Copper Futures
The highly anticipated trade agreement with China has failed at this time as the U.S has added more tariffs which were supposed to send shockwaves throughout many of the commodity sectors, but it fizzled big time as there are very few major reactions in today's trade. Copper prices are currently trading at 2.7680 a pound after settling last Friday in New York at 2.8190 down about 300 points continuing its bearish momentum as prices are trading right near a 14 week low. I have been recommending a bearish position from around the 2.8240 level & if you took the trade continue to place the stop loss above the 2 week high which remains at 2.9235, however in next week's trade the stop loss will be lower therefor the monetary risk will also be reduced. Copper prices are still trading below their 20 and 100-day moving average as clearly the trend is to the downside. However, we keep bouncing off of major support around the 2.75 level as that has to be broken on a closing basis to continue the bearish momentum as I still believe we can test the contract low around 2.56 in the coming weeks ahead so stay short.
TREND: LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH
S&P 500 Futures
The S&P 500 in the June contract settled last Friday in Chicago at 2947 while currently trading at 2853 down almost a 100 points for the trading week hitting a 6 week low all because there is no trade agreement between the United States and China. If you had followed any of my previous blogs you understand that I've been bullish the stock market forever, but this is why you need an exit strategy as the 2 week low was at 2890 as that's where you should have been stopped out if you had a bullish position as prices have dropped rather dramatically. When you trade the commodity markets buying and never getting out is not the way to trade as you must have some type of strategy to exit as mine is if prices hit a 2 week low it's time to move on. The S&P 500 is now trading below its 20 but still above its 100-day moving average as the volatility certainly has increased and that's going to remain the same until we find out more about this trade agreement. The next major level of support is down at the 2800 area & if that is broken, then a bearish trend could develop. However, I still have a bullish bias towards the stock market as the U.S economy is outstanding coupled with the fact of strong corporate growth. However, I am currently sitting on the sidelines as the risk/reward is not in your favor.
TREND: MIXED
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Mexican Peso Futures
The Mexican Peso in the June contract finished up 35 points currently trading at 5212. I have been recommending a bearish position from the 5177 level while placing the stop loss above most recent high which was hit on April 18th at 5287 as the risk was around $550 per contract plus slippage and commission as the chart structure is outstanding. In my opinion, the risk/reward are highly in your favor as the next level of support is around the 51 area as I also have a bullish U.S. dollar recommendation at the current time as it looks to me that the Peso has topped out. The Peso is trading below its 20-day but still above its 100-day moving average with stands at critical support around the 5120 level, so play this to the downside while risking 2% of your account balance on any given trade as the trend has turned south.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW
Cattle Futures
Cattle futures in the June contract settled last Friday in Chicago at 113.42 while currently trading at 111.62 down about 180 points for the week hitting 8-month lows as prices have collapsed since hitting the contract high on March 22nd at 124.90. The large money managed funds had a record long position as they have absolutely taken a beating on this trade as their liquidation has exaggerated the price to the downside as the next level of support is down at the 107/110 level as it still looks like further weakness lies ahead. Cattle prices are trading far below their 20 and 100-day moving average as the trend is to the downside as the commodity markets, in general, continue to bleed on a weekly basis as it does not look like a trade agreement with China is in the cards. The chart structure is terrible as the risk/ reward is not in your favor. I am currently not involved as I will wait for a better chart pattern to develop, but I see no reason to buy this commodity. Volatility in cattle is relatively high as I see that situation remaining throughout the summer months, but until the downtrend line is broken, I see no reason to be bottom fishing.
TREND: LOWER
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Coffee Futures
Coffee futures in the July contract settled last Friday in New York at 90.60 a pound while currently trading at 98.80 unchanged for the week. However, a 14 year low was hit on May 7th at 87.60 before rallying slightly on short covering. Coffee prices are still trading below their 20 and 100-day moving average as the trend is to the downside as the downtrend line also remains intact as I am currently sitting on the sidelines waiting for a bullish trend to develop. If you take a look at the daily chart the 4 week high stands at 95.25 which is just an eyelash away and if that is touched the downtrend line and the 20-day moving average would be breached due to the outstanding chart structure and the historically low volatility that we are currently experiencing. The soft commodity markets continue to melt away on a weekly basis. I have short recommendations in sugar and cotton which are at yearly lows as well as I see no reason to be a buyer until the situation between China and the United States on trade concludes as the uncertainty has a bearish and negative influence on all prices.
TREND: LOWER
CHART STRUCTURE: OUTSTANDING
VOLATILITY: LOW
If you are looking for a futures broker feel free to contact Michael Seery at 630-408-3325 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.
Corn Futures
Corn futures in the July contract are sharply lower for the 3rd consecutive session hitting an 8 month low as prices settled last Friday in Chicago at 3.70 while currently trading at 3.48 breaking the contract low of 3.51 as prices look to head lower in my opinion. I am currently not involved in corn, but I was telling investors who were bullish to place the stop loss under the contract low of 3.51 as an exit strategy as now you should not be long corn or the grain market at this time as the next major level of support is all the way down to the 3.30 area. The WASDE crop report was released today stating that we have 300 million more bushels of corn than expected coupled with the fact that production numbers in 2019 are predicted to be slightly over 15 billion bushels which were 250 million above estimates as the report was bearish across the board. Soybean prices have also hit an 11-year low in today's trade which is also putting pressure on corn, but the main topic today was the fact that the United States and China did not come up with a trade agreement which is very bearish all U.S agricultural products as weak demand and huge carryover numbers continue to plague these markets. Weather in the Midwestern part of the United States has been miserable as we rain almost every day with freezing temperatures. However, the 7/10 day weather forecast shows an ideal weather forecast as planting should be in full swing.
