Weekly Futures Recap With Mike Seery

S&P 500 Futures

S&P 500 futures in the December contract settled last Friday in Chicago at 3143 while currently trading at 3136 up for the 3rd consecutive session rallying sharply off of the unemployment number, which showed that we added 266,000 jobs which way above estimates as the U.S. economy is on fire.

I had been recommending a bullish position from the 3006 level getting stopped out earlier in the week at 3090, which is a little disappointing. However, you must have an exit strategy as President Trump announced on Monday that no trade deal with China was imminent, which sent prices sharply lower. I'm currently sitting on the sidelines, waiting for the chart structure to improve.

The S&P 500 is now trading above its 20 and 100-day moving average as the trend remains higher. I still have a bullish bias and I still believe the holiday shopping season will be outstanding; therefore, that will push prices even higher as I see no reason to be short this market.

Volatility this week has increased tremendously, and that it's not surprising, especially at these elevated levels. I still believe the 3200 levels come year-end is possible. However, the risk/reward is not in your favor to take a bullish position at this time, so I will be patient.

TREND: HIGHER
CHART STRUCTURE: POOR
VOLATILITY: INCREASING

Sugar Futures

Sugar futures in the March contract is trading higher for the 4th consecutive session after settling last Friday in New York at 12.94 while currently trading at 13.16 up about 22 points for the week continuing it's very low volatility. Prices continually grind higher every week.

If you take a look at the daily chart, the uptrend line remains intact, and I have been recommending 3 bullish positions with an average price of 12.79. If you took that trade continue to place the stop loss under the 10-day low, which now stands at 12.62 as an exit strategy as the chart structure is outstanding. Fundamentally speaking, global sugar production concerns fueled fund buying of sugar futures as the Indian Sugar Mills Association (ISMA) on Tuesday reported India's sugar production during Oct 1-Nov 30 fell sharply by -54% y/y to 1.89 MMT.

The ISMA on Nov 5 projected India 2019/20 sugar production would fall -19% y/y to 26.85 MMT as sugar prices also have support on strength in crude oil prices, which rallied to a 2-1/2 month high Thursday. Higher crude oil prices benefit ethanol prices and may prompt Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar production, thus curbing sugar supplies.

TREND: HIGHER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

Soybean Futures

Soybean futures are trading higher for the 4th consecutive session on optimism about a possible trade agreement with China currently trading at 8.88 a bushel after settling last Friday in Chicago at 8.76 as a potential double bottom on the daily chart may have formed. I have been recommending a bearish position from around the 9.23 level. If you took that trade, the stop loss stands at 9.04 as an exit strategy, and in Monday's trade will be lowered to 9.03 as the chart structure will improve daily next week, therefore, reducing the monetary risk.

Despite the recent rally that we have witnessed, prices are still trading below their 20 and 100-day moving average as the trend remains negative. We probably experienced oversold conditions because prices fell out of bed over the last several weeks as I think this is just a kickback, but continue to place the proper stop loss and let's see what next week's trade brings.

This is my only grain recommendation as the rest of the sector remains choppy with no trend insight as we will have more clarity on the Chinese trade agreement come Dec 15 as that is when new tariffs will be implemented unless some type of deal comes about.

TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

Live Cattle Futures

Live cattle futures in the February contract settled last Friday in Chicago at 126.20 while currently trading at 124.55 down about 165 points for the trading week as prices look to break out of a 5-week consolidation pattern in my opinion.

I will be recommending a short position if prices close below 123.12, which was hit on Nov 13 while then placing the stop loss at the November 29th high of 127.15 as the risk would be around $1,200 per contract plus slippage and commission. Cattle prices are now trading below their 20-day but still far above their 100-day moving average as prices are up about 20% from the September low as this has been a powerful bullish trend until the last month as prices looked to have topped out in my opinion.

