We’ve asked Michael Seery of SEERYFUTURES.COM to give our INO readers a weekly recap of the Futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.
Michael frequently appears on multiple business networks including Bloomberg news, Fox Business, CNBC Worldwide, CNN Business, and Bloomberg TV. He is also a guest on First Business, which is a national and internationally syndicated business show.
Cocoa Futures-- Cocoa futures in New York rallied for the 2nd consecutive trading session settling in the July contract at 2257 trading above its 20 day moving average and now also above its 100 day moving average with excellent chart structure and in my opinion if you look at cocoa on the daily chart it has a nice grinding stair step pattern to the upside with a possible double bottom created at 2046 which was hit on 3 – 7 – 13 with the next major resistance at 2300 and if that is broken and I do believe there is a good possibility of prices hitting 2450 in the next 1-2 weeks while a bull market might be underway in cocoa prices. An impressive week for the July cocoa which settled at 2153 up about 120 points for the trading week while many of the commodity markets were hammered once again to the downside however this market is showing you that the bear market in cocoa finally might be over and I’m still advising traders to be long this market placing a stop at the 10 day low in case the trend does change minimizing your risk in case you are wrong, but with excellent chart structure I think it is worth the chance on the long side. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Coffee Futures-- Coffee futures in New York finished down 170 points to close at 137.00 a pound still stuck in an incredibly nonvolatile tight trading range settling last week at 142.60 down about 500 points for the trading week still above contract lows which happened on 3 – 20 at 134.80 on the fact of a large Brazilian harvest possibly coming in the next couple of months still trading at its 20 day moving average but way below its 100 day moving average at 149.20 still in a directionless trade. I have been advising traders to be long coffee especially investors with long-term horizons and deep pockets and I’m still advising the same game plan because I think we’re really close to a bottom but possibly we can head down the 125 level, but when you invest in commodities you will never by a bottom or sell a top so the idea is that you are close to the low or close to the high. If you are looking to get long coffee my one suggestion would be to buy the futures contract and place a stop below the contract low limiting yourself to about 200 points which is around $750 per contract or look at simple bull call spread for the December contract which gives you plenty of time with limited risk to what the premium costs so the daily fluctuations do not mean as much. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Sugar Futures-- Sugar futures ended up only 2 points in a relatively quiet trading session still below its 20 day moving average which stands at 17.96 but below its 100 day moving average which is quite a distance away at 18.78 with extremely low volatility in the last couple weeks settling last Friday at 17.67 up about 15 points for the week which was the 1st time in over a month sugar prices ended higher for the week. Major support in sugar prices is at 17.50 with ample supply on the market with a huge harvest coming out of Brazil and I still believe that sugar prices are headed lower especially with commodity markets falling out of bed once again today with unleaded gasoline making new lows as well as the gold market absolutely plunging which I think will put pressure across the board in many of the other markets as deflation looks like it’s in the air at this point in time. I’m still recommending short positions in sugar placing your stop above the 10 day high in case you are wrong and with excellent chart structure limiting your risk to a small amount in case you are wrong due to the fact that there’s no volatility at this point but I do see a possibility of prices heading back down to the 2010 lows of around 14.50 a pound in the next couple of months. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Precious Metal Futures-- The story of the day was the gold market which absolutely collapsed down $64 an ounce at 1,501 an ounce and traded as low as 1,419 hitting a new 1 ½ year low breaking major support at 1,526 and blowing through the old low which is created on April 4th of this year on the fact of a weak commodity market across the board settling last Friday at 1,572 finishing down about $70 for the week trading far below its 20 & 100 day moving average. As I’ve stated in many previous blogs especially in the last week I think gold prices can absolutely collapse in the next couple weeks while my 1st target was the high 1400s which was hit today and I do think we could drop another $100 dollars in the next week and I would be looking at possibly covering all shorts around $1400 and possibly even getting long the market but at this point I’m extremely bearish and look for lower prices ahead. Silver futures for the May contract are trading far below their 20 & 100 day moving average settling last Friday at 27.22 down about $.90 for the trading week in the May contract currently at 26.30 breaking through the April 4th low of 26.57 and as I’ve stated in many previous blogs I do believe silver prices can back down to $25 an ounce possibly by next week as the precious metals have lost their luster here in the short term. Copper futures in the May contract finished down 800 points right near recent lows at 3.35 a pound with record inventories pushing prices lower trading below its 20 and 100 day moving average basically trading unchanged for the week with really no trend in sight as copper is being supported by a strong stock market which is basically telling people that economies around the world are improving where gold is strictly used as a currency and as a hedge against other problems throughout the world and that is why gold futures are selling off much more dramatically than the rest of the sector. Platinum and palladium futures continue to trade below their 20 and 100 day moving average hitting an 8 month low in platinum and a three-month low in palladium forming a possible head and shoulders top as investors want nothing to do with the sector at this point in time. As I stated in the previous many blogs I keep harping on this there is no reason to own gold at this point with all the deflation in the air and all the money flowing in the S&P 500 so I’m still recommending short positions across the board in the precious metals. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Grain Futures--- The grain futures bucked the trend today settling higher across the board with December corn which is considered the new crop higher by another $.06 closing right at session highs also closing at a two-week high at 5.49 as heavy rains and snow across the Midwest might delay planting so prices have propped up here in the short term after the USDA report sent prices spiraling a couple weeks ago while November soybeans which is also considered the new crop is only up $.04 at 12.25 and as I’ve been advising traders that I am extremely bearish the grain market and I do think the commodity selloff will continue and I believe that grain prices are too high as we enter spring planting. Wheat futures were up $.16 today at 7.19 and to be honest with you I have no idea where wheat is headed because it has been choppy in recent months and that my guess is that it is headed to the downside but I’m not advising traders to be in the wheat market at this point but I am advising traders to be short the November soybeans because I do think that prices could drop another $.75 to a $1.00 here in the next 3 to 4 weeks as we are receiving ample moisture here in the Midwest with waning demand as the commodity markets look to me as a tremendous sell to the downside as deflation is in the air as the demand is slowing down rapidly and with the QE possibly ending at the end of the year that is also putting some more pessimism on a sector that is already as pessimistic as I think it can get. With a record crop coming in corn and soybeans possibly this October the November contract in soybeans and the December contract in corn I think traders and hedgers should be careful to the downside especially farmers who own the crop I do believe you should be hedging your crops this year because there could be a substantial drop in prices if we do not have weather problems and we have not had a back-to-back weather problem in over 80 years so the odds of an excellent crop this year are very high and if you look at the weather here in the Midwest it is completely different from last year with ample moisture here in Chicago as we have rained for the 5th consecutive day starting out the growing season with excellent conditions.
TRADING RULES--- What Does Risk Management Mean To You? I generally tell people that the reason people lose money in commodities is not due to the fact that they are bad at predicting where prices are headed, however they are bad when it comes to losing trades and refusing to take a loss which results for heavy monetary losses that are difficult to come back from. For example if a customer has $100,000 account in my opinion on any given trade he or she should risk 2% – 3% of the account value meaning if you are wrong the worst-case scenario is still a $97,000 remaining balance, however what I always see is traders risking ridiculous amounts of money and instead of the 3% stop loss will risk 20% to 30% on any given trade or even higher therefore if you are wrong on two or three trades that $100,000 dollar account could dwindle down to nothing very quickly and I’ve seen it many times throughout my career. What many traders forget to realize is they might have 4 or 5 commodity positions on and if you have too many contracts on all at the same time and all of those trades go against you which is very possible the losses can add up to be staggering so what I am suggesting to you is if you have $100,000 account risk between $2,000 – $3,000 per trade so if you lose on five straight trades the worst-case scenario is that your down $15,000 and still have an $85,000 balance which is very possible to still come back from and your still in the game.
There are many different theories about how long does a meaningful consolidation have to last before you enter a trade on the breakout to the up or downside? In my opinion I always want to see a consolidation that lasts at least 8 or more weeks before I would consider entering. The reason that I want a longer consolidation is to try and avoid a bunch of false breakouts such as a 10 or 15 day consolidations which happen all the time, so I am trying to put the odds in my favor by trading the breakout of at least 8 weeks or more and the longer such as a 11 or 13 week consolidation the better. At this present time 2 commodities are in a major consolidation including wheat which is in a 14 week tight channel looking to breakout very soon and feeder cattle which is at a 13 week consolidation.
If you are looking for a futures broker feel free to contact Michael Seery at 800-615-7649 and he will be more than happy to help you with your trading or visit www.seeryfutures.com
There is a substantial risk of loss in futures, futures option and forex trading. Furthermore, Seery Futures is not responsible for the accuracy of the information contained on linked sites. Trading futures and options is Not appropriate for every investor.
Michael Seery, President
Seery Futures
Twitter–@seeryfutures
Phone # (800) 615-7649
I liked the summation on risk management. Most advisors are reluctant to give spacifics.
I do like this fellows logic even if it is sometimes convoluted, let us vote an 8 out of 10