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November 14, 2016

Futures Market Recap, Week Ending Nov. 11, 2016

By Michael Seery, INO.com


Gold Futures

Gold futures in the December contract finished sharply lower for the 3rd consecutive trading session after actually hitting a high of 1,338 in Tuesday's trade as panic filled the air due to the Trump presidency only to sell off sharply now trading at 1,222 an ounce. The stock market hit another all-time high once again this week. Gold prices are currently at a 5-month low and I've been sitting on the sidelines in this market as gold has been remarkably choppy over the last 6 months. I'm currently recommending a bullish position in silver. However, stock prices look very cheap especially with the new administration lifting regulations and fixing the tax code coupled with the fact that Obama care is finally going to be relinquished. That is very bullish for stock prices, so investors are liquidating gold at the current time. Gold prices look very weak in my opinion as silver and copper are two totally different commodities that have actual industrial use and could go higher. Copper prices are exploding the upside due to the fact that we will have huge rebuilding in the United States, but avoid the gold market at the present time as I do think lower prices are ahead as I am extremely bullish the stock market over the next 4 years as we have finally released the lid off the U.S economy as it certainly has more fuel in its fire to the upside for the first time in 8 years.

TREND: LOWER

CHART STRUCTURE: POOR

Silver Futures

Silver futures in the March contract are plummeting this Friday afternoon in New York down $1.30 an ounce currently trading at 17.58 is I've been recommending a bullish position from around the 18.35 level and if you took that trade continue to place your stop loss at the 10 day low which stands at 17.87 on a closing basis only as we could be out of this market in a couple of hours. Silver prices are now trading below their 20 and-100 day moving average experiencing massive volatility this week due to the U.S election. Gold prices have absolutely been crushed down another $45 and I have been sitting on the sidelines in that market. I am surprised at today's activity and I'm hoping we can rebound later in the trading session as there is sheer panic out there in many of the commodity sectors except for the livestock markets. Silver prices bumped up to around $19 an ounce over the last couple of days hitting a 6 week high as the chart structure was outstanding when I took the original recommendation risking around $700 per mini contract. I keep getting nickeled and dimed on my recommendations, but that's the way it goes as money management is the key to success as the trends will come back eventually as we have to hang around and accept small monetary losses.

TREND: LOWER

CHART STRUCTURE: EXCELLENT

Crude Oil Futures

Crude oil futures in the December contract settled last Friday in New York at 44.07 a barrel while currently trading at 43.25 down about $0.80 for the trading week with extremely high volatility due to the fact of the U.S election finally coming about last Tuesday as I'm sitting on the sidelines in this market as chart structure is terrible at the present time: therefore the monetary risk is too high for me to participate in this market. Crude oil futures are now trading below their 20 and 100-day moving average and it looks to me that we will retest the August 3rd low around 41.58. Many of the commodity markets are acting very weak due to an extremely strong U.S dollar, but eventually, I do think in 2017 stock and commodity prices will be very strong due to U.S growth which has not occurred in 8 years. The main culprit in crude oil is the fact that we just have massive supplies coupled with a strong dollar which makes it very difficult to rally. However, I believe that we are not going back down to $30 a barrel as there is absolute panic at the present time.

TREND: LOWER

CHART STRUCTURE: POOR

Dollar Index Futures

The dollar index in the December contract is trading higher for the 5th consecutive trading session currently at 98.95 up another 20 points. I'm looking at a possible bullish position if there is a retracement in next week's trade as the 10-day low stands at 96.94 risking about $2,000 per contract plus slippage and commission as that is a little too high for my risk tolerance at this point. The United States, in my opinion, is going to start growing tremendously over the next 4 years with the new Trump administration. Regulations and higher interest rates are coming upon us and that is very bullish the dollar and very bearish the bond market, but higher interest rates are a positive thing for the United States, not a negative as growth is coming upon us for the first time in 8 years. The dollar is trading above its 20 and-100 day moving average telling me that the short-term trend is higher. Higher interest equal a higher dollar as we have not had a 3% GDP in over 8 years which is remarkable as now it looks to me that were going to start acting like the United States once again and cut regulations, which is a huge positive for stock prices and commodity prices come 2017. I'm bullish across the board, however, in the next couple of months we can still have our trials and tribulations.

TREND: HIGHER

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.

Oats Futures

Oat futures in the December contract settled last Friday in Chicago at 2.28 a bushel while currently trading at 2.23. I've been recommending a bullish position for around 2 months from the 1.82 level and if you took that trade continue to place your stop loss at the 10-day low which now stands at 2.17 as the chart structure is outstanding at the current time. The grain market, in general, is stagnant and I've been recommending many positions across the board, but except for the oat market prices are still trading far above the 20 and 100-day moving average telling you that the short-term trend is higher as prices topped out about 2 weeks ago at the 2.40 level. Stick with the proper stop loss as I'm not convinced that the bullish trend is over at this time. I'm disappointed with soybeans and soybean meal as they seem to be very reluctant to go higher as another USDA bearish report continues to keep a lid on prices, but this market is completely different as a lot of horses need to be fed throughout North America. The bullish trend still is intact and if we are stopped out, we will move on as the chart structure is starting to improve tremendously and we could be involved in this market once again as I'm not sure that 2.40 is the top.

