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.
Precious Metal Futures—The precious metal futures ended lower this Friday afternoon with gold finishing down about $7 an ounce at 1,322 after settling last Friday at 1,293 up about $30 for the week which is pretty solid and I have been recommending buying gold when it broke out to a 4 week high above 1,302 and I still think gold has more room to run on the upside but make sure you do place a stop loss at the 10 day low if you are long the futures contract to try & minimize risk in case the trend does change. Gold futures are right at the uptrend line and if that is broken I think prices could head up to $1,400 here in the next month but I would be very suspicious & doubt if it has any more legs to pass those levels. The U.S dollar has been down substantially in recent weeks and that is helped push gold and silver prices higher as well as many hedge funds have taking profits on their short positions in recent weeks. Silver futures were down about $.40 today trading at 19.80 after settling last Friday at 19.46 up about $.35 for the week and are still trading above the 20 day moving average for far below the 100 day average and have also been recommending a bullish position here risking a stop loss at 19.23 an ounce which is the 10 day low or if you’re looking to go short the market I would sell the futures contract and place a stop above Monday’s high at 20.50 but in my opinion I do believe silver and gold prices will continue to move higher in the coming weeks. The U.S government is continuing to promise more QE which has sent the dollar substantially lower in the last 3 weeks and I do believe that will start to propel some of the commodity prices and if you look at U.S treasuries they were up sharply again today meaning the government is already buying the 5 year notes pushing interest rates lower which could spur the commodity markets to the upside, however I still remain bearish the grain sector and several other commodities do to ample supply so you must treat each market on its own credentials. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Grain Futures-- The grain market had an incredibly wild week and I had one of my worst trades of all time recommending August soybeans last Friday and I thought I was smart with a 30 cent up move on Monday and then after that a complete collapsing washout & now the crazy thing is I’m recommending to be short November soybeans which were down about $.40 for the week finishing higher today by $.05 at 12.29 a bushel continuing to make my head spin at this point. As a trader you must be nimble and prices broke under the 12.25 level so I have to go with the trend and I think prices are headed lower remember though this is a very volatile & high risk market so you must have a stop loss and under trade in case hot weather comes pushing prices higher once again and that’s what the grain market is famous for up-and-down moves during the summer months. Corn futures which I’ve been recommending to be short forever are down another $.03 at 4.75 a bushel finishing right near session lows as the U.S crop looks to be a record as we enter the month of August. Wheat futures which have been recommending to be short as well finished basically unchanged at 6.61 a bushel with extremely low volatility compared to the other grain market I still think that we could retest the $6 level here in the next couple weeks with corn possibly going down the 4.50 and I do think the beans will make contract lows and break the April lows of 11.86 all due to the looming carryover levels out as well as record crops across the board. The next crop report that traders are awaiting is about 2 weeks away which will show production levels and my estimates right now are about 13.5 billion bushels in corn and 3.4 billion bushels for soybeans and I like to trade with the trend and I still recommend selling the grain market once again. The August recommendation that I gave in the soybeans last week was one of the worst trades in my career, however the one point I want to stress is the fact that I under traded the market and I’m allowed to trade for another day so never let one trade ruin your entire account. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Coffee Futures--- Coffee futures settled down 230 points this Friday afternoon while still trading above its 20 day moving average but below its 100 day settling last Friday at 122.70 a pound basically trading unchanged for the week with excellent chart structure on the daily charts. I have been advising traders to be bullish or long the coffee market with either bull call spreads or outright futures and if your trading outright futures my advice would be to place your stop at the 10 day low which is 118.65 which was hit on July 15th minimizing your risk in case the trend does continue to the downside. Coffee prices are still right near a 3 year lows and I think with a sideways consolidation that we’ve had in the last 6 weeks looking to bottom especially with the U.S dollar hitting a 5 week low today which could be supportive coffee prices. All of the bad news in coffee is basically baked into the prices such as a large harvest from Brazil & waning demand worldwide so I think the tide might be turning to the upside in my opinion. