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.
Gold Futures
Gold futures are trading above their 20 day but slightly below its 100 day moving average hitting a 2 month high as investors came back into the precious metal as the stock market suffered sharply lower losses in the last couple of days. The Dow Jones is down 250 points this Friday as investors are putting money back in the bond and gold markets in recent weeks. I’m recommending sitting on the sidelines in gold as I think the trend is higher but we will see some choppiness especially if the stock market starts to reverse and head back up which in my opinion it will do as the selloff is blamed on emerging market weakness spooking investors in the last couple of days. The probability of gold bottoming at 1,180’s is high in my opinion as prices were sharply lower last year by 32% while the stock market never had any volatility and that’s just not going to continue over a long period of time as the volatility is starting to come back in the markets and that is good for gold in my opinion as price action is all about money flow. If you’re looking to get long the gold market my recommendation would be to buy a futures contract at today’s price placing a stop below the 10 day low which is 1,236 risking around $2,800 dollars per contract if you trading the large gold as the U.S dollar was sharply lower this week also helping push gold prices higher.
TREND: HIGER
CHART STRUCTURE: EXCELLENT
Silver Futures
Silver futures continue to trade in a 8 week channel as the tight consolidation looks to continue here in the short term finishing down $.15 in the March contract at 19.85 an ounce unable to break out above 20.67 which I’m recommending traders to take a long position if prices do break out above that level but silver has not been able to rally despite the fact that gold prices hit 2 month highs. The problem with silver right now is the emerging markets are causing concern selling off the stock market and putting money into gold and that’s bad news for silver as silver is used in many electronic components and if economies around the world start suffering demand for silver will start to suffer as well therefore the price goes lower, however I still recommending a long position in silver eventually I do believe prices will head higher and if you’re a long-term investor prices are relatively cheap at these levels, however if your day-to-day trader I would wait until 20.67 is broken on the upside before entering. The longer the consolidation that occurs in silver the more powerful the move will become so if this consolidation can last another 3 or 4 weeks and then breaks above 20.67 I would look for a $3-$4 run-up very quickly as silver has very few 11/13 week consolidations so keep an eye on this market as a special situation is starting to develop.
TREND: MIXED
CHART STRUCTURE: EXCELLENT
Soybean Futures
Soybean futures in the November contract which is considered the new crop which will be grown this year and I will be writing about in future blogs is trading below their 20 and 100 day moving average settling last Friday at 11.25 a bushel and going out today in Chicago around 11.09 finishing lower by about $.16 for the week continuing its bearish momentum. Soybeans have been extremely choppy especially in the front months but the November has had a better trend to the downside as investors are realizing the possibility of another outstanding crop in 2014 which could push prices lower due to the fact of higher carryover level and weak demand especially for soybean oil which hit a new 3 ½ year low yesterday and if you are short this market it has outstanding chart structure I would place my stop above the 10 day high risking very little from today’s price level as soybean oil will continue to move lower in my opinion due to huge supplies and very little demand. The one market has been holding up the soybean complex has been the soybean meal and the difference between corn prices and soybean meal prices is very wide at this point and I would have to think that soy meal will start to come down in price especially when the Brazilian harvest starts to take place in a couple of months so I remain bearish the entire grain sector.
TREND: MIXED
CHART STRUCTURE: POOR
Corn Futures
Corn futures in the December contract which is considered the new crop which will be grown this summer here in the United States and I will start to focus on this contract in all upcoming blogs as today prices were basically unchanged in the December contract at 4.50 a bushel trading right at its 20 day moving average but below its 100 day moving average with a mixed trend currently. In my opinion I’m still bearish corn prices as I think the secular bear market will continue for some quite some time with the possibility of 4.35 which was the contract low several weeks ago before the USDA report being retested once again as we are looking at another possible record crop this spring and summer with expanding carryover levels and a real possibility for prices to drop in my opinion 30% in the year 2014. If I was a farmer I would be very concerned about another record crop this year pressuring prices as I would definitely look to hedge with either put options or short futures contracts as people have a short memory in July 2010 corn traded below $3 before rallying sharply but that doesn’t mean it can’t happen again and with back-to-back record crops and an overall deflationary environment the path of least resistance is to the downside and if you agree with my recommendation look at some December options or structure your portfolio with outright futures to the downside.
