Gold Futures
Gold futures in the December contract settled last Friday in New York at 1,907 an ounce while currently trading at 1,930, ending the week on a positive note as prices have now hit a 3 week high.
If you look at the daily chart, gold, and silver mirror each other, it looks to me that this commodity bottomed out around the 1,850 level. I will be looking at a possible bullish position once prices hit a 4 week high, and the chart structure improves; therefore, the risk/reward would be more in your favor.
If you want to jump the gun and are bullish at this point, I would place the stop loss under the 1,850 level as the risk would be around $8,000 per contract plus slippage and commission. However, I will be patient and wait for that risk to be lowered significantly. The U.S. dollar was down by 50 points continuing its bearish momentum as the board's commodity markets look very strong. I think they will continue their bullish momentum in next week's trade as I am also keeping a very close eye on a possible bullish silver position as I do not think the 2,100 level will be the top in gold.
TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH
Silver Futures
Silver futures in the December contract settled last Friday in New York at 24.02 an ounce while currently trading at 25.08, ending the week sharply higher as prices have now hit a 3 week high.
I'm sitting on the sidelines looking at entering into a bullish position once prices hit the 4 week high. This market has been incredibly choppy over the last several weeks looking to bottom out, in my opinion. If you have been following my previous blogs, you understand that I am bullish on the commodity markets. I will not take a short silver position as I do not think the $30 level will be the high. We are just consolidating that run-up in price that we witnessed over the last couple of months.
Silver prices are trading right at their 20-day and still above their 100-day moving average as the chart structure is starting to improve daily; therefore, the risk/reward will become more in the favor in next week's trade as I see no reason to be short. Volatility remains extremely high at the current time, and that situation is not going to end anytime soon, especially with the U.S election right around the bend. So make sure you place the proper amount of contracts if you are involved.
TREND: HIGHER
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Orange Juice Futures
Orange juice futures in the November contract is trading higher by 215 points at 115.20 in a relatively quiet Friday afternoon in New York as prices are still near a 10-year low.
Currently, I'm not involved as my only soft commodity recommendation is a bullish coffee trade while also keeping a close eye on sugar. I think orange juice prices are starting to bottom out, and I will be looking at a bullish position once prices hit a 4 week high, so keep a close eye on this market as we could be involved soon.
Juice prices are still trading slightly below their 20 and 100-day moving average as the trend is lower. However, we are starting to enter the volatile winter season as a possible frost in December or January can devastate Florida's orange crop, sending prices higher. I think the downside is very limited, as I will not recommend a short position.
TREND: LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: INCREASING
Sugar Futures
Sugar futures in the March contract is higher for the 5th consecutive session, up 6 points at 14.23 a pound, continuing its bullish momentum as prices hit a 7-month high.
Sugar has rallied sharply over the past 3 weeks on concerns about Brazilian sugar output. Archer Consulting said last Tuesday that dry weather is sparking fires in Brazil's sugarcane growing regions could curb Brazil's 2020/21 sugar production by -2.8 MMT. Also, Maxar said that Brazil's sugar-growing regions have only received 5%-25% of normal rain in the past few months, leaving crops "extremely dry." Sugar prices have been supported by concern that a La Nina weather pattern could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields. This should expand volatility to the upside.
However, I'm not involved; I'm certainly not recommending a short position as I have lived through droughts in Brazil in the past, and they can send prices sharply higher. I will be looking at a buying opportunity on some type of price pullback around the 13.90 level. I think the long-term bottom around the 10 level, which was hit in April, will hold as we are starting to see rallies across the board as we are just in the beginning of a big secular bullish trend that will accelerate in 2021 in my opinion.
TREND: HIGHER
CHART STRUCTURE: POOR
VOLATILITY: INCREASING
Coffee Futures
Coffee futures in the December contract settled last Friday in New York at 108.95 a pound while currently trading at 111.60, up around 260 points for the trading week as prices are right near a 2 week high.
I have been recommending a bullish position from around the 109.55 level, and if you took that trade continue to place the stop-loss at 96.90 as an exit strategy as that stop loss will not be raised. You will have to accept the monetary risk, which is high. The volatility remains low for such a historically volatile commodity, which can experience tremendous price swings daily, and I think that situation is looming once again. I think prices look very cheap.
Coffee is now trading right at its 20-day moving average for the first time in weeks, but still far below its 100-day as the trend remains negative. I have talked about in previous blogs that this was a counter-trend recommendation. At the present time, this is my only soft commodity recommendation. Still, I think the whole complex moves higher as cotton and sugar continue their bullish trends this week as the commodity markets look to rally in 2021, in my opinion.
TREND: LOWER
CHART STRUCTURE: POOR
VOLATILITY: AVERAGE - LOW
Wheat Futures
Wheat futures in the December contract settled last Friday in Chicago at 5.73 a bushel while currently trading at 5.94, up about $0.20 for the trading week as prices hit a 5 year high.
I have been recommending a bullish position over the last month from around the 5.40 level, and if you took that trade, place the stop loss, which now stands at 5.49 on a hard basis only. I'm not willing to risk any more than that level as the chart structure will improve daily starting next week. The volatility remains high as that situation will not end anytime soon as the crop report was released today and was construed as pretty much neutral. I still think the 6.16 level, which was touched yesterday, will not be the high as I remain bullish.
Wheat prices are trading above their 20 and 100-day moving average as this trend is getting stronger weekly as the entire grain market continues to move higher. This reminded me of 2010/2011 when bullish trends exploded due to the quantitative easing, and that's the same situation presently occurring, however only times ten.
TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH
Soybean Futures
Soybean futures in the November contract, which is considered the new crop and is currently being harvested in the Midwest, settled last Friday in Chicago at 10.20 a bushel while currently trading at 10.73 up about $0.53 for the trading week, reacting positively off of the crop report which was released today.
I have been recommending a bullish position from around the 9.14 level, and if you took that trade, continue to place the stop loss on a hard basis only at 9.85. However, the chart structure will improve early next week; therefore, the monetary risk will be reduced.
The fundamental situation has changed as smaller supplies and increased exports with ending stocks projected at 290 million bushels, which was down another 170 million from last month and could become concerning if this trend continues. Volatility is relatively high, and I think it could get out of control to the upside, especially if weather conditions in l continue to remain hot and dry. So stay long as I still do not believe the top has been formed as I also have bullish recommendations in wheat and soybean meal.
TREND: HIGHER
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Live Cattle Futures
Cattle futures in the December contract is currently trading at 112.80 while settling last Friday in Chicago at 111.10, up about 170 points for the trading week still hovering near a 7 month high.
I have been recommending a bullish trade originally from the 111.00 level while adding another contract at 113.30 as the average is around 112.15. If you took those trades, place the stop-loss at the 2 week low at 110.75 on a hard basis only as I am not willing to risk more than that price level.
Volatility has come to a crawl as prices have gone nowhere over the last couple of weeks. However, I still believe prices will break the August 19th contract high of 114.02, possibly in next week's trade. We need some fresh fundamental news to dictate short-term price action, therefore expanding the volatility, which is much needed at this time. Currently, all of my trade recommendations are bullish, with most of them concentrated in the grain market, which continues to surge higher daily. I think 2021 will be terrific for the commodity markets to the upside, as prices are still cheap in many previous blogs.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW
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.
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
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