Weekly Futures Recap With Mike Seery

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.

Crude Oil Futures

Crude oil futures in the April contract settled last Friday in New York at 31.75 a barrel while currently trading at 33.90 near a 3 week high as I’m sitting on the sidelines in this market at the current time. In last week’s blog, I was looking to short this market, but I decided against that as a short term bottom has taken place as prices are now trading above their 20 but still below their 100-day moving average as it looks like a bottoming formation is at hand. The S&P 500 has exploded in the last week helping support crude oil prices as it certainly looks like the worldwide nervousness is finished at least for now so look for higher prices ahead, however the chart structure is poor as the 10 day low is too far away as the risk/reward is not in your favor so look at other markets with better potential. This market has been extremely choppy over the last month or so as oversupply issues continue to keep a lid on prices and I think that will remain over the next several months as production cuts are needed therefore decreasing supply as demand still remains relatively high especially at these cheap levels. At the current time, I do not have very many trade recommendations except for a couple of short positions in cotton and a natural gas and a bullish position in silver as many trends have been going sideways and as a trend follower, you must be patient and wait for the breakout but at this point. I’m not recommending any type of bearish position in crude as the short-term trend has turned positive.
TREND: MIXED - HIGHER
CHART STRUCTURE: SOLID

Natural Gas Futures

Natural gas futures in the April contract settled last Friday in New York at 1.87 while currently trading at 1.77 down about 10 points for the trading week trading lower 6 out of the last 7 trading days as I’ve been recommending a short position from around the 2.15 level and if you took that trade place your stop loss above the 10 day high which in Monday’s trade will be 2.03 as the chart structure will improve on a daily basis therefore lowering monetary risk. This trade has gone completely south since the original recommendation as warm weather is hurting demand. Therefore, lower prices are still ahead in my opinion as prices are still trading far below their 20 and 100-day moving average telling you that the short-term trend is to the downside as who knows how low prices can go. Oil prices have rallied to a 3 week high. However, you must remember that these are completely different products as the United States is the number one exporter and producer at the current time and that’s why prices are hitting a multi-year low. If you took the original recommendation I’m looking to add more contracts to this position on some type of rally, but at this point the chart structure is poor as I’m not going to add monetary risk so the patient and wait for the 10 day high to come down coupled with some type of rally before entering more positions, as I still think there’s more room to the downside as I see no reason to own natural gas as springtime is almost upon us.
TREND: LOWER
CHART STRUCTURE: POOR

Bond Futures

The bond market sold off slightly today in Chicago while still hovering around all-time highs in the bond futures and all-time lows in the bond yields with the 10 year note yielding 1.74% with the record low just the eyelash away at 1.30% while the five-year note is at 1.24% with the record low of 0.59% which might be broken later in the year. The 30-year bond is trading lower by 1-19 ticks at 165-24 selling off on solid economic news yielding 2.87 percent. What is the bond market telling us? When yields are near all-time lows that tells me that bond traders think the economy is not doing near as well as reported due to the fact that we are $18 trillion in debt and the United States Federal Reserve does not want to pay high interest rates on that debt so they are forcing yields low which is exactly what Alan Greenspan the former Federal Reserve chairman did 15 years ago which many blame him for causing the housing bubble because of the fact that he kept interest rates so low for so long. The problem with really low rates is senior citizens who are trying to retire want to have some fixed income but there are no interest rates worth purchasing and they are forced to either buy stocks, land, or some other type of investment with risk.

Gold Futures

Gold futures in the April contract settled last Friday in New York at 1,231 an ounce while currently trading at 1,237 up slightly for the trading week in a highly volatile trading manner with large swings on a daily basis. Gold prices are trading above their 20 and 100-day moving average telling you that the short-term trend is to the upside as the trend line is still intact as I have been sitting on the sidelines in this market because the risk/reward is not in your favor. However, I’m certainly not recommending any type of bearish position as that would be a counter trend trade which does not work in the long run in my opinion. The U.S dollar was mixed this week lending very little influence on gold prices with the next major level of resistance at 1,255/1,264 and if that is broken prices could test $1,300 in the short-term. The S&P 500 has rallied dramatically over the last 2 weeks cooling fears of a global recession, but gold prices have not sold off which is impressive in my opinion as there is still so much uncertainty around the world that investors still feel comfortable buying gold even at these levels. At the current time my only recommendation in the precious metals is a bullish silver position as the risk/reward was much better than gold, but if you currently own a futures position in gold, I would place my stop loss at the 10 day low which stands at 1,193 at the present time.
TREND: HIGHER
CHART STRUCTURE: POOR

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

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.

