Weekly Futures Recap With Mike Seery

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.

Crude Oil Futures

Crude oil futures in the March contract settled last Friday in New York at 34.10 a barrel as prices have reversed their recent downtrend including the last 2 trading sessions as prices are now trading at 32.17 up $2.62 this Friday afternoon. I have been recommending sitting on the sidelines for quite some time, however there could a trade here in the next couple of days as the 10 day high is around $35.02 in Mondays trade as prices are still trading far below their 20 and 100 day moving average telling you that the short-term trend still remains bearish. Oil prices traded below $28 a barrel in Wednesday’s trade as panic struck the stock market and the energy market as worldwide deflation continues to hamper prices and if you have been following any of my previous blogs you understand why I remain short so keep a close eye on this market as a possible trade could be in Monday’s trade. The problem with crude oil is that demand is not that weak, but massive oversupply issues continue especially with Iraq coming onto the market possibly inducing 1 million barrels per day creating even more supply, so sit on the sidelines and be patient as a short position could be coming next week.
TREND: LOWER
CHART STRUCTURE: IMPROVING

U.S. Dollar Futures

The U.S dollar futures in the March contract settled last Friday in New York at 99.02 while currently trading at 99.45 up 40 points for the trading week as I was recommending a bullish position from around 99.50 as I exited earlier in the week taking a small loss as the risk/reward is not in your favor at the current time so I decided to move on and look at other markets with better potential. If you decided to just stay in the trade continue to place your stop loss above the 10 day low stands at 98.41 risking $1,000 per contract plus slippage and commission as the volatility in the stock market is pushing the dollar on a daily basis as I’m just not sure where prices are headed next. The U.S dollar is still trading above its 20 and 100 day moving average telling you that the short-term trend is to the upside, but as a trader I decided that there were better opportunities out there so I accepted the small loss and moved on. In my opinion I did believe that the Federal Reserve would continue to raise rates in 2016, however with the stock market looking very weak at the current time I’m not so convinced that our rates are going higher and that is one of the main reasons I exited this trade as there is way too much uncertainty in the currency market at the present time.
TREND: HIGHER
CHART STRUCTURE: SOLID

Gold Futures

Gold futures in the February contract settled last Friday in New York at 1,090 an ounce while currently trading at 1,100 up about $10 for the trading week as I've been sitting on the sidelines in this market for quite some time as a possible breakout to the upside could be occurring in my opinion. The chart structure at the current time is not that great as the 10 day low is at 1,070 as the risk/reward does not meet my criteria to enter into a trade; however I'm certainly not suggesting any short position in this market at the current time. I have been recommending a short position in the silver market getting stopped out after holding a position for over 6 weeks around the 14.22 level as the commodity markets may have seen a short-term low especially with crude oil up over $2 today which is supporting many different markets. Gold futures are trading above their 20 but still below the 100 day moving average so keep a close eye on this market as I rarely buy this commodity, but this could be a special situation especially if the chart structure tightens up , but currently avoid this market as a breakout could be looming.
TREND: HIGHER
CHART STRUCTURE: SOLID

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

What do I mean when I talk about chart structure and why do I think it’s so important when deciding to enter or exit a trade? I define chart structure as a slow grinding up or down trend with low volatility and no chart gaps. Many of the great trends that develop have very good chart structure with many low percentage daily moves over a course of at least 4 weeks thus allowing you to enter a market allowing you to place a stop loss relatively close due to small moves thus reducing risk. Charts that have violent up and down swings are not considered to have solid chart structure as I like to place my stops at 10 day highs or 10 day lows and if the charts have a tight pattern that will allow the trader to minimize risk which is what trading is all about and if the chart has big swings your stop will be further away allowing the possibility of larger monetary loss.

Cattle Futures

Cattle futures settled last Friday in Chicago at 128.50 in the April contract while currently trading at 132.50 up about 400 points for the trading week in an extremely volatile day by day situation as I’m currently sitting on the sidelines as the risk/reward is not the favor at the current time. Prices rallied from 124 to around 138 hitting a weekly low on Wednesday at 127 which was also created on December 21st as I remain bearish the cattle market, but I’m waiting for higher prices to sell as 138 looks in my opinion to be a top. Cattle prices are trading below their 20 and 100 day moving average telling you that the short-term trend is to the downside as the long-term downtrend line is still intact in my opinion as the commodity markets had a nice rebound due to the fact that oil and stocks have rallied significantly over the last couple of days lending support to many commodity sectors. Cattle prices have traded sharply higher for the last 2 consecutive trading sessions, however keep a close eye on this market once the chart structure improves in two or three more days we might be entering another short position as cattle prices are still way too expensive in my opinion compared to the rest of the commodity markets just like I talked about in the cocoa market.
TREND: MIXED
CHART STRUCTURE: POOR

