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 for the December contract was down sharply this week settling at 83.11 last Friday down over 375 points this week in New York continuing its bearish momentum after breaking down at 82 last week currently trading at 79.30 basically unchanged this Friday afternoon. Prices are still trading below their 20 and 100 day moving average hitting a 9 month low & I’m still recommending a short position placing your stop above the 10 day high which at the time was about a $1200 risk but at today’s current price is around $2,500 remembering cotton is a very large contract. In my opinion it looks that cotton prices will retest the 78 level possibly even heading lower as there is weakening demand & excellent crops around the world pushing up supplies at this time despite the fact that the U.S dollar hit a 1 1/2 year low having very little effect on cotton prices at this time. The USDA will come out with crop estimates next week and it’s been quite some time for fresh news to appear due to the government shutdown and that should guide short-term price direction. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Orange Juice Futures--- Orange juice futures settled down 15 points this Friday afternoon at 121.45 breaking out last week at the 125 area and I’m still recommending a short position placing my stop loss above the 10 day high which stands at 127 risking around $900 per contract as poor demand is pushing prices lower at this point hitting a 9 month low. The problem with the soft commodities except for cocoa is the fact that there’s very poor demand & orange juice is considered a luxury product where consumers can cut back very quickly and I do believe that prices could head down to the 100 – 110 level here in the next couple of weeks despite the fact of greening disease which could cut some production but that’s already been factored into the market. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Coffee Futures-- Coffee futures were down for the 5th consecutive day low closing right near a five-year low settling last Friday at 114.65 and going out today at 109 in the December contract as the huge supply surplus at this time is pressuring prices possibly to 100 in the next 2 weeks. Coffee futures are still trading below their 20 and 100 day moving average with the same old story that most all of the soft commodities have as there is very poor demand for coffee with a huge supply so it has nothing going for it at this point in time and I do think lower prices are coming. If you’re in a futures contract I would place your stop loss above the 10 day high limiting your loss in case the trend does change but with very little bullish news in the coming I think coffee prices will continue to decline. Eventually coffee will become a terrific buying opportunity but at this point in time I don’t think it’s quite yet but I do think if prices got crazy like at the 95 level that could be a special situation longer term especially with the U.S dollar at 1 ½ year lows but I would like to see some type of washout or capitulation to the downside 1st. TREND: LOWER –CHART STRUCTURE: EXCELLENT
Sugar Futures-- Sugar futures were up 6 points this Friday afternoon settling last week at 19.50 and going out today at 19.03 a pound still trading above its 20 and 100 day moving average and I was recommending a long position in sugar for quite some time telling traders to offset around the 19 level and since then I have been neutral and remain neutral because I do think prices could head back down in the coming weeks. If you look at sugar on the daily chart its possible a spike top was created last Friday due to a fire burning some supply as traders were scrambling but that hysteria is over and I do think worldwide supplies are very large & a huge crop in Brazil prices are overdone to the upside especially with crude oil hitting a 5 month low this week as the crude oil market can influence sugar prices because sugar is used as bio diesel. I’m still recommending sitting on the sideline in this market but if you are looking to get short my recommendation would be to sell a futures contract at 19 & place a stop above the recent high which was 20.26 risking around $1500 if the trend continues to move higher. The problem I have with sugar at this time is there is very little demand for orange juice, and coffee which are both grown in Brazil as well as sugar & I think those markets will start to pressure sugar prices here in the next couple of weeks remembering the fact that this was a big bear market until recently. TREND: HIGHER –CHART STRUCTURE: TERRIBLE
Live Cattle Futures-- Live cattle futures for the December contract are trading higher by 15 points currently at 133 near all-time highs once again as small herds historically are really pushing prices higher still trading far above its 20 & 100 day moving average and I do think prices are headed higher still with excellent chart structure allowing you place a relatively tight stop minimizing your risk in case the trend does change but at this point I don’t think the trend will change & I think prices go higher in the short term. Prices traded as high in the December contract of 134.57 before pulling back about 150 points today as a plethora of reports are coming out next week which should have some impact on the short term prices but remember when prices hit all-time highs that doesn’t necessarily mean you always sell because prices can continue in that strong trend for quite some time and continue to possibly go much higher. