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June 2, 2015

Futures Market Recap Week Ending May 29

By Michael Seery

Crude Oil Futures


Crude oil futures exploded this Friday afternoon in New York trading higher by $2.60 a barrel currently at 60.26 reversing recent losses as yesterday prices hit a 6 week low and traded down to $56.51 rallying $5 since as there are rumors of facilities being shut down due to the Texas and Oklahoma floods but time will tell to see if that’s actually true. Crude oil futures are now trading above their 20 and 100 day moving average showing high volatility as I’ve been recommending a short position when prices hit a four week low around the $58 level and if you took that trade we are underwater currently so place your stop loss above the 10 day high which remains at 61.75 risking around $1.50 or $750 per mini contract plus slippage and commission from today’s price level. This is a perfect example of why I use my 2% rule of risk on any given trade because anything can happen on any given day as I did not expect oil prices to trade nearly $3 higher today and this trade has been a loser as the risk was $1,800 or approximately 2% of a 100,000 account balance as you must admit you are wrong sometimes but we are still in this trade and not stopped out yet as Monday could be a different story. Today’s action in my opinion was massive short covering as prices remained weak before today but we will see if there’s any follow-through in Monday’s trade and if you did not take this trade the risk/reward is your favor at the current time so take advantage of price spikes while maintaining the proper stop loss.

TREND: MIXED

CHART STRUCTURE: IMPROVING

Gold Futures

Gold futures in the August contract are trading below their 20 and 100 day moving average telling you that the short-term trend is to the downside after settling last Friday at 1,205 an ounce currently trading at 1,190 down about $15 this week in a very nonvolatile manner as prices are still trading in a 9 week consolidation. The true breakout to the downside is around the 1,170 level as the U.S dollar remains strong continuing to put pressure on gold in the short term, however the chart structure is poor at the current time but that will improve in next week’s trade as a possible short could be in the cards. As I talked about in many previous blogs I don’t see any reason to own gold at the current time as the stock market despite today’s selloff still remains very strong and the trend in the U.S dollar remains in a secular bullish trend so be patient and wait for a breakout to occur. I have a theory that states the longer the consolidation more powerful the breakout as the breakout is below 1,170 then I would suggest selling a futures contract placing your stop loss above the 10 day high which could happen in next week’s trade as investors are waiting for the U.S monthly unemployment report which comes out next Friday and certainly should send high volatility and price direction back into this market.

TREND: LOWER

CHART STRUCTURE: POOR

Silver Futures

Silver futures in the July contract are trading below their 20 and 100 day moving average telling you that the trend is mixed after settling last Friday at 17.05 while currently trading at 16.70 an ounce down about $.35 for the trading week hitting a two week low. Silver prices broke out two weeks ago and traded as high as 17.75 hitting a 3 month high, however I did not give any trade recommendation because the chart structure was so poor and the risk was way too high to enter so I’m still sitting on the sidelines at the current time. The U.S dollar has regained its bullish momentum which is putting pressure on silver prices as the trend is mixed at the current time and I don’t like trading choppy markets as its extremely difficult to trade successfully in my opinion as lower prices look to be ahead in my opinion but I’m not recommending any type of position currently. Volatility in silver at the current time is relatively mild as silver historically speaking is one of the most volatile commodities as something sure will develop in the coming weeks ahead so keep an eye on this market and wait for a better chart structure to develop lowering monetary risk as that’s the main key to successful trading in my opinion.

TREND: LOWER

CHART STRUCTURE: POOR

Soybean Futures

Futures--- Soybean futures in the November contract which is considered the new crop which will be harvested this October settled last Friday in Chicago at 9.07 while currently trading at 9.05 basically unchanged for the trading week as 61% of the crop has been planted as of last Monday and next week around 80% as the bearish trend remains intact in my opinion. Soybean futures are trading below their 20 and 100 day moving average as I’ve been recommending a short position when prices broke 9.35 a bushel and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 9.44 and that stop will be lowered on a daily basis starting next week as the chart structure will improve dramatically so continue to play this to the downside in my opinion. The United States is expected to produce 3.9 billion bushels which will be right near an all-time record as 84 million acres are planted as there is very little bullish fundamental news as the weather in the Midwestern part of the United States is outstanding with the 7/10 day forecast showing mild temperatures and rain as we start to enter the extremely volatile summer season. If you have not taken this trade on the short side take advantage of any rallies as the chart structure and the risk/reward will be in your favor in my opinion as I think if the weather continues like this soybean prices could trade as low as 7.50 come harvest time as the world is awash in soybeans as carryover levels are 500 million bushels. There are rumors that farmers are switching from cotton in the state of Texas due to the massive flooding situation to soybeans with could even increase production levels but it’s too early to determine that but the trend is your friend and the trend clearly is negative at this time.

