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.
Precious Metal Futures-- The precious metals had one of the best weeks to the upside in quite some time because of statements from Ben Bernanke coming out basically stating he’s going to continue QE3 forever which put the fire under gold prices up 4 days in a row before Friday as profit taking set in down about $3 at 1,277 an ounce after settling last Friday 1,212 now trading at 1,278 above its 20 day moving average but below its 100 day moving average and now has started to form excellent chart structure with a possible bottom being formed in recent weeks hitting a 3 week high in yesterday’s trade. I have been bearish gold and the precious metals for quite some time but I’m recommending to sit on the sidelines with a possible break out to the upside which is pretty amazing as I’ve been bearish forever but the trend can change very quickly so I’m looking at gold to the upside if it breaks out above 1300. Silver futures for the September contract are right at their 20 day moving average but below their 100 day moving average also at a 3 week high also developing excellent chart structure settling last Friday at 18.73 up around $1.00 this week currently going out around 19.78 an ounce and if you’re looking to get long this market I would buy a futures mini contract and place a stop below the contract low risking around $1500 per contract. Copper futures which I have been bearish for quite some time and now I’m neutral because it hit a 10 day high in yesterday’s trade also with excellent chart structure settling at 3.0650 last Friday currently going out around 3.17 a pound trading above its 20 day moving average with a possible short-term bottom in place as the entire precious metal sector is starting to look bullish. I’m still advising traders to sit on the sideline and wait for a 4 week high before entering and that could be next week especially if we have tighter trading ranges but the tide may have turned as Ben Bernanke refuses to let commodity, housing and stock prices to go down & he will do anything in is power to keep printing money and keep artificially inflating prices that should be much lower in my opinion. This man has way too much power in my opinion there are 7 billion people on this planet with one person dictating everything & I think that is out of control & has never happened in the history of the world and I do believe one day this will end in a total disaster and I do mean total disaster.
Grain Futures--- Grain futures had a wild trading week which is very typical for the month of July as this is the most critical part of the growing season with soybeans trading right around 20 and 100 day moving average after settling last Friday at 12.28 and traded as high as 12.97 before selling off $.35 to close right around 12.55 a bushel on profit taking and the fact that there is no drought which has been talked about in recent days but the market did its job and stopped out of a lot of people who were short including myself as the 10 day high was hit in yesterday’s trade. At this point I am fuming mad at that lousy false rally but that does occur sometimes and you have to minimize risk. I’m still advising traders to sit on the sidelines and if you want to sell my recommendation would be to sell a futures contract & place a stop loss above 12.97 therefore minimizing your risk to around $.40 loss which is $2,000 on a 5000 bushel contract. Corn futures were not as strong as soybeans this week and are still trading below their 20 and 100 day moving average settling last Friday 4.91 traded as high as 5.28 a bushel before selling off and finishing around 5.08 down around $.19 this Friday afternoon as many traders finally realized the corn crop is going to be a record in my opinion with a huge ballooning carryover within the next 3 months. Wheat futures were the strongest of the grain market finishing basically unchanged right around 6.95 really in a directionless trade in the last several weeks and I was recommending selling around 6.90 after it broke out of a 14 week consolidation but prices really went nowhere so I’m sitting on the sideline but remember wheat is a completely different animal than corn and beans because they are grown in different locations and wheat is an international crop which is grown in many different countries while soybeans and corn are primarily grown in the United States and in South America. As I wrote in yesterday’s blog if you had a gun to my head I would definitely still be selling this market because I’ve never heard of a crop be decimated by too much water without flooding and 85° temperatures throughout the entire growing season and I still do believe prices will be substantially lower from these levels come harvest time and I’m still recommending if you’re a farmer to be short this market with either futures or bear put spreads or some type of hedge because you are fooling around with your livelihood if you don’t.
Cotton Futures--- Cotton futures are still trading below their 20 and 100 day moving average basically settling unchanged for the trading week with major support at 83 and major resistance at 87 as the USDA this week stated that the new crop production was kept unchanged along with consumption which still tells me lower prices are ahead but at this point in time there really is no trend in cotton as we are trading midrange in the last couple of months but I do believe commodity markets still look weak despite the fact that Ben Bernanke continues to try to prop up asset classes. Cotton prices rallied earlier in the week along with grain prices as hot temperatures in Oklahoma and Texas and they are worried about drought conditions in certain areas, however as the week progressed prices can back down to reality and with weakening demand in China I still believe lower prices are ahead but I’m advising traders to sit on the sideline until 83 is broken and then I would place my stop loss at the 10 day high minimizing risk in case the trend does change.
