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.
Grain Futures--- The grain market continues its extreme volatility especially in soybeans up another $.40 this Friday right near contract highs at 13.26 a bushel all due to the fact that the crop is not very good despite heavy rains across much of the Midwest yesterday especially in Illinois but production in Iowa is dismal with a worse crop than the 2011 floods and the 2012 drought which is absolutely astonishing in my opinion, and it looks to me that these prices are headed higher. As I’ve stated in previous blogs the trade that is been working is to be long soybeans & short corn and wheat and its working again as the real strength is and soybeans as corn is still going to have a terrific crop and if wheat could talk it would bark that’s how big of a dog this market is only up $.04 today at 6.44 only $.05 away from making new contract lows as the fundamentals in wheat are much different than in soybeans. Corn futures are up $.06 at 4.71 basically going nowhere in recent weeks after Thursday’s debacle down $.19 due to the heavy rains and it looks to me that corn and wheat will remain weak for quite some time as the possibility of soybeans continuing towards the $14 mark looks pretty good and if you look at soybean meal prices they have hit contract highs once again as massive demand for that product continues to prop up prices towards historical highs.I’ve been recommending buying the oat market which I don’t talk about a whole lot but I believe it has excellent chart structure and I do believe prices are headed higher finishing right around 3.31 a bushel in a pretty lack luster trade this week but if you have a smaller account or even a large account you are only risking around $600 per contract on this trade & whenever the risk reward is in your favor I always take that trade regardless of what I think. One lesson to remember is the fact that I was short soybeans for such a long period of time and I was stopped out at the 10 day high which was 12.21 which was almost 2 weeks ago and that is why you use stop losses because now were at 13.26 and what a debacle that would’ve been if I stayed in this trade and many people probably did & that is why you have to use the 2% rule on your account balance as a risk tool and you have to have an exit strategy & my exit strategy if I’m short to put a stop at the 10 day high regardless of what you think of the market because you must exit and move on and I did and I didn’t turn this trade into a loser or a tremendous loser which it would have become. Another lesson to learn here is you never add to a loser if people have been adding short positions to this market on the way up they are getting absolutely crushed so remember when trades go against you make sure you just put a stop and you never add any more contracts because of the fact that you are wrong because you only add contracts when you are right. TREND: HIGHER IN SOYBEANS –CHART STRUCTURE: AWFUL
Crude Oil Futures----Crude oil futures in the October contract sold off a $1.50 for the 2nd straight trading session as worries about Syria are fading to fade finishing at 107.50 a barrel down around $1.50 right near session lows as investors lately have been taking advantage of the hysteria going on in the Middle East pushing prices higher recently but profit taking set in on the close today. It will be interesting to see how prices react over the Long Labor Day weekend ahead making traders nervous today. The trend is your friend in the commodity markets and I have been recommending buying crude oil when it broke above 108 which was contract highs and I still believe prices are headed higher and I would place my stop below the 10 day low which is at 103.53 risking at this point around $2,500 per contract if you believe prices are headed higher. Crude oil is a very large contract meaning if you are correct on the direction in this market it will pay you off very well, however if you are wrong it can do serious damage to your trading account if you risk too much money or overtrade the market so make sure you use stop losses or invest in the option market where your losses are limited to what the premium costs. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Coffee Futures-- Coffee futures were extremely quiet this Friday afternoon still hovering right near 4 year lows with prices not seen at these levels since June 2009. Coffee futures are still trading below their 20 and 100 day moving average basically trading unchanged for the week as pressure has been put on prices due to the fact of a weak Real versus the U.S dollar which is actually hitting new lows & pressuring all the Brazilian products at this time. In all my years of trading I can’t remember such a nonvolatile coffee market and I’m just wondering when this will end because volatility certainly has come back in all the other markets and I still believe if you’re a long-term investor this is a sleeping giant waiting to be woken and when it does you will see extreme volatility come back especially at 4 year lows. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Orange Juice Futures-- Orange juice futures were slightly lower this Friday afternoon still trading above their 20 and 100 day moving average but really there is no trend at this point in time and I’m still recommending sitting on the sidelines and waiting for something to develop as we enter hurricane season possibly pushing prices higher. The chart structure in orange juice at this time is OK as in the last 3 months prices traded as high as 152 and as low as 126 and I’m still recommending watching this market at this time as volatility will increase during hurricane season. TREND: MIXED –CHART STRUCTURE: SOLID
Cotton Futures-- Cotton futures were lower for the 4th consecutive trading session hitting a 12 week low before rallying on the closing bell to finish up 25 points at 83.49 & as I was recommending in yesterday’s blog to be short this market with a futures contract or some type of put option because prices are starting to look weak with the next major support at 81.72 which is the contract low and what a difference a week makes when prices were trading at 93.54 on August 19th now down about 1000 points quickly. The reason for such a dramatic drop is U.S production is going to be very solid as well as Indian production which is ahead of expectations with China releasing or possibly releasing some of their cotton to the market which is putting more pressure on prices at this time with very little bullish fundamental news out there. The chart structure in cotton is starting to improve as it’s starting to look like a classic bear market that grinds lower like what sugar and coffee have been doing for several years and I do think prices are headed lower. TREND: LOWER –CHART STRUCTURE: IMPROVING
Sugar Futures-- Sugar futures are trading below their 20 and 100 day moving average with extremely low volatility settling last Friday at 16.47 basically unchanged for the week settling around 16.40 as volatility continues to stay away from this market at the present time. There is major support in sugar prices at 16 which the contract low and we haven’t seen those prices since July 2010 despite the fact that crude oil prices are right near contract highs & that usually helps support the sugar market to the upside since sugar is used as a bio diesel, but at this point with the Real sinking against the U.S dollar to new lows pressuring agricultural products in Brazil and the fact that we have ample supply so at this time I would still be sitting on the sidelines waiting for some type of trend and volatility to develop. TREND: LOWER –CHART STRUCTURE: EXCELLENT
U.S. Dollar Index Futures-- The U.S dollar index in the December contract is up for the 2nd consecutive trading session trading at 82.45 higher by 15 points hitting a 4 week high against the major foreign currencies as investors are seeking a safe haven with higher interest rates and problems in the Mideast the dollar is starting to look appealing in my opinion. I’m recommending traders to take a long position buying a futures contract and place a stop below the 10 day low which was just hit on August 20th at 81.03 risking around $1300 per contract as I do think the momentum will continue to the upside here in the short term as investors are fleeing out of European banks and putting the money back in the U.S dollar & in my opinion I believe that is a wise decision which could prop up prices which have come down dramatically in recent weeks. The strength of the U.S dollar today had a negative influence on the precious metals & energies; however I do think this is more of a flight to quality because I do believe you could still have a higher dollar and higher oil and precious metal prices at the same time. TREND: HIGHER –CHART STRUCTURE: IMPROVING
What do I mean when I talk about chart structure and why do I think it is so important when deciding to enter or exit a trade?-- I define chart structure as a slow and 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 and allowing you to place a stop loss with will be 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 but markets that continue to trend like the current soybean complex allowing for you to place close stops as it continues to fall dramatically. I always 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 loses.
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
Phone # (800) 615-7649