Crude Oil Futures
Crude oil futures in the May contract is trading lower for the 2nd consecutive session after settling last Friday in New York at 22.63 a barrel while currently trading at 22.23 down about 40 cents for the trading week continuing its bearish momentum.
Fundamentally speaking, the energy complex sold off sharply, with oil prices sinking after the Trump administration canceled its plans to buy crude oil to replenish the Strategic Petroleum Reserve (SPR). Then the energy complex extended its losses Thursday on dire predictions from the International Energy Association (IEA).
I am not involved, but I do think prices will break the $20 level as I'm certainly not recommending any bullish position as weakening demand due to the Coronavirus causing millions of Americans to work from home while not driving.
Crude oil prices are trading far below their 20 and 100-day moving average as the trend is to the downside as unleaded gasoline is right near an all-time low as that is also putting pressure on oil in the short-term. If you are short a futures contract, I would place the stop loss at 28.50 as an exit strategy as I do think $15 a barrel is a realistic number that could happen in the coming weeks ahead.
CHART STRUCTURE: POOR
Silver futures in the May contract is currently trading at 14.51 an ounce after settling last Friday in New York at 12.38 up over $2 for the trading week experiencing high volatility as prices hit an 11-year low last week. Silver has been mirroring the gold market, which is also having tremendous price swings daily.
I'm not involved at the current time, and I will wait for the chart structure to improve as prices historically speaking look cheap, but there is so much uncertainty due to the Coronavirus. I don't know where prices are headed in the short-term. Congress passed a massive 2 trillion-dollar relief package, which generally is supportive silver prices, but in the short-term is having minimal impact. I think longer-term, this will start to be a bullish factor towards silver and the entire commodity markets in general.
The last time this happened was in 2009 when commodity prices were depressed, and then we experienced tremendous rallies over the next couple of years. Interest rates will probably remain near zero for several more years as that is also a bullish factor towards prices, so keep a close eye on this market as we could be involved soon.
CHART STRUCTURE: POOR
Gold futures in the April contract settled last Friday in New York at 1,484 while currently trading at 1,628 an ounce experiencing a wild trading week. Prices tried to bust the 1,700 level on a couple of occasions only to fail as that level has been touched four times over the last month, but unable to close above.
Volatility in gold is unbelievable at the current time as we hit a 7 month low just last week and then a 7-year high this week. We have multiple $100 trading ranges daily, and I am currently sitting on the sidelines as the chart structure is terrible. The risk-reward is not in your favor. Congress has passed massive stimulus packages this week, as that is a fundamental bullish factor towards gold. Still, there is so much uncertainty out there that there's also a risk-off mentality as nobody wants to own anything, as that's why this market has such dramatic price swings.
Gold prices are still trading above their 20 and 100-day moving average as the trend is to the upside as the Coronavirus certainly has caused massive panic worldwide and in the United States and until that situation resolves itself expect high volatility.
CHART STRUCTURE: POOR
S&P 500 Futures
The S&P 500 in the June contract settled last Friday in Chicago at 2288 while currently trading at 2525. We are sharply lower in today's trade, as the volatility is as high as I've ever witnessed. I don't think that the situation is going to end anytime soon as prices traded as low as 2174 earlier in the week only to rally due to oversold conditions.
I am advising clients to avoid this market as the volatility is too high; therefore, the risk/reward is not your favor as we continually flip flop daily. The headlines about the Coronavirus is sending shockwaves throughout the United States and the world at the current time.
I have talked about it in many previous blogs. I think there are a lot of individual stocks that look cheap, especially if you are a long-term investor as eventually the virus will go away. We will get back to normal even though we lost 3 million jobs last week, and there's going to be millions more that will be lost in the coming weeks ahead, but that has already been reflected in the market. Congress has passed a 2.2 trillion relief fund as that has helped stabilize the market. However, time will tell to see how this situation unfolds, but at the current time, there is just too much uncertainty.
CHART STRUCTURE: POOR
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.
Corn futures in the May contract settled last Friday in Chicago at 3.43 a bushel while currently trading at 3.47 after bottoming out last week around the 3.30 level as this market is the weakest out of the grain sector. Fundamentally speaking, corn has nothing going for it as the war between Saudi Arabia and Russia over oil has undoubtedly put pressure on corn prices. Ethanol is experiencing very weak demand because millions of Americans are working at home due to the Coronavirus.
Estimates of the 2020 planted acres are 94.1 million vs. 89.7 million last year as we could produce another record crop, therefore, raising carryover levels unless some type of weather event happens, such as a drought. Corn is trading below their 20 and 100-day moving average as the trend remains to the downside as spring planting will start in the next couple of weeks as the volatility will start to increase.
At the current time, I do not have any grain recommendations as the volatility will start to increase as a weather premium could be put back into the price. However, this market needs crude oil to rally as that will help support corn as that commodity is at an 18-year low.
CHART STRUCTURE: SOLID
Cotton futures in the May contract settled last Friday in New York at 53.68 while currently trading at 51.70 down about 200 points continuing its bearish momentum as prices are right near an 11 year low.
If you take a look at the daily chart, the downtrend line remains intact as this market has completely fallen out of bed over the last couple of months. If you are short a futures contract place the stop loss above the 10-day high, which stands at 59.67. However, the chart structure will improve daily next week, therefore, lowering the monetary risk. Fundamentally speaking, this market remains extremely bearish. No one is currently shopping as everyone is stuck in quarantine in much of the United States as there's no demand for this commodity, and until some clarity comes about with the Coronavirus, look for lower prices ahead.
I think cotton could trade down to the 45 level as I'm certainly not recommending any bullish position as this is one of the strongest trends to the downside, and if you are short, stay short as a bottom has not been formed.
CHART STRUCTURE: IMPROVING
Live Cattle Futures
Cattle futures in the April contract settled last Friday in Chicago at 98.65 while currently trading at 102.00 experiencing a crazy trading week with multiple limit ups without even trading as the volatility is extraordinarily high at the present time.
I had been recommending a bearish position from around the 124.50 level, getting stopped out earlier in the week around 105.00. I will avoid the market for the time being as the risk/reward is not in your favor as prices today are filling the gap that was created earlier in the week. Last week prices traded around the 91 level and then traded as high as 110.65 earlier this week, experiencing a 20% rally in such a short amount of time. There is still a lot of uncertainty about the Coronavirus.
I will wait for the chart structure to improve and the volatility to slow down, which could still take a couple of more weeks, so sit on the sidelines and be patient.
CHART STRUCTURE: POOR
What Does An Inverted Market Mean? Its when a futures market where the nearer month contracts are more expensive than the distant month's contracts as an inverted market occurs during periods of shortages.
Typically, the further months are more expensive because the goods have the additional costs of insurance, storage, and interest costs incurred in borrowing funds to hold the commodities.
Take a look at what has developed in crude oil prices over the last month with the October contract higher than all the back months due to demand.
If you are looking for a futures broker feel free to contact Michael Seery at 630-408-3325 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.