The risk/reward would be in your favor if the 123.12 level is broken as the volatility should increase as historically speaking, the winter season for cattle prices can experience large price swings daily, so look to play this to the downside in my opinion.

TREND: MIXED
CHART STRUCTURE: EXCELLENT
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.

Cotton Futures

Cotton futures in the March contract is currently trading at 65.38 after settling last Friday in New York at 65.36 unchanged for the week. I've been recommending a bearish position from the 65.00 level. If you took that trade, continue to place the stop loss above the 10-day high, which now stands at 66.14 on a hard basis only as an exit strategy as the chart structure is outstanding due to the fact of the very low volatility that we are currently experiencing.

Cotton prices are still trading under their 20-day above their 100-day moving average, which stands at the 63.00 level. However, for the bearish momentum to continue, prices have to break the November 21st low of 63.70 as we await some fresh fundamental news to dictate short-term price action.

I also have a bullish sugar recommendation out of the soft commodity sector, which continues its bullish momentum. However, I still believe that a rounding top chart pattern has developed in cotton, which is a negative technical indicator for lower prices ahead. This market has been stuck in the mud over the last several weeks as I will not 2nd guess as I will continue to place the proper stop loss as the risk/reward is still in your favor.

TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

Coffee Futures

Coffee futures in the March contract settled last Friday in New York at 119.05 a pound while currently trading at 125.30 up over 600 points for the trading week as prices have now hit a 1-year high. Coffee prices have traded higher 6 out of the last seven trading sessions as dryness in the country of Brazil has sparked prices higher as historically speaking coffee prices are still cheap as we just hit a 14-year low 2 months ago.

Coffee prices are trading above their 20 and 100-day moving average, telling you that the trend is higher as I am currently not involved. Still, I'm certainly not recommending any bearish positions, and if you are long a futures contract, I would place the stop loss under the 10-day low, which stands at 114.65 as an exit strategy. However, the chart structure will improve daily next week, therefore lowering the monetary risk. Fundamentally speaking supply concerns sparked fund buying of coffee futures as Coex Coffee International on Wednesday said that Brazil's coffee crop will be closer to 54-55 million bags below the USDA's forecast of 58 million bags.

Also, arabica coffee inventories continue to decline, which is also providing support to coffee prices. The ICE-monitored arabica coffee inventories fell to a 16-month low of 2.056 million bags on Tuesday.

TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: INCREASING

Corn Futures

Corn futures in the March contract is trading higher by 1 cent at 3.77 a bushel as the volatility in this commodity is extremely low, and that is not surprising as seasonably speaking, the winter months generally are very quiet. Harvest in the United States is 89% complete as the 5-year average is about 98% as we will now focus on the 2020 crop as the country of Brazil will increase its planting by 3.5%, which is another record as fundamentally speaking this market remains on the defensive.

At the current time, my only grain recommendation is a bearish soybean trade which continues to go lower on a daily basis, but it looks to me that corn prices are bottoming out as I'm looking at a possible bullish position in the coming days ahead as I think the downside is limited at this depressed prices.

The main problem with corn is the fact that the USMCA trade agreement has not been signed by Congress as they are dragging their feet focused only on impeachment at this time as that is a major deal that could push corn prices higher if passed. Corn prices are trading at their 20-day but still below their 100-day moving average as the trend is mixed, so be patient and keep a close eye on this market as we could be involved soon.

TREND: LOWER - MIXED
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

Trading Theory

If you follow this rule you will have a chance of being successful over the course of time, if you don’t follow this rule you will be sure to lose your money quickly. This rule is simple Do Not OVERTRADE EVER for this is an easy way to lose all your capital quickly. My definition of over trading is risking too much money on any given trade, for example, if you are trading a $100,000 dollar account and you place a gold trade today you should limit your loses to 2% of the account value which in this case is $2,000 which allows you to be wrong on many trades and still be around to play another day. In futures and options trading you will have losing trades that is for certain so make sure you manage those losses and move on to another trade.