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Lumber Futures-- Lumber futures were slightly higher this Friday afternoon settling around 321.50 per board foot settling last Friday at 326 slightly lower and I’ve been recommending a long position in the lumber market because it does have excellent chart structure with the 10 day low right at 3.10 which are around $1300 risk from today’s close. The stock market and the S&P 500 continue to make all-time highs and I do think that is supportive lumber prices as the housing market has come alive in recent months, however housing starts is on the decline because of the interest rate spike lately but the interest rates today were down dramatically once again as the government promises to continue to print money which is bullish lumber prices. I always look for solid chart structure when entering a market and this market does have solid chart structure on the daily chart allowing you to place a stop to minimize your risk no matter what direction you believe the market is headed. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Cocoa Futures-- Cocoa futures finished slightly lower this Friday basically unchanged for the trading week settling right around 2333 and in my opinion it looks to be topping out, however this is a counter trend trade if you’re looking to go short my advice would be to place a stop above the recent high which is 2381 risking around $500 per contract. Cocoa prices have rallied over 200 points in the last 3 weeks retesting the June highs with terrible chart structure due to the fact that prices went straight up and I’m generally a trend follower so I’m not recommending a position in cocoa at this time but if you are looking to get short I would always place a stop above the 10 day high which is 2381 which was hit just a couple of days ago and if those levels are breached you’re looking at possibly retesting the contract highs which were hit about 6 months ago. Many of the commodity markets have started to rally due to the fact that the U.S dollar hit a 5 week low & dropped over 300 points in the last 3 weeks which is generally supportive commodity prices. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Cotton Futures--- Cotton prices finished lower by about 80 points this afternoon trading below its 20 and 100 day moving average going sideways for the last several months settling last Friday 86.18 down about 100 points for the week with really very little fundamental news to dictate short-term prices. Traders are still awaiting weather reports from Texas and Oklahoma looking for some solid rains that might really develop the crop pushing prices lower with major support at 83 and major resistance at 87 and I would be looking to have cotton break one of those levels before I enter a trade so I’m advising traders to sit on the sideline until a real trend develops because at this time there is absolutely no trend in sight. Demand from China is definitely weak in recent months ,however there is concern that it’s too hot down South & the cotton crop might not be as large as thought, however the agricultural sectors in my opinion including the grain market look weak at this time and I think cotton will break the 83 support in the next month or so. As a trader though I want to make sure that prices break that on a closing basis and if that happens I try to go with the trend & place my stop loss at the 10 day high or low depending on what side of the market my position is. TREND: LOWER –CHART STRUCTURE: EXCELLENT
When Do You Enter A Trade? What are your rules to initiate a trade on the long or short side of the commodity market? I have been asked this question many times throughout my career and my opinion is simply to buy on a 20-25 day high breakout in price on a closing basis only or sell on a 20-25 day low breakout to the downside also on a closing basis. Many times the price will break the 25 day high and sell off later in the day only to have your trade be negative very quickly. I would rather buy the commodity at a higher price on the close because that gives me more confidence that the market has truly broken out. However there are more ways to skin a cat and this is not the only answer because some other trading systems might rely on different breakout rules that have also been reliable. Remember always keeping a 1%-2% risk loss on any given trade therefore minimizing risks because the entry system I use always goes with the trend because I have learned over the course of time the trend is truly your friend in the long run. I also look for tight chart structure meaning a tight trading range over a period of time with relatively low volatility. I try to stay away from a crazy market that hit a 25 day high in 2 trading sessions versus the 25 high that actually took 25 days to create.
WHEN DO YOU EXIT A TRADE ?-- The biggest question that I have been asked is when do I exit a winning trade and when do I exit a losing trade? In my opinion the rule of thumb that I use is placing my stop loss at the 10 day high if I am short or a 10 day low if I am long. The other rule of thumb is to place your stop loss at the 2% maximum loss allowed in your account for any given trade.
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
Phone # (800) 615-7649