is that temperatures in Russia will decline to more seasonal normal levels which should help the government with the struggles of the wildfires.

Ukraine wheat traders are asking the government to ban wheat exports like Russia so that they can wash out contracts on a force majeure and not endure large losses on the sharp rise in the market. Whether the traders will be heard is unknown, and the strict certification program on quality is causing a lot of uncertainty, delays and added costs for exporters.

We can not recall a time when grain articles dominated the front pages of all the financial newspapers of the world. We do not trade according to the headlines; however the opportunities that lie ahead will be excellent. One thing to be learned from all this is the world's powers - particularly India and China - will not tolerate food inflation. And no matter what calamities the world finds itself in at the end of the day, the world needs to eat.

This report Thursday morning should be bearish and as always it will be interesting to see how the market reacts to this important government report. The trade in recent years has a strong tendency to underestimate US corn production for August and to overestimate USDA soybean production.

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.

Wheat, Weekly Continuation

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

The upcoming USDA August crop production and US and world supply/demand updates on August 12 will have the attention of both agricultural and financial professionals from around the world after the past month's dramatic increase in grain and oilseed prices. The harsh weather in the Former Soviet Union's spring wheat and coarse grain areas, which have prompted significant cutbacks in crop potential according to government and trade reports, lead to the strongest price advance in July/August wheat prices ever. This also prompted an announcement from Russia late last week of a temporary ban of wheat and grains exports from August 15 to December 15, 2010.

The year's extreme heat and drought in Russia's spring wheat growing areas has been the main catalyst for the past six week's price strength in all the major crops. In the Former Soviet Union (FSU), wheat production could be 10-12 mmt lower on the upcoming USDA update, according to recent trade reports, suggesting the coming year's US wheat exports will be 150 million bu. or more larger on August 12. However, with strong US winter wheat harvest reports, high spring wheat crop ratings and strong yield reports from the recent North Dakota wheat tour that averaged 45.6 bu, we expect a 25 million higher US total crop of 2.241 billion bu. with the spring and durum outputs at 620 and 105 million, respectively.

The recent dramatic change in wheat prices has also likely cut 2010/11's feed demand, keeping US ending stocks near 1 billion bu. this month. On a worldwide basis, this year's drop in Black Sea supplies and higher prices will likely curtail this food grain's feed demand to 115 mmt, down 6.8 mmt from July and resulting in just an 11 mmt drop in world stocks to 176 mmt, despite this year's hefty cuts in the FSU's grain crops. With US talk of expanding winter wheat seedings producers should have 70-75% of old-crop output and 20-25% of 2011 wheat output marketed when July Chicago wheat is in its $7.35-$7.30 price range.

This summer's above-normal temperatures, excess moisture that fell in major portions of Iowa and Illinois during June and July, and dryness in the East Coast, Southeast and pockets around the Midwest keeps us cautious about 2010's corn crop potential. Countering this situation was 2010's early jump in corn plantings, which will likely produce a strong increase in plant population - a significant factor in any year's yield potential. The impact of this season's diverse weather of high temperatures, heavy rainfall likely causing denitrification in some fields, dryness and high humidity and overnight temperatures on corn's kernel filling and yield isn't totally known.

We feel being cautious on the first production estimate of the year is the best approach with the 162 bu US corn yield. The strongest yields will likely occur in the Western Corn Belt (WCB) where Minnesota, Nebraska and Iowa have some of highest state ratings this year with the region averaging 168.9 bu., 1.8 bu. less than 2009. Excessive heat, high humidity and pockets of wetness and dryness in the Eastern Corn Belt (ECB) has reduced this region's potential with a 165 bu average vs. last year's record of 167.9 bu. Heat and dryness have also impacted the Southeast, Delta and Southwest this growing season. The Southeast's average yield is likely to be down 7.8 bu. to 113.5 bu. and the Southwest and Delta's average off 2 bu. to 146.9 bu. this year. Overall, 2010's corn harvest could still produce a record 13.12 billion crop similar to last year while the average trade expectations is for 13.28 billion bu crop and 164.1 bu. yield. Hold sales at current 50-55% of 2010 output.

This year's heat and drought in the FSU has also had an impact on the corn market because of the loss of feed wheat and coarse grain output (barley, corn, millet, rye and pulses) meaning world buyers will need to shift to corn and other feedgrains to replace these lost supplies. Because of this trade shift, 2010/11's corn exports should increase by 200 million bu. this month. However, the duration of the current dry spell in the FSU will determine the final US export level this year. Previously, corn shipments suggested old crop exports might increase, but with 3.5 weeks left and the need to average 43.8 million bu. to hit the USDA's 1.95 billion forecast, no change in old-crop export demand is likely. Ethanol's 4.5 billion bu. appears solid after the recent EIA adjustments put 33 million more bu. of ethanol production into last fall's output on its recent revisions for 2009. Dropping 2010/11's ending stocks to 1.1 billion level probably will limit December corn's downside to the $3.60-$3.70 area, while a 1.25 billion ending stock level could open selling pressure to the $3.50 area ahead of the next update and September harvesting in the ECB.

Heat and heavy rainfall in parts of the Midwest will also impact soybeans' yields, but projecting this crop's yield potential isn't an easy task this time of year. Disease problems from too much moisture can be as bad as too little rainfall, so our first US soybean yield estimate is 42.2 bu. while the trade average is 43.2 bu. Reports of sudden death syndrome (SDS) disease are also surfacing In Iowa and Illinois in the past 10 days. With Chinese purchases continuing, old crop exports still have the potential for 20 million added shipments in the last month, but the US crush likely will be shaved by 5 million, resulting in 160 million 2010 September 1 stocks. This is a positive, but this year's mid-South harvest will be starting soon, taking the sting out of tightest in the Midwest. Ongoing Chinese new-crop purchases should prompt another increase in 2010/11 exports, so new-crop stocks may slip below 300 million if the USDA is conservative about its initial 2010 bean yield. This isn't a very bullish supply story yet, but downside weakness may be limited as Chinese buying keeps South American producers expanding soybeans plantings to supply Beijing's potential of over 55 mmt of soybeans in the coming year. Hold sales at 50-55%.

Questions or Comments on This Article

Do you have any questions or comments on this issue of eView—or anything else you'd like to discuss with our brokers?

When it comes to futures trading, what do YOU want to learn more about? If we already have a resource, we'll personally provide you access to it. If not, we might make it the topic of our next trading resource project.