TREND: LOWER
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Cotton Futures
Cotton futures in the July contract is trading lower for the 5th consecutive session hitting an 18 month low as a trade agreement with China did not occur as that is a very bearish fundamental factor towards prices as China is the largest U.S importer of cotton in the world. I have been recommending a bearish position from the 75.74 level, and if you took that trade the stop loss has now been lowered to 77.33, however, the chart structure will improve on a daily basis next week therefor the monetary risk will be reduced as I still think there's room to run to the downside. Cotton prices are trading far below their 20 and 100-day moving average as the trend is strong to the downside as the grain market is also hitting multi-year lows reacting bearish off of the crop report which was released this afternoon as I remain bearish all commodities. As I've stated in previous blogs, the main reason why I took this trade was that there was a rounding top technical pattern as it worked like a charm as that why you must do your homework and study technical analysis in my opinion. The volatility in cotton is high as we were almost limit down yesterday which is 300 points as ideal weather conditions in the southern part of the United States is allowing aggressive planting to take place as farmers are also thinking about putting more acres into cotton because corn and soybean prices are not profitable.
TREND: LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH
Sugar Futures
Sugar futures in the July contract settled last Friday in New York at 12.01 while currently trading at 11.73 a pound hitting a 7 month low continuing its bearish momentum as the entire soft commodity market remains bearish. I have been recommending two positions to the short side with an average price of 12.06 and if you took those trades continue to place the stop loss above the 2 high standing at 12.75, however in Monday's trade that will be lowered to 12.39 as the chart structure will improve significantly, therefore, reducing the monetary risk. Tuesday's forecast from Conab that Brazil 2019/20 sugar production will climb by +17.4% as that has been one fundamental factor in pushing prices lower, but technically speaking this market still looks weak so stay short while making sure that you risk 2% of your account balance on any given trade and that includes the 2nd contract. Sugar prices broke out of a tight consolidation a couple weeks back as that was one of the main reasons for the recommendation to the downside as a trade agreement with China does not look to be coming to fruition. I see no reason to be a buyer of this commodity as prices are still trading below their 20 and 100-day moving average.
TREND: LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE
Wheat Futures
Wheat futures in the July contract is currently trading at 4.29 a bushel after settling last Friday in Chicago at 4.38 continuing its bearish momentum as there has been no trade agreement with China which is negative the entire grain sector and that is why you see much of the complex at fresh yearly lows. In my opinion, I believe wheat prices are probably going to test the $4 level as I see no reason to be bullish at this time as the large money managed funds also agree with me as they are short a record 75,000 contracts as they still believe lower prices are ahead. Wheat prices are trading under their 20 and 100-day moving average as the trend is to the downside, and if you take a look at the weekly chart, the downtrend line remains intact as this bearish trend has strengthened over the last 6 months. One of the main reasons for the depressed prices in the state of Kansas which is the largest wheat producer in the United States which produced an outstanding crop of around 47 bushels per acre as carryover levels are ample at present coupled with weak demand so if you are short a futures contract stay short in my opinion. Volatility is extremely low. However, I don't see that situation lasting much longer as we enter the summer months which are always the most volatile for the grain market because you can have a weather problem such as drought.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW
Orange Juice Futures
Orange juice futures in the July contract settled last Friday in New York at 93.90 while currently trading at 95.85 finishing the week on a positive note up over 200 points. However, this market remains bearish in my opinion. If you're short a futures contract, I would place the stop loss above the 2 week high which now stands at 102.70 as the chart structure will improve daily, therefore, lowering the monetary risk. Most of the soft commodities were lower in today's trading session as no agreement on trade between China and the U.S. has a negative influence on all agricultural markets. Juice prices are still trading below their 20 and 100-day moving average as the trend remains negative, but I still think there's a chance prices could trade down to the 75 level as weak demand and high inventory levels so stay short and place a proper stop loss. Seasonably speaking this time of year for orange juice generally heads lower as harvest pressure occurs typically coupled with the fact that there's no chance for frost in the state of Florida.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW
Trading Theory
Trade with the short term trend, as the saying goes in futures trading the trend is your friend but sometimes you will be a market that is trending higher and then has a false breakout to the upside and then suddenly sells off causing you a 2% loss on your equity and you say to yourself that was a bad trade and should I do something different on my next trade.
If it were up to me, I would continue to buy strength and sell weakness because in the long run commodity trading is about percentages of success in the long run, and if you go with the path of least resistance more often than not you will have the probabilities of success on your side.
I define a trend as a commodity hitting a 20-day high or low as a trendy market if the market is in a consolidation stay away from it and find something that is trending up or down and goes in that direction remembering the money management rules of 2% maximum loss if you are wrong.
If you are looking for a futures broker feel free to contact Michael Seery at 630-408-3325 and he will be more than happy to help you with your trading or visit www.seeryfutures.com
Michael Seery, President
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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.
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.
