Precious Metal Futures Sell-Off

Gold Futures

Gold futures in the December contract settled last Friday in New York at 1,974 while currently trading at 1,931 an ounce, down about $43 for the trading week still stuck in a 3 week consolidation.

If you look at the daily chart, we generally trade between 1,900/2,000, looking to break out above or below those critical levels in the next several days. I'm not involved in gold at the current time, but I do have a bullish bias as I think higher prices are ahead as prices are consolidating the massive run-up in price that we've witnessed over the last 6 months. Presently I also have a bullish silver recommendation as we're very close to getting stopped out of that trade as the US dollar is up about 50 points today, throwing some water on the bullish trend.

Gold prices are trading below their 20-day moving average for the first time in months, but still far above their 100-day. The trend is neutral to higher, so sit on the sidelines and wait for the breakout to occur; therefore, the risk/reward would be more in your favor as trading choppy markets are very difficult.

TREND: MIXED - HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH

Silver Futures

Silver futures in the December contract is trading lower for the 3rd consecutive session down another $0.25 at 26.63 an ounce as prices are bouncing off of major support on the daily chart.

I have been recommending a bullish position for the last couple of months from the 18.61 level, and if you took that trade, the stop loss has now been raised to 26.29 on a hard basis only as I'm not willing to risk any more than that critical price level. At the current time, we are just an eyelash away from being stopped out and if that does occur, look at other markets that are beginning to trend as I think we will consolidate in silver for quite some time. Still, I do believe the precious metals will continue to move higher over time.

Silver prices are now trading below their 20-day but still above its 100-day moving average, telling you that the trend is now higher to mixed. The US dollar is ending the week on a positive note, up around 50 points as you have to remember Monday is the Labor Day holiday as we will be closed, so volatility next week will remain high.

I do not have any other precious metal recommendations as the entire sector has sold off from their contract highs blamed on profit-taking. Still, I believe that money flows will start to enter these sectors once again as Federal stimulus programs should continue to prop up the commodity markets going forward, in my opinion.

TREND: HIGHER - MIXED
CHART STRUCTURE: EXCELLENT
VOLATILITY: HIGH

S&P 500 Futures

The S&P 500 in the September contract settled Friday in Chicago at 3504 while currently trading at 3360, down about 145 points for the trading week as the last couple of days, prices have experienced a tremendous washout.

If you have been following my previous blogs, you understand that I have been bullish for quite some time. Still, it is time to become neutral as prices have now hit a 3 week low as I think this market will experience choppiness going into the election, which is still 59 days away. In my opinion, I see no reason to short the stock market as I still think higher prices are ahead, but we have had such a tremendous rally over the last several months that this was expected, but the problem is you just don't know when it's going to happen.

The S&P 500 is now trading below its 20-day moving average for the 1st time in months, however still far above its 100-day. The trend now is mixed as I will be looking at a possible buying opportunity in the coming weeks ahead as I do not think the all-time high has been touched yet.

TREND: MIXED - HIGHER
CHART STRUCTURE: POOR
VOLATILITY: HIGH

Soybean Futures

Soybean futures in the November contract settled last Friday in Chicago at 9.50 a bushel while currently trading at 9.68, up about $0.18 for the trading week and now has traded higher for the last 10 trading sessions experiencing a remarkable run-up in price over the last several weeks. I have been recommending a bullish position over the last several weeks from the 9.14 level, and if you took that trade, the stop loss now stands at 9.11. However, the chart structure will improve next week, therefore, lowering the risk.

I believe prices will test the contract high that was hit on January 2nd at 9.82. I believe that there are a lot of buy stops above that level, which could push prices above the $10 level rather quickly.

Fundamentally speaking, weather concerns in the Midwest is causing concern that will reduce yields come harvest time. Coupled with the fact that China has stepped up big time abiding by the Phase 1 trade deal as prices look to move higher in my opinion, so stay long as the risk/reward is in your favor to the upside.

TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Soybean Meal Futures

Soybean meal futures in the December contract settled last Friday in Chicago at 309 while currently trading 315 a ton up about 600 points for the trading week, continuing it's bullish momentum as prices are right near a 6 month high.

I have been recommending a bullish position from around the 299 level, and if you took that trade, continue to place the stop loss under the 2 week low, which now stands at 298 as the chart structure is outstanding and will improve next week as well. I think prices will break the March 22nd contact high of 315 as I will be looking at adding more contracts to the upside as the chart structure will improve in the next several trading sessions, but I do believe there is significant room to run to the upside.

I also have a bullish recommendation in soybeans as the entire complex continues to move higher because hot and dry weather conditions persist in the Midwest. Coupled with the fact that China has come back into the US market big time as fundamentally speaking, this market looks bullish. Soybean prices are trading above their 20 and 100-day moving average as this trend is strong to the upside, so trade with the path of least resistance as counter-trend trading is very dangerous over time.

TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: LOW

Lean Hog Futures

Hog futures in the October contract settled last Friday in Chicago at 53.65 while currently trading at 59.65, up about 600 points for the trading week up for the 4th consecutive session as prices have now hit a 4 month high.

The volatility in hogs is extremely high as we had a 10% move just this week as. Historically speaking, I still think prices look cheap; however, we are experiencing overbought conditions, in my opinion, which means prices may have gone up too quickly, too fast. If you take a look at the weekly chart, a possible Head and Shoulders bottom chart pattern may have developed over the last several months as that is a bullish technical indicator for higher prices ahead, so stay long.

I have been recommending a bullish position over the last several weeks from around the 50.75 level, and if you took that trade, continue to place the stop loss under the 10-day low, which stands at 53.17. The chart structure will not improve for another 6 trading sessions, so you will have to accept the monetary risk at this time.

TREND: HIGHER
CHART STRUCTURE: EXCELLENT
VOLATILITY: HIGH

Trading Theory

This is an outstanding rule to understand when a market trades limit down, such as what cotton did in today's trading session. That tells you there is a high probability that prices will open lower on the open in tomorrow's trading session as buying limit down is a fool's game.

Remember, when a market closes limit down, there is also the chance of opening limit down the next day as that situation frequently occurs as the volatility when that situation happens explodes as that generally happens off of some type of report.

Also, the exact opposite happens when a commodity goes limit up; then, you would see a higher probability that the next day's opening will be sharply higher, now it doesn't have to close higher. Still, it will open higher, so never sell limit up and never buy limit down as that is extremely dangerous in the next day's trading session.

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

Michael Seery, President
Seery Futures
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Phone #: 630-408-3325


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