TREND: LOWER

CHART STRUCTURE:IMPROVING

Sugar Futures

Sugar futures in the July contract settled last Friday at 12.31 a pound in New York while currently trading at 11.96 down around 35 points for the trading week continuing its bearish trend hitting a five-year low still trading below their 20 and 100 day moving average as the crop in Brazil is expected to be large coupled with ample supplies pushing prices to multi-year lows. I’m currently sitting on the sidelines in this market as the chart structure is very poor, however in the next couple of days that could tighten up considerably so keep an eye on this market to the downside as prices still look vulnerable for another leg down in my opinion, but the risk is too high at the current time to enter. Sugar futures have dropped about 160 points in the last two weeks as I was recommending a long position getting stopped out around 12.66 level and that’s what you must have an exit strategy because if you never get out of a position monetary losses can be significant as it was a losing trade but a small loss which is the key to successful trading in my opinion. If you are currently short this market place your stop loss above the 10 day high as I’m keeping a close eye on this as we could be entering a short position in next week’s trade.

TREND: LOWER

CHART STRUCTURE: POOR

Cotton Futures

Cotton futures in the July contract settled last Friday in New York at 63.30 while currently trading at 65.45 sharply higher for the 2nd consecutive trading session due to the fact of massive flooding hitting the states of Texas and Oklahoma producing tremendous rains which are delaying planting and possibly could be switching to soybeans as prices are now trading above its 20 and 100 day moving average. I’ve been sitting on the sidelines in this market for several months as it remains extremely choppy still advising clients to avoid this market as the chart structure is poor at the current time as the United States will not produce a record crop this year as I think the downside is limited, however China holds 50% of the world supplies and should not be importing very much cotton in 2015 but I’m a technician and the chart looks terrible and is mixed at the current time so look at other markets that are beginning to trend. The cotton market will definitely experience high volatility in the coming months just like we saw in the last couple of days with back to back 100 point moves due to weather concerns so make sure if you enter this market place the proper amount of contracts risking 2% of your account balance on any given trade.

TREND: MIXED

CHART STRUCTURE: POOR

Coffee Futures

Coffee futures in the July contract settled last Friday in New York at 127 while currently trading at 125 a pound down about 200 points for the trading week as I’m sitting on the sidelines in this market and certainly not recommending any type of bullish position as the trend is to the downside but the chart structure is poor as the 10 day high is too far away & does not meet my criteria to enter into a new trade. Production estimates in Brazil are expected to be very large and that’s what pushing prices lower as the Brazilian Real remains extremely weak against the U.S dollar which is negative anything that’s grown in the country of Brazil as volatility has slowed down this Memorial shortened holiday trading week but look at other markets with better chart structure. Coffee prices are trading below its 20 and 100 day moving average as I do think there’s a possibility that prices could trade down to the 105 level over the next 4 to 6 weeks as there’s very little bullish fundamental news to dictate prices to the upside in my opinion except possible short covering at this time. Many of the soft commodities have been going lower including sugar, orange juice, and coffee in recent weeks as global supplies are just very large and that’s what continuing to pressure prices as I don’t see that situation changing anytime soon or at least until the next growing season.

TREND: LOWER

CHART STRUCTURE: POOR

Corn Futures

Corn futures in the December contract which is concerned the new crop which will be harvested this October settled last Friday in Chicago at 3.78 a bushel while currently trading at 3.68 down about $.10 continuing its bearish momentum as I’ve been recommending a short position for the last month when prices broke 3.95 and if you took that trade continue to place your stop loss above the 10 day high which stands around 3.85. The weather in the Midwestern part of the United States has been excellent as the state of Illinois has outstanding weather as 92% of the crop was planted as of last Tuesday as I expect 100% next week as we enter the summer season as June 1st is Monday as traders are anticipating the next crop progress report. Traders are anticipating a 13.6 billion bushel crop in the United States which is 500 million less than last year as I continue to think that prices have further go to the downside so take advantage of any rallies while maintaining the proper stop loss as I think 3.50 is in the cards in the next couple of weeks as the commodity markets especially the grain market still look weak in my opinion. The U.S dollar has been very strong over the last couple of weeks putting pressure on corn prices as worldwide supplies are huge and unless some type of weather market arises such as a major drought which happened in 2012 prices should continue its bearish trend and if you’re a farmer I would still be hedging even at today’s prices as who knows how low prices can actually go. Corn futures are trading far below their 20 and 100 day moving average telling you that the trend is to the downside as the path of least resistance is the most successful way to trade in my opinion.

TREND: LOWER

CHART STRUCTURE: IMPROVING

Trading Theory

There are many different theories about how long does a meaningful consolidation have to last before you enter a trade on the breakout? 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 10 or 13 week consolidation the better as gold prices are in a 9 week consolidation so keep a close eye on that market.

Courtesy Michael Seery, SEERYFUTURES.COM via INO.com  
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters. © EconMatters All Rights Reserved | Facebook | Twitter | Free Email | Kindle
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Item Reviewed: Futures Market Recap Week Ending May 29 Rating: 5 Reviewed By: EconMatters