TREND: MIXED
CHART STRUCTURE: EXCELLENT
Wheat Futures
Wheat futures in Chicago this week finished unchanged for the trading week going out this Friday afternoon at 5.64 down about $.05 a bushel still trading below its 20 day moving average and $.90 below its 100 day moving average which also tells you this trend is very strong to the downside and I’ve been recommending a short position in wheat for quite some time and I still do believe prices are headed lower. Wheat prices hit 3 ½ year lows this week with outstanding chart structure on the daily chart and if you are still short this market my recommendation at this point is to place your stop at the 10 day high at 5.80 risking around 15 cents which is $750 per contract as the bear market will continue throughout spring as inventories are rising with excellent wheat crops around the world.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
Cotton Futures
Cotton futures this Friday afternoon are currently trading at 87.40 right near 5 month highs finishing up slightly for the trading week as overbought conditions are blamed for today’s minor losses. Cotton futures in the March contract are trading above their 20 day and 500 points above their 100 day moving average which tells me that the trend is very strong, but prices may have gotten ahead of themselves and if you’re still long this market I would put my stop at the 10 day low which is 82.59 risking around $1,000 dollars from today’s level. Prices this week basically consolidated after the sharp run-up in recent weeks with the possibility of prices going back to 90 so make sure you have a risk parameter in place as I like an exit point at the 10 day low booking a profit or cutting monetary losses if you are wrong.
TREND: HIGHER
CHART STRUCTURE: IMPROVING
Coffee Futures
Coffee futures are trading below their 20 and 100 day moving average hitting a 2 week low settling last Friday at 117.15 going out this afternoon at 114 a pound as the trend has turned neutral and I’m recommending to sit on the sidelines in this market as there’s a possibility that prices retest support at 110 and possibly right near the lows of around 1.04 as the market looks weak in my opinion. Were at about the 50% retracement level from the low to the recent high as there is very little new fundamental news to dictate short-term price action but we will start to enter the volatile part of the year come springtime as prices are bottoming in my opinion. The Brazilian Real is right near recent lows which are also putting pressure on sugar and coffee at the present time and I think that will keep a lid on prices unless some type of weather event occurs.
TREND: MIXED
CHART STRUCTURE: EXCELLENT
Sugar Futures
Sugar futures continued their bearish trend this week in New York settling last Friday at 15.22 and going out this afternoon at 15.04 trading below their 20 day and 230 points below their 100 day moving average which tells me this trend will continue to go lower as the trend seems to be getting stronger on a weekly basis hitting a new 3 ½ year low. The problem with sugar is that there’s too much of it around the world with excellent growing conditions and a possible record crop next year keeping a lid on prices plus the Brazilian Real is right near new lows which are also putting pressure recently as there is very little bullish news in this market. Sugar has outstanding chart structure allowing you to place your stop if you are short at the 10 day high which is 15.30 risking around $250 per contract from today’s level but I do think prices are headed down to the July 2010 lows of around 13.66 and then there’s a chance of even lower prices possibly back down to 12 level in my opinion.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
Bond Futures
The 5-year note is trading above its 20 and 100 day moving average spiking up sharply in the last 2 days as the stock market finally looks like it has a chink in its armor as investors are coming back sending the 5-year note higher by 1 full point in the last 2 trading days currently at 120 – 05 & I’m still recommending to take advantage of this panic buying if you’re a long term investor because money will come back into the stock market and out of bond funds in my opinion in the year 2014 as I think buyers will come back in the S&P 500 eventually. I am a trend follower and I stick to my rules pretty well except for this one as I’m taking a longer-term view on the situation understanding the fact that the Federal Reserve is going to stop its stimulus program eventually that’s going to pressure this market but it will take time possibly even 2 to 3 years, however if you have patience I think this trade will pay off. If you’re looking at trying to structure a short bond portfolio feel free to give me a call anytime I will be more than happy to help you. Many people call this market a bubble due to the fact that the Federal Reserve has bought $5 trillion worth of bonds and I have a hard time believing that this isn’t going to end ugly and when these bubbles burst they really turn into bad situations as we have experienced several of them in the last decade and I think the next bubble is the bond market
