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.
Coffee Futures--- Coffee futures in New York are trading higher for the 3rd consecutive session currently in the July contract at 142.70 a pound looking like a possible bottom may have been hit a couple weeks ago at 135 on the fact of possible crop production cuts in Vietnam and Central America due to drought and rust which could consume up to 20 to 30% of next year’s crop while this year’s crop should be very large coming out of Brazil and that is one of the reasons why prices have been going lower right near a new 2 ½ year low. Many of the commodity markets in recent weeks have been heading lower as the U.S dollar has rallied but coffee seems to have stabilized here at this level and remember coffee traded above 300 a pound over 2 years ago and has really fallen out of bed so eventually I do think if you’re longer-term investor these prices are very attractive down at these levels. Coffee is trading above its 20 day moving average but it is still below its 100 day moving average which stands at 150 a pound with volatility extremely low at this point in time but we are headed into the frost season in Brazil so the months of May and June you could see extreme volatility in my opinion so if you’re looking at getting long coffee possibly get a bull call spread or some type of option play which might be the way to go due to the fact that we could have some tremendous ups and downs in the market in the next couple of months. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Grain Futures-- The grain market is lower this afternoon in Chicago with many of the other commodity markets off of a very poor unemployment report which was released this morning showing that the private sector added only 88,000 new jobs which might be showing that the economy is slowing which is pushing commodity prices lower again with the December corn down $.05 at 5.35 a bushel trading far below its 20 & 100 day moving average right near recent lows due to the fact that the last USDA report showed 400,000 million more bushels than expected. Soybean futures for the November contract are down about $.05 a bushel at 12.28 trading below its 20 & 100 day moving average with excellent chart structure also nearing a recent 8 month low on the fact that this could be a record crop if weather conditions are ideal, however it is too early in the growing season to be talking about crop size because soybeans won’t be planted until the month of May here in the Midwest. As I’ve stated in previous blogs I’m advising traders to be short corn and soybean because I do believe that the tide has turned and prices will continue to grind lower in the next couple of months due to a supply situation that is increasing dramatically and if we do have ideal conditions you could see prices fall out of bed. The corn and soybean markets are trading below their 20 and 100 day moving average while also hitting multi-month lows which is a great trend indicator and in my opinion the further away prices trade from those moving averages the stronger the trend but only time will tell to see how low grain prices can go in the short term. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Energy Futures--The energy futures plunged this week as inventories are starting to climb with a very poor jobs report which came out this morning as traders are wondering how much lower can energy prices go in the short term with unleaded gasoline hitting a fresh 9 week low currently trading at 2.86 a gallon down another 400 points trading lower for the 5th straight trading session continuing its bearish momentum and is now down about 2900 points in the last 5 trading days breaking major support at 2.90 and it looks to me as if the commodity markets as a whole have turned bearish and I’m very negative energy prices because of the fact that they are extremely high compared to many of the other commodity sectors like corn, sugar, and the precious metals sector so I do believe there is room to go on the downside. Crude oil futures for the May contract are down another $.70 at 92.55 down 3 days in a row but still has not broken out to the downside with major support between 90-92 dollars a barrel as investors are thinking that the economy could be slowing and as I stated earlier in the week I was taking a shot recommending a short position putting stop loss above $99 which was the contract high risking around $1,500 per contract if you are trading the mini contract which is $5 a point because I do believe you could head back down the $87 relatively quickly while heating oil futures are down 550 points at 2.91 a gallon breaking major support at 2.95 and finishing lower by around 1400 points this week and I think prices will trend lower here in the short term as we enter spring with the demand season weakening for heating oil while and generally strengthening for unleaded gasoline. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Japanese Yen--- The Japanese yen is sharply lower again this Friday afternoon selling off another 160 points and now has sold off 565 points in the last 2 trading sessions all because the Bank of Japan has unveiled changes to its monetary policy looking to achieve a 2% inflation rate within a two-year span with the combination of doubling its purchases of government bond holdings and combining bond programs to allow the government to buy all of its maturities and it looks to me as if the Japanese government is taking a cue from the United States government because now central banks around the world are printing money which in my opinion I do not believe has ever happened in the past and Japan has finally realized that it has worked here in the United States in the short term. The Japanese government wants the Yen to go lower against the U.S Dollar to help spur exports and try to revive their economy and that is exactly what is happening today once again while I have talked about this several different times and I remain very bearish while it is trading below its 20 and 100 day moving average down over 150 points today trading at 10240 continuing to be one of the best down trends in recent months and in my opinion I believe we are headed down to the 95 level in the next couple of months due to the fact that the Japanese government is forcing the Yen lower against the U.S dollar hitting a fresh 2 1/2 year low once again today and I am still advising traders to be short the Japanese Yen. Remember when you trade commodities you will be wrong sometimes so you must put a stop loss and not marry your position because never getting out causes exaggerated monetary losses so always risk between 1-2% of your account balance on any given trade trying to minimize risk. TREND: LOWER–CHART STRUCTURE: EXCELLENT
