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.
Cotton Futures-- Cotton futures in New York this week continued their bullish trend settling last Friday at 86.63 going out this Friday at 87.47 about 85 points higher hitting a 6 week high and still trading above its 20 and 100 day moving average which I consider a bullish technical indicator. I have been recommending buying cotton futures in the December contract last Friday when it broke out above 85.80 but cotton is very large contract with heavy risk so trade only 1 contract while placing a stop below the 10 day low at 84.07 risking around $800 per contract at the time if you are wrong and the trend changes to the downside. The chart structure in cotton is excellent at this point which has allowed you to place a tight stop if you’re looking to get involved into this market, however traders are keeping an eye on next week’s crop report which definitely will have an impact on short-term price direction as I still do believe cotton prices will fill that gap at 89 in the coming weeks possibly if next week’s report is very bullish. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Coffee Futures-- Coffee futures this week continued their sideways trading action settling last Friday at 113.70 basically unchanged for the trading week settling at 114.15 a pound in the December contract and at this time there is very little interest in this market at this point as volatility is as low as I can ever remember historically. Coffee prices are right at 4 ½ year lows as huge crops around the world including Vietnam have put ample supplies onto the market which is why prices are so depressed at this time. If you are interested in getting long the coffee market I would look at call options at least 6 months out and buy them at the money limiting your risk to what the premium costs because premiums are historically cheap due to low volatility. The volatility in coffee at the present time is very small and I have been following coffee for 20 years and I believe volatility is going to come back into this sleeping giant and that usually means prices rise as interest comes back into the market. If you’re a longer term investor I would take advantage of coffee if prices dropped down into the 110 area remembering that coffee was trading at 300 just 3 years ago when supplies were much lower. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Sugar Futures-- Sugar futures settled last Friday at 17.74 a pound going out today at 18.45 continuing its bullish trend hitting a 5 1/2 month high still trading above its 20 and 100 day moving average. Prices tumbled about 60 points last Friday just missing the 10 day low but then on Monday prices rallied about 60 points so if you’re still in this market I would still keep my stop below the 10 day low as prices have come alive to the upside as volatility has come back into this market. Sugar prices went up 4 straight days before profit taking took place finishing down 5 points at 18.48 and I think the next major resistance is around 19/19.50 as the U.S dollar is hitting 10 month lows which is starting to spur some commodity prices higher especially sugar. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Wheat Futures--- Wheat futures in the December contract finished down 3 cents to close out at 6.87 a bushel finishing higher 8 out of the last 10 trading sessions. The slightly lower day was blamed on spreading between corn and wheat as that spread has widened recently with wheat rallying 60 cents from their lows while corn has basically remained unchanged. The winter wheat is currently being planted and as of Monday was 39% complete right at the 5 year average as the weather has allowed farmers to plant unlike earlier this spring. The chart structure in the December contract is outstanding and I am still recommending being long a futures contract while placing your stop loss at the 10 day low at 6.49 or using a call option which limits your risk to what the premium costs. Traders are awaiting next week’s crop report which should dictate the short term price direction and I still think the risk/reward situation is on your side as prices may have finally bottomed looking to break $7 dollars soon. TREND: HIGHER–CHART STRUCTURE: EXCELLENT
Corn Futures—At the bottom of this article show Informas estimate of the upcoming crop report. The corn market finished higher for the 2nd consecutive trading session closing up 4 cents at 4.42 near session highs as wet weather is delaying harvest and there is a tropical storm headed in Louisiana which could bring even heavier rains. This trade is becoming a head ache as volatility has slowed down quite a bit this week and that usually does occur during harvest especially if it’s a record crop. I have been recommending a short position in corn as yields seem to be coming in much higher than expected throughout the Midwest and I still do see prices under pressure during harvest which still has 5-7 weeks remaining as a 14 billion crop in my estimation is coming onto the market. The chart structure in corn is outstanding allowing you to place a stop above the 10 day high which is 4.64 risking around $1,000 per contract if you are trading the 5,000 bushel contract and I do believe 4.35 which is the contract low will be broken in the coming days as my next target is 4.15 –4.20 a bushel within the next couple of weeks. TREND: LOWER–CHART STRUCTURE: EXCELLENT
Corn Production 14.010 bb
Corn Yield 158.8 bpa last month 157.2
Soybean Futures—Below is the crop estimate from Informa: Soybean futures for the November contract finished up $.08 at 12.96 higher for the 2nd straight trading session as wet weather across the Midwest is delaying harvest & a tropical storm heading down south could impact harvest even further. Traders are keeping an eye on next week’s crop report but there is a chance that report will be delayed because of the government shut down. I was recommending selling soymeal in the December contract yesterday at 415 placing the stop at 420 risking around $500 as soymeal closed up 340 points today to close at 418.70 just an eyelash away from the stop loss. The chart structure in soybean meal is excellent allowing you to only risk $500 on this trade while soybean meal has rallied about $20 which equals $2,000 from session lows on Monday and I’m hoping that was just a kick back due to oversold conditions. I was also recommending buying soybeans at 12.80 in the November contract & if you took that trade I would place my stop loss at 12.63 which was the recent low this week limiting your loss to 17 cents or an $850 dollar loss if you are trading the 5000 bushel contract. TREND: MIXED–CHART STRUCTURE: EXCELLENT
Bean Production 3.176 bb
Bean Yield 41.7 bpa last month 42.4
Gold Futures---The gold market in the December contract sold off $30 dollars an ounce this week at 1,316 as the U.S dollar hit a fresh 10 month low not influencing gold prices just yet. Gold made a new 10 week low on the night session this week trading as low as 1,276 then rallied sharply as investors came rushing back into this market and I am still recommending to sick on the sidelines because of this choppy pattern where gold is down $40 dollars and the next day its up $30 but I still do think prices look weak and I think they still could re-test the summer lows around 1,200. If you are short the futures market in the December contract I would place my stop loss at 1,354 which was Mondays high minimizing your risk in case the trend changes. This market is very volatile with high risk so make sure you under trade meaning don’t lose more than 2% of your account balance on any given trade. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Silver Futures---Silver futures ended down 12 cents for the week in the December contract at 21.72 an ounce and in my opinion the panic selling on October 1st for no reason might have created a spike low on the daily charts as the U.S dollar broke 80 for the 1st time in 10 months. As I’ve stated in many previous blogs I think investors should take advantage of big down days because silver has a lot of bullish fundamentals which in the long run could push prices higher, however gold still looks weak to me as money seems to be going into the stock market which was sharply higher today and out of gold lately which is also keeping a lid on silver prices here in the short term. The silver market is very sensitive to a strong or weak dollar and if you do some homework and look at some historical charts you will see a rising silver market when the U.S dollar declines. TREND: NEUTRAL–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
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