TREND: HIGHER
CHART STRUCTURE: POOR
Live Cattle Futures
Live cattle futures continue to hit all-time highs this week in Chicago as traders await this afternoon’s cattle on feed report which will have an impact on Mondays trading session as prices continue to move higher this week closing up over 300 points in the February contract, however finishing lower this Friday afternoon by 70 points to close at 143.20 a pound. Live cattle futures are trading above their 20 and 1100 points higher than their 100 day moving average which tells me this is a very strong market and I do think there’s a possibility that volatility will increase dramatically as we saw our 1st limit up move of 300 points on Wednesday and I think that will continue with the possibility of prices even going to higher historical levels. Feeder cattle prices have not been as volatile as live cattle and is still right near all-time highs finishing down this Friday afternoon by 80 points at 171 a pound as the smallest herds in over 6 decades and low feed costs continuing to prop up prices as I think feeder cattle prices are still headed higher as well. If you are long February live cattle place your stop at the 10 day low as well in the feeder cattle if you have a long position minimizing your risk or booking profits as the live cattle trade has been pretty much straight up in the last several weeks. Feeder cattle prices are trading above their 20 and 100 day moving average just slightly however prices have been basically mixed in the last couple weeks hovering near all-time highs with the highly anticipated report this afternoon as I look for a big move come Monday morning.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
Lean Hog Futures
Lean hog futures continued their bullish run in Chicago this week closing right at weekly highs at 94.00 a pound up 100 points this afternoon and I’ve been recommending a long position in hogs and I do believe prices are headed up towards the contract high of 96 a pound which happened 3 months ago as prices will start to catch up to cattle and feeder cattle prices. The chart structure in hogs is outstanding at this time allowing you to place your stop below the 10 day low which is right at 90.00 which is around $1,600 from today’s level as the bullish momentum I think will get stronger next week looking at a possibility of adding more contracts to the upside placing your stops appropriately. As a trader I like to go with the short term trend and the short term trend in the hogs is higher as demand is very strong while still trading above its 20 and 100 day moving average which is another bullish indicator in my opinion so continue to be a buyer.
TREND: HIGHER
CHART STRUCTURE: EXCELLENT
Where Should You Place Your Stops? Identifying where stops exist in the market is an important lesson to learn because placing a correct stop loss that will improve your trading tremendously over the course of time. Nobody knows for sure where stops are located, however I have learned a couple of things over my 20 year career and I have a general idea where stops are placed and why. Buy stops are generally placed above the 10 day high as well as above contract highs as the bulls generally are buying more and the short selling are getting stopped out. Sell stops are usually placed at the 10 day low as well as below contract lows which means the shorts are adding to their position and the longs are getting stopped out as they figure they are wrong. The other common places to have stops are at certain moving averages such as the 20 or 100 day moving average where traders think either the trend is turning bullish or the market is starting to break down. Placing stops to close or not at important price levels can get very frustrating because the market can stop you out and then go the direction that you thought leaving you behind and out of the market. Placing stops is one of the most important aspects of trading in my opinion.
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
SEERY FUTURES ACCEPTS CANADIAN COMMODITY ACCOUNTS
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.
Michael Seery, President
Seery Futures
Facebook.com/seeryfutures
Twitter–@seeryfutures
Phone #: (800) 615-7649
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