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.
10-Year Note Futures
The 10 year note in the June contract settled last Thursday in Chicago at 129 7/32 while currently trading at 130 12/32 trading higher 4 out of the last 5 trading sessions as I’ve been recommending a bullish position from around 129/25 as I think interest rates in the United States are going lower which is an amazing thing to state. Worldwide interest rates in many different countries have gone negative which is the first time in history that has happened as I think the world is chasing interest rates and at 1.77% the U.S still looks expensive in my opinion so play this to the upside as I’m looking to add more contracts once the chart structure improves, therefore, lowering monetary risk. If you took the original recommendation place your stop loss below the 10 day low which currently stands 128/20/30 as the chart structure will not improve for another 4 days as you will have to be patient with the monetary risk as I think prices will retest last month’s high around 132/16 as the bullish trend remains intact in my opinion. I have not traded the bond market to the upside probably since the stock market collapse around 2009 as interest rates have been dictated by the Federal Reserve and I thought it was kind of a rigged market, so I avoided the trade, but the risk/reward is your favor at the present time as I see no reason to be bearish interest rates as the United States is offering 1.77% which is outrageously high compared to Japan or Europe.
CHART STRUCTURE: SOLID
Corn futures in the May contract settled last Thursday in Chicago at 3.70 a bushel while currently trading at 3.48 hitting a new contract low reacting sharply lower to a very bearish USDA crop report which was released yesterday afternoon stating that we will plant approximately 93.6 million acres in 2016 well above pre-trade estimates of around 90 million acres with a production number. If everything goes well to be around 14 billion bushels which would be right near another record crop, therefore, ballooning carryover levels once again. Corn prices are trading far below their 20 and 100-day moving average telling you that the short-term trend is to the downside. However, I’m sitting on the sidelines as the chart structure is terrible at the current time due to the fact that prices have dropped about $.30 over the last three days as it looks to head lower in my opinion. As a trader, you must look at the risk/reward scenario as the 10-day high is too far away to enter into a new trade. However, I am certainly not recommending any type of bullish position in this commodity as I still think we will grind lower in the coming weeks until some type of weather problem develops which probably won’t happen until late April or early May so avoid this market at the present time and look at other markets with better risk/reward scenarios.
CHART STRUCTURE: POOR
Wheat futures in the May contract settled last Thursday in Chicago at 4.63 a bushel while currently trading at 4.69 reacting off of yesterday’s USDA crop report with estimates of all wheat planted acres around 49.6 million acres which is the smallest figure in the U.S since 1970 reversing early losses in yesterday’s trade only to finish right near session highs. At the current time, I’m sitting on the sidelines in this market as I will be recommending a bullish position if prices break out above 4.80 while placing my stop below the 10-day low which stands at 4.55 as the chart structure is solid at the current time as prices have gone nowhere over the last several months. In my opinion, I think the report was bullish. However, corn prices have dropped $.30 over the last 3 days and I think that’s putting pressure on wheat prices here in the short term, but remember these are different crops that can go in opposite directions especially if weather problems occur in critical wheat growing regions so keep a close eye on this market as we could be entering a bullish position any day. Volatility in wheat is relatively low as wheat historically speaking is one of the most volatile markets especially during the spring and summer months as currently I’m only recommending soybeans and soybean meal to the upside in the grain market.
CHART STRUCTURE: INPROVING
Soybean futures in the November contract settled last Thursday in Chicago at 9.22 a bushel while currently trading at 9.27 up slightly for the trading week still near a 8 month high as I’ve been recommending a bullish position from 9.11 and if you took that trade place your stop loss below the 10-day low at 9.05 as the chart structure still remains solid at the present time. Soybean prices are trading above their 20 and 100-day moving average telling you that the short-term trend is to the upside as yesterday’s USDA crop report stated that the United States will plant slightly more than 82 million acres which was basically what was planted in 2015 with a possible production number around 3.8/3.9 billion bushels right near another record crop. Volatility in soybeans certainly will increase as we enter spring planting in the month of May as I still believe there is a high probability of a hot and dry summer as we’ve experienced record temperatures in 2016 in the Midwestern part of the United States as I’m going to continue to play this to the upside, but if I am stopped out I will move on and look at other markets that are beginning to trend. The commodity markets, in general, this Friday afternoon are sharply lower across the board including the precious metals, energies, and many other sectors as the recent bullish trend certainly will have bumps along the way in my opinion as that’s why you must have a 2% risk on any given trade as over trading is the kiss of death in my opinion.
CHART STRUCTURE: INPROVING
Soybean Meal Futures
Soybean meal futures in the July contract settled last Thursday in Chicago at 277.80 a ton while currently trading at 274.30 down slightly for the trading week as I’ve been recommending a bullish position from around the 277 level and if you took that trade continue to place your stop loss under the 10 day low which stands at 268 as the chart structure is outstanding at the present time. Soybean meal is now trading above its 20-day but slightly below its 100-day moving average basically following the coattails of soybeans as I still think higher prices are ahead and if you missed this trade I am still recommending the trade at today’s price levels as the risk/reward is in your favor.
