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 May contract settled last Friday in New York at 36.79 a barrel while currently trading at $39.31 this Friday afternoon on bullish comments about production slowing down dramatically towards the end of year propping up prices this afternoon. Oil prices are trading above their 20-day and 100-day moving average telling you that the short-term trend is higher. However, this market remains extremely choppy and had bearish momentum before today’s action so avoid this market at present and wait for better chart structure to develop which could take several more weeks in my opinion. Oil prices are trading between $35/$42 a barrel as there is very little fresh fundamental news to push prices sharply higher or lower in my opinion. I am waiting for volatility to slow down, therefore, then I can place my stop loss relatively close, therefore, lowering monetary risk, but at this time, I don’t see any trend in crude oil so look at other markets that are beginning to trend with better risk/reward potential at the current time. Rumors are circulating that OPEC might suddenly start to cut production, but we have heard that on several occasions only to be disappointed every single time as nobody seems to want to cut production especially Iran despite the fact that prices are extremely low.
TREND: MIXED
CHART STRUCTURE: POOR
Gold Futures
Gold futures in the June contract settled last Friday in New York at 1,223 an ounce while currently trading at 1,236 up around $13 for the trading week as gold prices are digesting the huge gains that we saw in the 1st quarter of 2016. I’m sitting on the sidelines at the current time. Gold prices are trading right at their 20-day but still below their 100-day moving average holding major support earlier in the week around 1,215 as the U.S dollar has now hit a fresh 8 month low supporting the precious metals this week. As a trader I always look at the risk/reward scenario and at the current time I’m just not sure where gold prices are headed so I will wait for a better chart pattern to develop before entering into a new trade, but there seems to be tremendous demand every time gold has a price dip as there is so much uncertainty worldwide right now including negative interest rates which have been very supportive gold prices here in the short-term. At the current time, I’m very few recommendations as there are few strong trends at present, so I’m sitting on the sidelines waiting for the trends to come back as I’m sure they will come back with a vengeance it’s just a matter of time.
TREND: MIXED
CHART STRUCTURE: SOLID
Sugar Futures
Sugar futures in the May contract settled last Friday in New York at 15.18 a pound while currently trading at 14.30 down almost 90 points for the trading week while also trading lower for the 7th consecutive trading session. I’m sitting on the sidelines in this market as the chart structure is terrible at the present time. Sugar prices are now trading below their 20 and 100-day moving average telling you that the short-term trend is lower as prices broke support around 14.50 as I just don’t know where prices are headed at this time. Sugar prices have had a wild ride recently rallying from around 12.60 all the way to about 16.60 only to drop over 200 points in the last two weeks. I do not like markets like this as they are very difficult to trade successfully, in my opinion, so wait for better chart structure to develop therefore lowering monetary risk. Many of the commodity markets have been mixed in recent weeks with very few trends at present, so we will have to be patient and sit on the sidelines and wait for certain risk parameters to get back into our favor as sugar prices are too sporadic for my type of trading.
TREND: LOWER
CHART STRUCTURE: POOR
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 Friday in Chicago at 79.37 while currently trading at 80.00 as I have been recommending a short position from around the 79.50 level and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 83.50 risking about 350 points or $1,400 per contract plus slippage and commission from today’s price levels. The chart structure in the hogs will improve tremendously come Wednesdays trade as the 10 day high will be lowered to around the 82 levels, but you are going to have to be patient with this high risk as many of the commodity markets are sharply higher including cattle prices which I also have bearish bias to at present. Hog prices are trading below their 20 day but still above their 100 day moving average as the hogs have been in a bullish trend over the last 5 months before this recent downturn as there is major support between 78/79 and if that is broken I think then the all-out bear market is underway once again so stay short in my opinion as the risk/reward will be in your favor in a couple of days.
TREND: LOWER
CHART STRUCTURE: IMPROVING
Corn Futures
Corn futures in the May contract settled last Friday in Chicago at 3.54 while currently trading at 3.62 higher for the last 5 consecutive trading sessions reversing last week’s losses due to the very bearish USDA crop report as I’m currently sitting on the sidelines waiting for the chart structure to improve. Corn prices are trading below their 20 and 100-day moving average telling you that the short-term trend is to the downside as I might be recommending a short position in the next couple of days as the risk/reward will start to be in your favor. Investors are still digesting the extremely bearish USDA crop report which estimates 93.5 million acres planted with a possible record crop of 14 billion bushels in 2016 as there are very few bullish fundamental indicators at present. Currently, I’m recommending a bullish position in soybeans and soybean meal while possibly having a short position in the corn market as volatility will start to increase in the next couple of weeks as we are starting spring planting as now the weather is the main influence on prices. The 10 day high currently stands at 3.74 but in a couple of days that will be lowered significantly so keep a close eye for a possible short position in corn.