Coffee Futures--- Coffee futures were down 400 points today and are trading below their 20 and way below their 100 day moving average still stuck in a 4 week consolidation looking to retest contract lows at 117.10 settling last Friday at 121.25 going out today around 119.50 right at a 3 year low and it looks to me that prices are still headed lower as coffee is considered a luxury item and with deflation in the year coffee prices might retest 100 a pound in the coming months. Coffee prices have been in a steep decline for 3 years now and finally they are starting to stabilize with volatility near all-time lows because generally coffee is one more volatile commodities but in recent weeks is just been very quiet & one of these days this volatility will pick up again but at this point it looks to retest 100 a pound in the next couple of months as the classic bear market continues with the slow grinding down moves on a daily basis.
Lumber Futures-- Lumber futures which I don’t talk about very often but have a special case in my opinion with the September contract trading at an 8 week high trading above their 20 day moving average slightly below their 100 day moving average settling last Friday at 309.50 per board foot up around 800 points this week. Prices are trading at an 8 week high if you’re looking to get long & are a trend follower I would be buying lumber placing a stop loss below the 10 day low which is 283 risking around $3000 per contract if you look at the chart prices have come all the way from 400 in recent months and I believe with the strong housing market recovering that could bring back demand for this product and a nice rounding bottom could be a special opportunity to the upside if you’re looking to take the chance. Remember you must have an exit strategy because there will be times when you get stopped out of the market and the markets goes the direction that you thought & you will be upset, however there will also be times that you will get stopped out of the market and the market keeps going saving you quite a lot of money so continue to have a solid money management program because in the long run that increases your odds of success.
Sugar futures-- Sugar futures continue their classic bear market with great chart structure hitting a fresh 3 year low in today’s trade finishing at 16.06 a pound down for the 3rd consecutive day and are still trading below its 20 day moving average but way below its 100 day moving average which is always a bearish indicator in my opinion. Sugar has outstanding chart structure and I’m still recommending short positions placing a stop above the 10 day high therefore minimizing the risk in case the trend does change, however at this point I still think prices could head down to the 2010 lows of around 14.50 a pound as ample supply in Brazil is keeping a lid on prices also with the generally pessimistic commodity market except for crude oil.
Orange Juice Futures-- Orange juice prices were up 400 points this Friday afternoon & I have been bearish orange juice prices for quite some time but you hit a 10 day high and that is my exit strategy to try to minimize losses or to take profits at this point in time. I’m neutral as a hurricane is entering Florida spooking traders to get long in case there is some production damage or possible damage to the trees which could hurt next year’s production. Orange juice settled last Friday at 130 for the September contract currently settling around 139 and I’m not recommending a long position at this point in time ,however sit on the sidelines & wait for some chart structure to develop with a solid trend and that could take a couple of weeks as prices have been choppy in recent weeks. Orange juice is a luxury item and I still believe it is too expensive for this economy while we have a pessimistic commodity market, however I would not sell the futures contract until it breaks 125 which was the recent low and that could happen very easily if the hurricane does not do any damage which could send prices back down very quickly in my opinion.
What Does Risk Management Mean To You? I generally tell people that the reason people lose money in commodities is not due to the fact that they are bad at predicting where prices are headed, however they are bad when it comes to losing trades and refusing to take a loss which results for heavy monetary losses that are difficult to come back from. For example if a customer has $100,000 account in my opinion on any given trade he or she should risk 2% – 3% of the account value meaning if you are wrong the worst-case scenario is still a $97,000 remaining balance, however what I always see is traders risking ridiculous amounts of money and instead of the 3% stop loss will risk 20% to 30% on any given trade or even higher therefore if you are wrong on two or three trades that $100,000 dollar account could dwindle down to nothing very quickly and I’ve seen it many times throughout my career. What many traders forget to realize is they might have 4 or 5 commodity positions on and if you have too many contracts on all at the same time and all of those trades go against you which is very possible the losses can add up to be staggering so what I am suggesting to you is if you have $100,000 account risk between $2,000 – $3,000 per trade so if you lose on five straight trades the worst-case scenario is that your down $15,000 and still have an $85,000 balance which is very possible to still come back from and your still in the game.
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
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.
Michael Seery, President
Seery Futures
Twitter–@seeryfutures
Phone # (800) 615-7649
