Mike Seery's Daily Commodity Comments 6-11-14

11 Jun in Blog, commodity consulting, commodity consulting live cattle futures, commodity trading, copper futures, corn futures, feeder cattle futures, futures broker, gold futures, Kansas City wheat, Lean hog futures, Michael Seery, Minneapolis wheat, oat futures, option broker, options broker, palladium futures, platinum futures, rough rice futures, Seery Futures.com, silver futures, soybean futures, soybean meal futures, soybean oil futures, wheat futures

Soybean Futures--- Soybean futures finished down $.12 a bushel in Chicago this Wednesday afternoon after the USDA crop report stated that we 320 million bushels in storage for the new crop while the July contract which is considered the old crop has 125 million bushels pretty much what the trade was expecting, however the weather remains outstanding especially here in state of Illinois as we are 70° and wet and I think that is the reason why prices finished lower for the trading session and I’m still bearish the entire grain market. Soybean futures are trading below their 20 day but still above their 100 day moving average as we basically have chopped around in the last month or so and I’m still recommending a short position while placing my stop above the contract high of 12.80 risking around $.60 or $3,000 per contract at today’s price levels as I do think prices are headed lower and it will catch up with corn prices which hit another 4 ½ month low as its getting very difficult to rally here in the short term in the November contract. Corn continues its collapse in price as the crop looks absolutely outstanding at this time and looking at the 10 day forecast temperatures will average 80° with scattered showers so continue to be short soybeans as I think prices will break $12 a bushel here in the next couple of days.

Historically speaking 320 million bushels is relatively high, however I have seen higher statistics than that so it’s all depends on demand and if that will cut carryover levels as prices go lower but right now soybeans are in a full-blown weather market and the weather is outstanding so continue to play it to the downside as I have a hard time believing we are going to have 3 back to back poor crops in a row especially with 81.5 million acres being planted which is all-time record which could produce a 3.6 billion crop which would be 400 million bushels higher than the last 2 years which produced around 3.2 billion bushels. TREND: LOWER –CHART STRUCTURE: IMPROVING

 

Corn Futures--- Corn futures in the December contract finished lower for the 3rd consecutive trading session retesting contract lows that happened in early January 2014 and if you took my recommendation selling at the 4 week low when prices hit 4.87 a bushel in early May continue to place your stop above the 10 day high which currently stands at 4.70 and that stop will be lowered to 4.65 in tomorrow’s trade and then 4.60 on Fridays trade as the chart structure is tightening up as the weather here in the Midwest is absolutely outstanding pushing prices sharply lower in the last 6 weeks.

Corn futures are trading far below their 20 &100 day moving average as the trend seems to be getting stronger on a daily basis as the corn is around 16 to 18 inches tall already in this area of Illinois and the forecast for the next 10 days is wet and cool so I’m expecting a record crop to develop in October so continue to play this to the downside making sure that you place your stop properly. If you’re looking to get short the grain market I would be a little hesitant to sell corn down at this level due to the fact that it’s very oversold so look at the November soybeans which eventually will catch up to corn to the downside in my opinion as prices are still expensive still trading around 12.21 a bushel as I think the spread between soybean meal and corn will have to narrow eventually. TREND: LOWER –CHART STRUCTURE: IMPROVING

 

Sugar Futures--- Sugar futures finished lower for the 2nd consecutive day trading down by 16 points at 16.81 in the July contract hitting a fresh 3 ½ month low and I’m still recommending a short position while placing your stop loss above the 2 week high which is 17.57 risking around 77 points or $800 per contract as the trend is in a steep decline in recent weeks. Around 3 months ago sugar prices rallied significantly from around 15 to 18 due to the fact that a possible production cut in central Brazil which suffered a tremendous drought, however those fears are starting to fade as production numbers are coming in rather strong so continue to play this to the downside as it has excellent chart structure and is still trading below its 20 and 100 day moving average telling you that the trend is to the downside with the next major support around the 16 level which could be hit in the next week or so in my opinion. The volatility in sugar is relatively low currently as prices broke out of a three-month channel between 17 – 18 as I think that’s a very bearish technical indicator and that’s why I’m playing the market to the downside. TREND: LOWER –CHART STRUCTURE: EXCELLENT