Natural Gas-- Natural gas futures are higher by 13 points in the May contract currently trading at 4.09 right at recent highs which were hit back on 3/28/13 at 4.12 still trading far above its 20 & 100 day moving average and in my opinion there are buy stops above 4.12 which could propel prices even higher possibly up to 4.25 very quickly. In my opinion as I’ve stated in previous blogs I am extremely bullish natural gas because I do believe that the United States government is going to mandate natural gas for many different uses therefore propelling demand up in the next 3 to 5 years tremendously in my opinion. If you look back on the weekly chart natural gas bottomed on 4/23/12 at 192 and is slowly crept up in the last 10 months with a possible bottom right around 3.20 which has been hit 5 different times and rallied each time and as I’ve stated before I believe in a couple years down the road you’re going to see natural gas prices at $8-$9 level with people shaking their heads wondering where were they when these prices were at ridiculously low levels. If you’re looking to invest in natural gas I would look at buying a futures contract for possibly the November or December delivery and if you’re longer-term investor you hold for a long period of time hoping that demand will increase and that your investment gains value over a several year period. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Precious Metal Futures-- The precious metals rebounded sharply this Friday afternoon after a rough week to the downside with gold finishing higher by $22 in the June contract at 1,574 an ounce after trading as low as 1,535 yesterday before rallying on the fact that the unemployment report which came out earlier this morning showed that we only added 88,000 new jobs keeping the unemployment rate at 7.6% sending gold futures sharply higher on the fact that the economy might not be doing as well as we expected and prices may have been over sold here in the short term while still trading far below its 20 and 100 day moving average looking at major support now and around 1,525 and if that level is broken I do believe you still can head into the 1,400s in the month of April. As I’ve stated in previous blogs I am bearish the precious metals I think today was just a kick back as the U.S dollar is continuing its bullish momentum against the Japanese Yen which is spooking investors who are now selling most of the commodity markets. Silver futures were also up by $.40 today in the May contract at 27.17 ounce down about $.85 for the trading week breaking out of a 6 week consolidation right around $28 also looks very pessimistic here in the short term with the possibility of heading down to $26 relatively quickly as demand seems to be waning at this point. Copper futures are still at 8 month lows basically unchanged for the trading session at 3.3480 a pound also continuing its bearish momentum on the fact that we have record high inventories while demand is slowing down in China due to a housing bubble which we also went through here in the United States in 2007. As I’ve been advising traders to be short positions in the precious metals across the board and I do think prices are headed lower here in the short term if you look at last year’s commodity charts they sold off in the months of April and May then rebounded in early June and it looks like the same type of pattern is developing especially with the U.S treasuries almost hitting all-time low yields once again which will keep the easy monetary policies around for a long period of time. Remember when you trade commodities you will be wrong sometimes so you must put a stop loss and not marry your position because never getting out causes exaggerated monetary losses so always risk between 1-2% of your account balance on any given trade trying to minimize risk. TREND: LOWER---CHART STRUCTURE: EXCELLENT
Cocoa Futures--- Cocoa futures are slightly lower in quiet and nonvolatile action currently trading at 2128 in the May contract as harvest is wrapping up in West Africa with the possibility of a seasonal low developing while still maintaining its neutral trend if you look on the daily chart it does continue to grind higher and remember in commodities the trend is your friend so if you’re looking to enter this market I would play to the upside remember always use a stop loss trying to minimize your risk to 1 or 2% of your account balance on any given trade therefore trying to reduce losses is much as possible because you will have losses when you trade commodities so you need to manage them as well as possible. Cocoa is not very volatile at this point in time however volatility should increase tremendously in the next couple of months especially if you start getting problems out in the Ivory Coast where Cocoa is grown then you start to see the 100 and 200 point Cocoa moves which I think are upon us in the next couple of months. TREND: NEUTRAL---CHART STRUCTURE: EXCELLENT
TRADING RULES--- There are many different theories about how long a meaningful consolidation has to last before you enter a trade on the breakout to the up or downside? In my opinion I always want to see a consolidation that lasts at least 8 or more weeks before I would consider entering. The reason that I want a longer consolidation is to try and avoid a bunch of false breakouts such as a 10 or 15 day consolidations which happen all the time, so I am trying to put the odds in my favor by trading the breakout of at least 8 weeks or more and the longer such as a 11 or 13 week consolidation the better. At this present time there are no consolidations longer than 5 weeks.
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