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Feeder cattle futures--- for the January contract are down 45 points at 166.25 a pound still trading barely above their 20 and 100 day moving average still looking to retest the all-time high price in just hit recently at 169.42 and in my opinion I do think prices are headed higher, however this market is lacking volatility especially at such high prices which is very unusual in my opinion but with reports coming out next week you should start to see some volatility come back into the futures price. The chart structure in feeder cattle is outstanding and if you are still in a long position you can actually place your stop at the 10 day low which is about 100 points from today’s level risking around $500 dollars. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Lean Hog Futures---Lean hog futures for the December contract are up 100 points this Friday and over 300 points for the week hitting new contract highs as demand is pulling up prices and in my opinion I think there is a possibility of prices hitting 100 by Christmas. Prices are trading above their 20 & 100 day moving averages as the whole meat complex remains in a strong bull market as volatility will increase as we enter the winter months. The chart structure is excellent allowing you to take a long position and place your stop below the 10 day low minimizing monetary risk if the trend changes to the downside. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Silver Futures-- Silver futures in New York finished down $.20 in the December contract settling around 22.60 an ounce hitting a new 5 week high in Thursdays trade and I’m still recommending traders to be long silver because I do think higher prices are coming especially with the U.S dollar hitting another 1 ½ year low today which in my opinion will continue to push silver prices to the upside. Silver futures are still nearly 35% from their 52 week high of 34.62 and that shows you how far prices have come down despite the Obama administration continuing to print money and I do think silver prices will benefit from this practice as I think prices are cheap especially with solid demand. The U.S dollar is trading at 79.40 with major yearly support at 79.00 & if that level is broken there is the possibility of re testing the 2008 lows around 71 which would be a major bullish factor for silver. The next major resistance in silver is 23 – 25 and if that level is broken I do think there’s a chance that silver could get into the low 30s in the next several months. If you would rather trade silver options look at bull call spreads at least 6 months till expiration giving you some time and minimizing your risk to what the premium costs. TREND: HIGHER –CHART STRUCTURE: EXCELLENT
Gold Futures—Gold futures in the December contract rose $2 dollars an ounce to settle at 1,352 right near a 4 week high as investors came back into the market thinking prices are cheap especially with the U.S dollar hitting a 1 ½ year low again today continuing its strong trend to the downside. Gold is trading above its 20 & 100 day moving average and if you are bullish gold and think prices have bottomed look at some out of the money bull call spreads limiting your risk to what the premium costs also allowing you to deal with the daily fluctuations without having to place stops. Gold has been very volatile in recent months with no real trend at this time so sit on the sidelines and wait for better chart structure to develop. TREND: MIXED –CHART STRUCTURE: POOR
Soybean Futures-- Soybean futures for the January contract settled down 10 cents at 12.93 a bushel and are still trading above their 20 and 100 day moving average hitting a 3 week high yesterday at 13.11 settling last Friday at 12.90 breaking out of its recent range and a possible bottom being formed as the U.S dollar continues to hit 1 ½ year lows which in my opinion has stirred up soybean prices. Traders are waiting next week’s USDA report showing crop production as well as carryover levels and we have not had any news in some time so I expect high volatility in that report and I’m still recommending sitting on the sideline in soybeans and waiting for that report while looking at the fundamentals and going from there. The crop estimate is around 3.2 billion bushels with this report being highly anticipated. TREND: HIGHER –CHART STRUCTURE: GOOD
Corn Futures—Corn futures for the December contract are trading at their 20 day moving average but below their 100 day settling basically unchanged for the week as traders are awaiting next week’s USDA crop report with the possibility of a 14 billion crop or higher being announced as traders have had little news in the last month due to the government shutdown. I had been recommending a short position in corn for a long time but the market has very little volatility right now so I suggest you get out of any long or short position and see what the report states and analyze it then. TREND: LOWER –CHART STRUCTURE: TERRIBLE
Wheat Futures—Wheat futures finished down this Friday afternoon in Chicago still trading above its 20 & 100 day moving averages reversing some of week’s sharp gains as planting progress and weather conditions remain a bearish influence as wheat supplies are large. Prices settled at 7.05 last week dropping around 15 cents after hitting 4 months highs pulling back on profit taking & I am recommending sitting on the sidelines in the wheat market but if you are long a futures contract and are bullish the market place your stop loss at the 10 day low of 6.78 risking around $750 from today’s prices based on a 5,000 bushel contract. TREND: HIGHER –CHART STRUCTURE: GOOD
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
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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. My opinion in this blog are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any futures or option contracts.
Michael Seery, President
Phone # (800) 615-7649