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.
S&P 500 Futures
The S&P 500 futures in the June contract settled last Friday in Chicago 2059 while currently trading at 2040 right near a 4 week low and if you have been following any of my previous blogs you understand that I do not trade this very often. However, the setup is starting to become favorable as I want to keep a close eye on a possible short position next week. The S&P 500 is trading below its 20-day but still above its 100-day moving average as we are right near major support I do want to see the chart structure to tighten up as the 10 day high is 2094 risking around 55 points or 2,800 per contract plus slippage and commission which is too high of monetary risk to enter at this point. The monthly unemployment report was released this morning stating that the United States added about 160,000 new jobs below expectations with the unemployment rate at 5% having little impact on today’s price as I will keep a close eye on this market as volatility should definitely start to increase as the old saying states “sell in May and go away” as that’s exactly what’s happened so far. As you know I am generally bullish the equity market as I do not sell this very often but the risk/reward over the next week or so could improve as trading is all about risk in my opinion as I try not to put too much thinking behind my trading as I like to keep things as simple as possible and eliminate all the news and fundamental noise.
CHART STRUCTURE: IMPROVING
Gold futures in the June contract settled last Friday in New York at 1,290 an ounce while currently trading at 1,282 down slightly for the trading week consolidating the recent bullish trend. I’m currently sitting on the sidelines as the 10 day low currently stands at 1,231 which is too far away to meet my criteria to enter into a new trade. Gold is trading above their 20 and 100-day moving average telling you that the short-term trend is to the upside. I’m certainly not recommending any type of short position as that would be counter trend trading which is very dangerous over the long haul in my opinion so wait for the chart structure to improve therefore lowering monetary risk. The U.S dollar has rallied over the last three trading sessions as that has put pressure on many of the commodities which have recently rallied as gold and silver prices are heavily influenced by the value of the U.S dollar. The chart structure will start to improve later next week so keep a close eye on this market while risking 2% of your account balance on any given trade as volatility certainly remains extremely high in gold at present.
CHART STRUCTURE: POOR
Live Cattle Futures
Live cattle futures in the June contract settled last Friday in Chicago at 114.90 while currently trading at 119.65 up about 500 points for the trading week as I was recommending a short position from the 124 level getting stopped out in yesterday’s trade as prices hit a 2 week high. At the current time, I’m now sitting on the sidelines waiting for better chart structure and a fresh trend to develop as I’m a little disappointed that prices rallied over the last 3 days after a double bottom was created around the 114 level. Cattle and feeder cattle prices have reacted positively because corn prices have dropped over the last week or so while at the current time I have very few trade recommendations as I will wait for another set of trends to develop. I was also recommending a short position in hogs getting stopped out in last week’s trade as I’m not sure where prices are headed here in the short-term as volatility is extremely high in cattle at present. Cattle prices are now trading above their 20-day but still below their 100-day moving average telling you that the short-term trend is mixed as I do not want to trade choppy markets as they are extremely difficult to trade successfully in my opinion over the course time so look at other markets that are beginning to trend.
CHART STRUCTURE: POOR
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
What do I mean when I talk about chart structure and why do I think it’s so important when deciding to enter or exit a trade? I define chart structure as a slow 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 allowing you to place a stop loss 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 as I 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 loss.
Wheat futures in the July contract settled last Friday in Chicago at 4.88 a bushel while currently trading at 4.64 down about $.25 for the trading week as I was recommending a bullish position from around the 4.95 level getting stopped out in yesterday’s trade as prices fizzled out very quickly. Wheat prices are now trading below their 20 and 100-day moving average telling you that the short-term trend is to the downside as volatility is very high at present as I’m now sitting on the sidelines waiting for better chart structure to develop. At the current time, I only have one trade recommendation which is in the sugar market as I was stopped out of many trades this week as the bullish momentum ended in the short-term. The U.S dollar rallied about 150 points over the last 3 trading sessions as prices are now looking to retest the contract low around 4.50. Growing conditions in the Midwestern part of the United States is outstanding at present as we should produce an excellent crop which definitely helped put pressure on prices here in the short-term so let’s find other markets that are beginning to trend. Last week I was recommending a bullish position in the oat market which I was also stopped out earlier in the week as the grain market remains very choppy except for the soybean complex which remains in a bullish trend.