TREND: LOWER
CHART STRUCTURE: POOR
Wheat Futures
Wheat futures in the May contract are trading below their 20 and 100-day moving average telling you that the short-term trend is to the downside, but this market has remained extremely choppy over the last several months as I’m currently sitting on the sidelines waiting for a breakout to occur. Wheat prices settled last Friday in Chicago at 4.75 a bushel while currently trading at 4.60 down about $.15 on the trading week due to very poor export demand pushing prices right near a 4 week low. As I’ve talked about in previous blogs, I was looking at a bullish position if prices broke 4.80 as we are in consolidation at present so be patient and wait for the breakout to occur before entering as choppy markets are extremely difficult to trade successfully in my opinion. The USDA announced last week that we have the lowest amount of wheat planted since 1970 as we certainly will have an extremely volatile spring and summer so keep a close eye on this market as we also might be involved in the next couple of days.
TREND: LOWER
CHART STRUCTURE: SOLID
Cotton Futures
Cotton futures in the July contract settled last Friday in New York at 58.84 while currently trading at 59.40 up about 50 points for the trading week. I’ve been recommending a bullish position from around this level and if you took that trade continue to place your stop loss below the 10-day low at 57.00 as the chart structure will not improve until later next week. Prices are trading above their 20-day but still below their 100-day moving average hitting a 6 week high coupled with the fact of outstanding chart structure are the reasons why I took a shot at this commodity to the upside. Planting is underway in the southern part of the United States especially in the state of Texas and we are starting to enter the volatile season for cotton prices as you will start to see large price swings up and down on a daily basis as I think the breakout has occurred in today’s trade. At the current time, I’m recommending several agricultural commodities including soybeans, soybean meal, and cotton. I think most of the negative news has already been priced into these markets, but if we are stopped out, I will look at other markets that are beginning to trend as you must have an exit strategy because never get out is a terrible way to trade over the course of time.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
Coffee Futures
Coffee futures in the May contract settled last Friday in New York at 127.25 a pound while currently trading at 119.60 trading lower by over 700 points for the trading week hitting a 3 week low as I was recommending a bullish position getting stopped out at the 10-day low in Monday's trade. I'm now sitting on the sidelines waiting for another trend to develop. Coffee prices are trading below their 20 and 100-day moving average telling you that the short-term trend is to the downside as the chart is almost identical to that of the sugar daily chart as both commodities ran higher then dropped like a stone. This was a disappointing trade in my opinion as prices traded slightly above 134 just 2 weeks ago only to top out at the five-month high, but I still do believe that the downside is limited as major support is between 114/118. I would be surprised if that level is broken, but I will wait for better chart structure to develop as I will keep an eye on this market as we probably will not be involved in coffee for several more weeks.
TREND: LOWER
CHART STRUCTURE: POOR
Soybean Futures
Soybean futures in the November contract which is concerned the new crop as it will be grown this summer and harvested this October settled last Friday in Chicago at 9.32 a bushel while currently trading at 9.27 down slightly for the week still near an eight-month high. I’ve been recommending a bullish position from around 9.11 and if you took that trade continue to place your stop loss below the 10 day low which stands at 9.10 as the chart structure will not improve for another 4 days, so you’re going to have to accept the monetary risk at this point. Soybean futures are still trading above their 20 and 100-day moving average telling you that the short-term trend is higher. If you have been following any of my previous blogs you understand that I am a trend follower as trading with the path of least resistance is the most successful way to trade over the course time in my opinion. At the time that I’m writing this article, it's snowing in the suburbs of Chicago and spring planting of soybeans will not take place until the month of May and that’s when we will see high volatility as weather will be the main concern on traders’ minds and certainly will dictate the short-term price action. The USDA estimated around 82.5 million acres being planted in 2016 with a possible production of 3.7 – 3.9 billion bushels which would be right near a record number, but it’s a long growing season and I still think there are going to be weather problems this summer, so I’m going to continue to play this to the upside while placing the proper stop loss.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
Soybean Meal Futures
Soybean meal futures in the July contract settled last Friday in Chicago at 275 a ton while currently trading at 275.60 basically unchanged for the trading week holding major support around the 268 level as we were just an eyelash away from getting stopped out of this trade last Wednesday. Meal futures this Friday afternoon have rallied sharply up about $6 as the commodity markets are higher as the U.S dollar has hit an eight-month low, but the true breakout in this market is above 280 as I will be looking at adding more contracts to my position if that level is broken. I’ve been recommending a bullish position from around the 277 levels and if you took that trade continue to place your stop loss below the 10 day low which stands at 268 risking around $900 per contract plus slippage and commission as I still do believe prices are in a bottoming pattern. Soybean futures are up about 9 cents helping push-up soy meal prices here in the short term as the chart structure is outstanding at the current time and if you did not take this trade I am still recommending it even at today’s price levels as the risk/reward is in your favor at present in my opinion.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
Trading Theory
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.
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
Michael Seery, President
Seery Futures
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Twitter–@seeryfutures
Phone #: 312-224-8140
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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.