Live Cattle Futures

Live cattle futures in the April contract settled last Friday in Chicago at 133.95 while currently trading at 137.50 up about 350 points for the trading week right near a 5 week high. At the current time on sitting on the sidelines in this market as prices have been extremely volatile and choppy over the last several months as prices look to retest the December 30th high around 138.95 as the chart structure remains very poor which means monetary risk is too high to get involved at this point. Prices are trading above their 20 and 100-day moving average telling you that the trend is to the upside as a strong stock market in the past week, in my opinion, has strengthened cattle prices as perception is that demand is coming back as supplies are still relatively low compared to historical averages. As a trader I always want to focus on risk as risk is the most important thing to successful trading and at this point the risk/reward is not in your favor so be patient and wait for tighter chart structure to develop which could still take several more weeks as I’m currently keeping a close eye on the hog market as well as that has also rallied as the livestock complex continues its bullish short term momentum. In my opinion, I still believe that hog and cattle prices are way too expensive compared to the rest of the commodities, however fighting a trend can be very dangerous in my opinion so I will be patient and wait for an opportunity to get short.
TREND: HIGHER
CHART STRUCTURE: POOR

Cocoa Futures

Cocoa futures in the May contract settled last Friday in New York at 2857 while trading at 2956 up about 100 points for the trading week hitting a 4 week high trading above its 20-day but still below its 100-day moving average telling you that the short-term trend is mixed. I was recommending a short position for quite some time getting stopped out in last week’s trade as I’m now waiting for another trend to occur. Believe it or not I am now looking at a possible bullish position in cocoa as I'm waiting for some type of price retracement then placing my stop loss below the 10-day low which stands at 2800 as I would like to buy this market around 2900 risking $1,000 per plus slippage and commission as a short term bottom looks to be at hand. The chart structure in cocoa has improved tremendously over the last several weeks as prices have been grinding higher with high volatility so keep a close eye on this market as the risk/reward could be in your favor at any moment. As a trader, you must be able to change direction. I was short this market for 2 months and now I’m looking at a possible bullish position as that is the way to trade instead of always having a bearish or bullish bias as trading with the trend and the path of least resistance is the most successful way to trade over time.
TREND: HIGHER
CHART STRUCTURE: SOLID

Cotton Futures

Cotton futures in the May contract settled last Friday in New York at 59.54 while currently trading 57.34 down around 200 points for the trading week as I’ve been recommending a short position over the last several months and if you took that trade place your stop loss above the 10 day high which has been lowered to 60.40 as the chart structure has improved dramatically. Prices are trading below their 20 and 100 telling you that the trend is to the downside as the chart structure will start to improve in the next 4 days as prices traded lower 4 out of the last 5 trading sessions. The problem with the cotton market as well as much of the grain market is that we have large supplies and less demand. China is not importing as much as they used to as China holds the largest reserves in the world as it seems to me that we need some type of weather disaster here in the United States to push prices higher, or I think prices could trade as low as 50.00 in the coming weeks. Cotton planting has started in certain sections of the state of Texas as planting is upon us as we are entering the month of March as we are expected to grow 9% more than in 2015 which is also another very bearish indicator as this trend is getting stronger on a weekly basis in my opinion, so continue to place the proper stop loss always risking 2% of your account balance on any given trade.
TREND: LOWER
CHART STRUCTURE: SOLID

Coffee Futures

Coffee futures in the May contract settled last Friday at 116.55 a pound while currently trading at 116.85 basically unchanged for the trading week still stuck in a sideways consolidation with no trend in sight in my opinion. Coffee prices are right at major support between 114/116 as this market has gone nowhere as I have been sitting on the sidelines for the last 6 months waiting for something to develop. In my opinion, I do believe coffee prices are in the midst of bottoming as prices have come down tremendously over the last several years. There is very little fresh fundamental news to dictate short-term price action at the current time as volatility has come to a crawl so avoid this market at the present time and look at other markets with higher potential. The next major breakout to the upside in coffee is a close above the 126 level which is still quite a distance away as the 126/130 level has been difficult to cross over the last 3 months which was attempted on multiple occasions only to fail, so be patient on this market as we could be entering a trade in next several weeks as trading in a tight consolidation is difficult to be successful in my opinion over the course of time.
TREND: LOWER
CHART STRUCTURE: POOR

Sugar Futures

Sugar futures in the May contract settled last Friday at 12.67 a pound while currently trading higher by 17 points hitting a 4-week high trading at 14.37 rallying around 170 for the week or around a 13% rise which is remarkable bringing high volatility back into the market. I was recommending a short position for quite some time getting stopped out on this trade around the 13.75 level on massive volume of almost 4 times as much sending prices up over 100 points in Tuesdays trade as massive hedge funds came into the market. Sugar prices are now trading above their 20 and 100-day moving averages telling you that the short-term trend is higher; however the chart structure is absolutely terrible at the current time so I will be sitting on the sidelines while shaking my head wondering what the heck happened. The next major level of resistance is at 14.50/15.00 which it had a very difficult time breaking those levels in the last 4 months as I still have my doubts that sugar prices are going higher, but look at other markets where the risk/reward criteria is better as this rally came out of nowhere. At the current time, I’m only recommending 1 short soft commodity and that is in the cotton market which continues its bearish trend as cocoa, orange juice, and sugar prices have all rallied from recent lows so keep a close eye on the soft markets waiting for another trend to develop.
TREND: HIGHER
CHART STRUCTURE: POOR

Trading Theory

When Do You Add To Your Winning Trade? This has always been a very interesting question because it can create a situation of going from rags to riches or from riches to rags in a very short amount of time. Many times I see traders abuse pyramiding or adding to positions with utter lack of any type of money management system in place and letting it ride which usually ends up in a complete wipeout of capital and sometimes even worse. Commodity prices can move very quickly with large gains or losses like we experienced in the 2008 crash of stock and commodity prices, so you always have to use stops and not fall in love or marry a position. In my opinion, the answer to this question is add only once to the trade if that position has made you, at least, 2%-3% of your account balance while still having stop losses on all positions that equal 2% loss at a maximum risk. Remember your stop losses will be different on both positions because of the fact that you entered those trades at a different date and price.