CHART STRUCTURE: EXCELLENT
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.
Lean Hog Futures
Lean hog futures in the June contract settled last Thursday in Chicago at 80.85 while currently trading at 79.32 trading sharply lower for the 3rd consecutive trading session hitting a 5 week low, but at the current time I’m sitting on the sidelines as I’m looking at entering a short position, however the 10-day high currently stands at 83.70 as the risk is around $1,800 per contract plus slippage and commission, but the risk/reward is not in favor at the present time. Keep a close eye on this market as we could be entering a short position in next week’s trade especially if prices rally therefore lowering monetary risk as prices are trading below their 20-day but still slightly above their 100-day moving average as prices have not hit a 5 week low in over 6 months as that just tells you how strong and how bullish this market has been. Cattle prices have dropped precipitously here in the last week and that is putting pressure on hog prices as I still believe prices are way too expensive compared to the rest of the commodity markets as prices have rallied from around 71 in November to 84 which was hit in last week’s trade before dropping off on profit-taking, so let’s look at this to the downside in next week’s trade as a top has been formed in my opinion.
CHART STRUCTURE: POOR
Live Cattle Futures
Cattle futures in the June contract settled last Thursday in Chicago at 125.37 while currently trading at 123.80 continuing its bearish momentum as I’m still itching to short this market, but I’m waiting for a price rally before entering, therefore, lowering monetary risk. Cattle futures are trading below their 20-day but slightly above their 100-day moving average as prices peaked two weeks ago around the 131 level as the 10 day high is too far away which currently stands 128.75, however come next week’s trade that will be lowered and if we get price rally I will be an aggressive seller in this market as a top has occurred in my opinion. Cattle prices reacted strongly to the USDA crop report which was released yesterday sending feeder cattle prices up 450 points which the daily limit was pushing live cattle prices higher. However, that was just a short covering rally in my opinion as the livestock sector still looks weak with another possible leg down. Hog prices have now hit a 5 week low as I’m looking at a possible short position in that sector as well which is also starting to pressure cattle prices so any price rally look to be seller while placing the proper stop loss as the risk/reward will be in your favor in the next week’s trade.
CHART STRUCTURE: POOR
Cotton futures in the July contract are trading higher for the 3rd consecutive trading session hitting a 5 week high as I'm now recommending a bullish position while placing my stop loss below the 10-day low at 57.00 risking around 1,000 per contract plus slippage and commission. Prices settled last Thursday in New York at 57.58 while currently trading at 58.80 busting out of the recent trading range now trading above its 20 day moving average as I was recommending a short position over the last several months getting stopped out a couple of weeks ago, but the tide has turned as the trend has now turned to the upside. At the current time I have bullish positions in soybeans, soybean meal, 10 year notes and now cotton as I think some of the commodities have bottomed out despite the fact of overwhelming pessimism at the current time, but I do remember 2009 when prices bottomed and rallied sharply over the next several years so do not be stubborn and go with the flow. Traders are awaiting the next USDA crop report as planting is underway here in the United States as volatility certainly will wake this sleeping giant up once again as historically speaking cotton can become outrageously volatile with huge risk come summertime as I think that will happen once again.
CHART STRUCTURE: EXCELLENT
Coffee futures in the May contract settled last Thursday in New York at 127.55 a pound while currently trading at 127.20 basically unchanged for the trading week as I've been recommending a bullish position from around the 121.50 level and if you took that trade continue to place your stop loss below the 10 day low which currently stands at 126 on a closing basis only as prices traded below that level over the last 2 trading sessions only to rally towards the close. At the current time coffee prices are still trading above their 20 and 100 day moving average consolidating the recent rally from 114 to 134 then trading as low as 124 this Friday afternoon before rallying once again at the closing bell as I still remain bullish many of the commodity sectors as I think the tide has turned to the upside. The U.S dollar continues to hit a multi-month low which has been supporting commodity prices, however this will be a bumpy road to the upside as you don't simply turn a giant bear market into a screaming bull market all at once as we will stair step higher in my opinion as I'm now recommending a bullish position in cotton and several of the grain commodities as well.
CHART STRUCTURE: EXCELLENT
What Is Your Definition Of Adding To A Losing Position? My rule for adding to a losing trade differs from mainstream thinking because for this reason that if you buy soybeans and the trade goes against you adding to this trade would be adding to a loser, which is correct. However many traders won’t add to the soybean long position but they will buy gold or some other commodity without getting out of soybeans first. My rule states that if you have a losing long position and want to get long another market, you must exit the soybeans before you enter a long position otherwise you are adding to a loser. Remember many commodities trend in the same direction so if you have a losing long gold position and now you’re buying silver you are basically doubling down which is a bad money management technique and this also applies to adding to short positions as well. Remember try and keep a balanced portfolio of longs and shorts so you never get top heavy on one side of the market.
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’m short or a 10-day low if I’m 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 312-224-8140 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. My opinion in this blog are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any futures or option contracts.