TREND: HIGHER

CHART STRUCTURE: EXCELLENT

Wheat Futures

Wheat futures in the December contract finished lower for the 3rd consecutive trading session. I was recommending a bullish position from around the 4.16 level getting stopped out in Thursday trading around 4.03 as prices have hit a 2 week low as its time to move on and look at other markets that are beginning to trend. Wheat prices have been stuck in a 10-week consolidation as we could be possibly entering into another position relatively soon as the chart structure is outstanding, but there is very little bullish fundamental news to dictate short-term prices higher. The grain market in general continues to move sideways with very little trend as I'm still recommending bullish positions in soybeans, soybean meal, and oats as the chart structure on all 3 commodities is outstanding at the present time. Volatility in many of the commodities has certainly increased due to the Trump presidency as that is good news for 2017. I think we have taken the lid off of many markets telling you that we could have some tremendous trends in 2017. I'm very excited about that fact, but I was twisting in the wind over the last month, but I will be proactive and I will still keep an eye on this market as I still believe that the grain market is in a bottoming process.

TREND: MIXED

CHART STRUCTURE: EXCELLENT

Cotton Futures

Cotton futures in the March contract settled down around 70 points to close around 69.40 now trading at its 20 and 100-day moving average. I have been sitting on the sidelines waiting for a breakout to occur which could happen any day as this chart looks almost identical to several of the grain daily charts as well. The real breakout in this market is above 72, which could happen possibly in tomorrow's trade while then placing your stop at the 10-day low around the 68.50 level. The chart structure will start to improve later next week so wait for the breakout to occur as prices have been stagnant over the last 4 months just like the grain market so be patient and don't jump the gun. Volatility in the commodity markets certainly will increase in 2017 in my opinion. I do think the United States will finally start to grow after 8 years of absolute stagnation as the interest rates are certainly climbing and that is a positive towards the stock market & commodity prices. I think 2017 is going to be a run to the upside across the board, but we still have a couple more months to digest what is currently happening. Harvest is complete in the southern part of the United States as we will now start to look at planting figures come next year as I do think the agricultural market as a whole is very cheap at this point in time.

TREND: MIXED

CHART STRUCTURE: IMPROVING

Soybean Meal Futures

Soybean meal futures in the December contract settled last Friday in Chicago at 309 a ton while currently trading at 306. I've been recommending a bullish position over the last several weeks from around the 316 level and if you took that trade continue to place your stop loss at 304 which is just an eyelash away as the grain market cannot get out of its own way. Soybean meal futures are now trading below their 20 and 100-day moving average telling you that the short-term trend is lower as prices touched the 316 level unable to break through. The volatility has entered the grain market big time this week, and I think it's due to the U.S election. This has been disappointing to see over the last 2 night sessions which were sharply higher only to sell off during the day session, but stick with the proper stop loss as the risk is minimal at this point in time. The USDA announced another record crop here in the United States and my guess is next year we will not plant as many corn or soybean acres, but for the rest of 2016. We just have massive supplies keeping a lid on prices as the breakouts in many of the grains have been false and not been able to continue any momentum to the upside.

TREND: LOWER

CHART STRUCTURE: EXCELLENT

Soybean Futures

Soybean futures in the January contract settled last Friday in Chicago at 9.90 a bushel while currently trading at 9.88 basically unchanged with the trading week. I've been recommending a bullish position over the last several weeks from around an average price of 9.95 and if you took that trade continue to place your stop loss at the 10-day low which just an eyelash away at 9.84 on a closing basis as this has been a very frustrating trade. Soybean prices over the last 2 nights have been sharply higher only to sell off when the day session begins as I really don't understand what is going on as volatility certainly has increased, but if we are stopped out, we will move on as the grain market continues to move sideways. The USDA announced on Wednesday that we would produce another record crop around 4.3 billion bushels and that is certainly keeping a lid on prices coupled with the fact that the U.S dollar is hitting a yearly high as there is very little bullish news to dictate short-term prices to the upside at the current time. Soybean prices are now trading below their 20 and 100-day moving average telling you that the short-term trend is lower as prices could not break the 10.20 level which was tested twice this week so now they are retesting the bottom end of the trading range.

TREND: LOWER

CHART STRUCTURE: EXCELLENT

Trading Theory

If you follow this rule you will have a chance of being successful over the course of time, if you don’t follow this rule you will be sure to lose your money quickly. This rule is simple Do Not OVERTRADE EVER for this is an easy way to lose all your capital quickly. My definition of over trading is risking too much money on any given trade, for example if you are trading a $100,000 dollar account and you place a gold trade today you should limit your loses to 2% of the account value which in this case is $2,000 which allows you to be wrong on many trades and still be around to play another day. In futures and option trading you will have losing trades that is for certain so make sure you manage those losses and move on to another trade.

Courtesy of Michael Seery, President, Seery Futures via INO.com

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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Item Reviewed: Futures Market Recap, Week Ending Nov. 11, 2016 Rating: 5 Reviewed By: EconMatters