CHART STRUCTURE: POOR
Cotton futures in the July contract settled last Friday in New York at 63.77 while currently trading at 62.10. I was recommending a bullish position from the 59 level getting stopped out in yesterday’s trade as prices have now hit a 3 week low, so it’s time to move on and look at other markets that are beginning to trend. Cotton prices are now trading below their 20-day but still above their 100-day moving average telling you that the short-term trend is mixed as weak demand coupled with a stronger U.S dollar this week has finally put pressure on prices as cotton has had a nice run to the upside in my opinion. Weather is the main factor to determine price action as planting is in full swing as nice weather throughout the southern part of the United States is getting the cotton crop off to a solid start, but the growing season is very long as we could still get a weather scare such as a drought as volatility should start to increase later this month as we enter the summer season. The chart structure is very solid at present so keep a close eye on this market as we could be involved again soon.
CHART STRUCTURE: SOLID
Coffee futures in the July contract settled last Friday in New York at 121.50 while currently trading at 124.40 a pound up about 300 points for the trading week finishing higher for the 3rd straight session. Coffee prices are trading above their 20-day but still slightly below their 100-day moving average telling you that the trend is mixed at the current time as I’m sitting on the sidelines waiting for something to develop, but I do believe that prices are limited to the downside. Volatility in coffee over the last several months has been relatively low as coffee historically speaking is one of the most volatile commodities around as I do think volatility will start to increase, but the true breakout is above 131 to the upside so be patient and wait for a 4 week high to develop before entering as I still think we are in a bottoming pattern at present. My only recommendation at the current time is a bullish position in sugar as I was stopped out of many trades this week as the commodity markets sold off due to a stronger U.S dollar so I will keep a close eye on coffee as I think there will be an opportunity in the next couple of weeks for another entry. Coffee prices over the last several months have rebounded off of major support between 115/120 and that’s exactly what happened this week as I’m certainly not recommending any type of short position as I still think higher prices are ahead.
CHART STRUCTURE: SOLID
Sugar futures in the July contract settled last Friday in New York at 16.32 a pound while currently trading at 15.90 down about 40 points for the trading week. I’m now recommending a bullish futures position from around the 16.00 level while placing my stop loss under the 10 day low risking about 60 points or $700 per contract plus slippage and commission. At the current time, sugar is my only trade recommendation as I was stopped out of many trades this week as I was very patient in sugar as now the risk/reward is highly in your favor in my opinion as the 10 day low will be raised to 15.66 in Monday’s trade. Sugar prices are still trading above their 20 and 100-day moving average telling you that the short-term trend is to the upside as volatility is very high at present. Yesterday’s trade had a 100 point trading range so make sure you place the proper amount of contracts risking 2% of your account balance on any given trade.
CHART STRUCTURE: EXCELLENT
What Does Risk Management Mean To You? I generally tell people that the reason people lose money in commodities is not that they are bad at predicting where prices are headed. However, they are bad when it comes to losing trades and refusing to take a loss which results in heavy monetary losses that are difficult to come back from. For example, if a customer has $100,000 account in my opinion on any given trade should risk 2% – 3% of the account value meaning if you are wrong the worst-case scenario is still a $97,000 remaining balance. However, what I always see is traders risking ridiculous amounts of money and instead of the 3% stop loss will risk 20% to 30% on any given trade or even higher therefore if you are wrong on two or three trades that $100,000 account could dwindle down to nothing very quickly, and I’ve seen it many times throughout my career. What many traders forget to realize is they might have 4 or 5 commodity positions on and if you have too many contracts on all at the same time and all of those trades go against you which is very possible the losses can add up to be staggering so what I am suggesting to you is if you have $100,000 account risk between $2,000 – $3,000 per trade so if you lose on five straight trades the worst-case scenario is that your down $15,000 and still have an $85,000 balance which is very possible to come back still from as your still in the game.
If you are looking for a futures broker feel free to contact Michael Seery at 312-224-8140 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. 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.