 

Coffee Futures--- Coffee futures in New York finished sharply higher in the September contract trading up 600 points at 174.30 as I’ve been recommending a buy at the 165 level which was just missed in the last couple of days as the 170 level as held pretty well going into crop estimates which should be happening on a daily basis and I do think coffee prices are overdone to the downside & if you have deep pockets I would be looking to purchase coffee here which is down about 22% from contract highs hit just 7 weeks ago.

Coffee futures are trading below their 20 and 100 day moving average as both basically stand at the same price at 180 a pound & if that level is broken I would have to think that there will be additional new buy stops above that level possibly propelling prices back up to the 190 level quickly and if you’re looking to get long this market my recommendation would be to buy at today’s price while placing your stop below Monday’s low of 169 a pound risking around 550 points or $2,200 per contract as the chart structure has improved dramatically over the last several weeks as volatility has slowed.

When your trying to devise a trade what you want to look at the risk reward and if you can risk a little over $2,000 on a coffee trade I always think that you should take that trade ,however if the risk is 7,000 to 10,000 then you want to sit on the sidelines and wait for better chart structure to develop but the chart structure is very tight so if you’re looking to enter take a shot my opinion remembering the fact of risking only 2% of your account balance as a worst-case scenario. TREND: LOWER--MIXED–CHART STRUCTURE: EXCELLENT

 

S&P 500--- The S&P 500 sold off 7 points at 1944 as this selloff was blamed on the fact that the world Council slowed down world growth and with major problems developing in Iraq as 500,000 people are trying to leave the city of Mosul as Al Qaeda has taken over the city which is a giant disappointment to the United States after spending $732 billion dollars and multiple casualties watching that city being taken over in a matter of days is very disappointing as an American but I  don’t think it will derail the S&P 500 anytime soon. All of this negative news won’t have an impact on this market as I’m still recommending buying dips making sure you place your stop below the 10 day low as this market still goes higher but today was just needed an excuse to have a down day as prices are currently in overbought territory and might chop around for a little bit but continue to but dips as this bull market will continue as I think 2000 is in the cards in the S&P 500 as I also think Apple Computer will break all-time highs above $100 a share in the coming weeks propelling the stock market higher. With companies buying back stocks while increasing dividends they are creating the perfect demand market as investors are seeking yields they will continue to seek yields in my opinion for the rest of 2014 so don’t be bearish the equity market in my opinion as the chart structure remains outstanding and the P/E ratio still remains at 16 which is historically still very solid and not outrageously expensive especially with extremely low interest rates that will be here for years to come. TREND: HIGHER--MIXED–CHART STRUCTURE: EXCELLENT

 

Crude Oil Futures---Crude oil futures rallied slightly finishing up around 10 cents at 104.50 a barrel in a quiet trade in New York as traders are keeping a close eye on the country of Iraq which has turned into a huge problem with Al Qaeda taking over the city of Mosul which should continue to push the energy sector higher here in the short term as prices are still trading above their 20 & 100 day moving average telling you that the trend remains strong to the upside here in the short term. If you’re looking to get long this market I would buy at today’s price level of 104.50 while placing my stop loss at the 2 week low of 101.60 which was hit in last Thursdays trade risking around 3,000 per contract in case the trend reverses remembering to keep your trading system simple as complex trading systems do not work in my opinion. TREND: HIGHER--CHART STRUCTURE: SOLID

 

 

 What Does Risk Management Mean To You?  I generally tell people that the reason people lose money in commodities is not due to the fact 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 for 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 he or she 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 dollar 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 still come back from and your still in the game.

 

I will be hosting a live trading webinar 2 hours 1 night a week  for 6 weeks starting on Wednesday  March 19th  --The Program will teach you how to:

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