Cocoa Futures

Cocoa futures in the March contract settled last Friday in New York at 2920 while currently trading at 2875 hitting a 9 month low as I have been recommending a short position from 3350 and if you took that trade continue to place your stop loss above the 10 day high which in Monday’s trade will be 2960. The chart structure in cocoa has improved tremendously over the last week as prices have absolutely plummeted over the last several weeks as we are up nearly 500 points on this trade as I still think lower prices are ahead, as prices are still trading far below their 20 and 100 day moving average telling you that the trend is to the downside and as a trend follower stick to the rules in my opinion. The next major level of resistance is the recent low around 2750 and if that is broken I think you can trade down to 2500 and possibly down to 2000 as this product is way too expensive compared to the rest of the commodity markets as a strong U.S dollar continues to hangover prices. As a trader you always recognize risk as I think risk is the number one most important situation as the original trade I believe was around 80 points or $800 and if you took that trade you’re doing very well so continue to stick to the rules and don’t take profits.
TREND: LOWER
CHART STRUCTURE: IMPROVING

Cotton Futures

Cotton futures in the March contract settled last Friday in New York at 61.41 while currently trading at 62.60 up about 120 points for the trading week as I’ve been recommending a short position over the last several weeks from around 62.50 and if you took the original trade continue to place your stop loss above the 10 day high which currently stands at 62.95 which is just an eyelash away from today’s price level. Prices are now trading slightly above their 20 and 100 day moving average telling you that the trend in the short-term has now turned higher as I’ve had no luck trading cotton in recent months; however they have been relatively small losses including this present trade and if we are stopped out look at other markets are beginning to trend. The volatility is most of the commodity markets is extremely high including stocks, however volatility has been relatively low in cotton as prices have gone nowhere despite the fact that prices hit a three month low on a real breakout two weeks ago but unable to follow through as this market just remains in a sideways trend just like the grain market.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT

Coffee Futures

Coffee futures settled last Friday in New York at 114.90 a pound while currently trading at 116.65 up slightly for the trading week hitting a contract low in Wednesdays trade around the 111 area before rallying as I’ve been sitting on the sidelines in this market for quite some time waiting for a real trend to develop. Coffee prices rallied sharply for the 2nd consecutive trading session hitting an 8 day high as the 115 level has been extremely resilient and unable to penetrate on a longer-term basis as I still think coffee prices are in a bottoming pattern. At the current time there is very little fresh fundamental news to dictate short-term price action as the trading is technically driven in my opinion but at this point this market has had no trend for several months and remains choppy, but something will develop you’re just going to have to be patient. The breakout to the upside in coffee is above 126 where prices were at in late December as the commodity markets have all rebounded rather sharply today as the stock market seems to have stabilized coupled with the fact that crude oil prices are up $2 sending many commodity sectors higher on short covering. I enjoy trading coffee as it is one of the largest contracts in the commodity world, however you have to wait for the proper setup and at the present time this market does not meet my criteria to enter into a new trade.
TREND: MIXED
CHART STRUCTURE: SOLID

Orange Juice Futures

Orange juice futures in the March contract are trading far below their 20 and 100 day moving average telling you that the short-term trend is getting stronger on a weekly basis as I've been recommending a short position from 140 and if you took that trade continue to place your stop loss above the 10 day high which has been lowered to 135 as prices have absolutely plummeted in the last 2 trading weeks. Prices settled in New York last Friday at 127.20 while currently trading at 121.50 and actually traded as low as 113 in yesterday's trade hitting a fresh 3 month low as volatility at the current time is extremely high, but if you have missed this recommendation sit on the sidelines and look at other markets as the risk/reward is not in your favor. Juice prices have rallied for the 2nd consecutive trading session which does not surprise me as oversold conditions are prevalent at the current time, but I still think prices could retest the contract lows around 110 in the next couple of weeks so stay short and once the chart structure starts to improve we will start to add more contracts to this trade.
TREND: LOWER
CHART STRUCTURE: SOLID

Sugar Futures

Sugar futures in the March contract settled last Friday in New York at 14.92 a pound while currently trading at 14.45 down about 45 points for the trading week as I’m now recommending a short position once again while placing your stop loss above the 10 day high which stands at 15.12 risking around 67 points or $700 per contract plus slippage and commission. If you take a look at the daily chart if prices break 14.00 on a closing basis I will be looking at adding more positions to this as I think a real washout could happen in the next couple of weeks. The U.S dollar continues to hover around the 100 level which is pessimistic commodity prices despite the fact that crude oil and the stock market are sharply higher this Friday afternoon supporting many different markets, but the trend is your friend and the trend in sugar is to the downside. Sugar futures are trading below their 20 day but slightly above their 100 day moving average telling you that the trend is lower to mixed at the current time as the chart structure is very solid, but I definitely like the rounding top which has developed so take another shot at the downside as I’m currently short juice and cocoa as well which have worked out here in the short-term.
TREND: LOWER
CHART STRUCTURE: SOLID

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.