Sunday, February 2, 2014

Mike Seery on Gold, Silver, Sugar and Coffee Futures

It's time to check in with our trading partner Mike Seery to get his take on where our favorite commodities are headed. Say what you want about the current pull back in the indexes we are glad to see the volatility, we finally have us a real market.

Gold Futures

Gold futures finished the week at 1,240 still continuing their choppy trade as investors sold off the precious metal later in the week despite the fact that the S&P 500 is having huge volatility which generally spooks investors into buying gold but the precious metal closed very poorly in my opinion. I have a hard time believing that gold is going to start to rally anytime soon as it might be stuck in the mud and could trade choppy for quite some time. The U.S dollar hit a 7 week high today which is bearish gold prices as the printing press here in the United States is starting to stop which is creating a higher U.S dollar versus the foreign currencies and that is bearish commodity prices in general. I’m recommending investors to sit on the sideline in the gold market at this time as there really is no trend as you have to look for a market that is trending up or down because if you screw around with markets that go up and down and have no trend with constant choppiness that will kill you in the long run. The trend in gold continues sideways and chart structure is very poor.

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Silver Futures

Silver futures continued their 9 week consolidation finishing at 19.12 an ounce in the March contract right near contract lows of 18.72 & if that level is broken you have to think prices would head lower in the short term. The emerging market crisis over the last couple of weeks I think is hurting silver prices here in the short term but this too will blow over, as if your long term investor I still think silver prices look attractive as eventually inflation will come back into this market it’s just a matter of when. Silver futures are trading below their 20 & 100 day moving average and the longer the consolidation in my opinion the stronger the move will be when prices truly break out while the breakout to the upside is at 20.67 & the breakout to the downside is 18.72 as prices were unable to rally despite the fact that there was panic selling in the S&P 500 as money poured out of the stock market into the bond market but not into the precious metals which tells me the market still currently looks weak. Silver trend remains to the down side, chart structure is excellent.

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Sugar Futures

Sugar futures in the March contract finished sharply higher for the 2nd consecutive trading session closing at 15.55 now trading above its 20 day but still below its 100 day moving average as I’ve been recommending a short position in sugar for quite some time getting stopped out as today as prices hit the 10 day high as funds liquidated huge short positions so sit on the sidelines and wait and see what develops. I’m a technical trader and I must have some exit strategies in place and my exit strategy is placing my stop at the 10 day high but you can have something different possibly a 15 day high or 7 day high so create some type of exit strategy for your personal account still maintaining the proper risk management as I do think prices are still headed lower but I can’t recommend a short position at this time as the trend has now turned neutral here in the short term. If you’re not a trend follower I would have to believe that you have to continue to sell sugar as supplies are too high as there are some dry areas in Brazil which is causing some concern possibly cutting some crop production, however I think today was massive short covering as the funds covered in today’s trading session. The trend for sugar remains mixed but the chart structure is excellent.

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Coffee Futures

Coffee futures exploded to the upside for the 3rd consecutive trading day hitting 5 month highs at 125.20 a pound up over 1100 points for the week as investors are pouring in thinking that the long term bottom in coffee has finally been hit in the last several months. Coffee is trading above its 20 and 100 day moving average telling you that the trend in the short term is higher but at this point this market has absolutely terrible chart structure so I have a hard time buying it because the 10 day low is at 114 risking around $4,400 per contract so I’m recommending to sit on the sidelines and wait for some better chart structure to develop as I do think there will be profit taking eventually. The U.S dollar hit a 7 week high today and I believe that eventually could start to pressure commodity prices especially with the emerging markets now having difficulties but the trend in some markets have been heading higher despite that headwind and coffee prices historically are still relatively cheap. Keep an eye on this market as the real volatility will start in the month of May when we begin frost season down in Brazil but it does look to me that coffee is in a bottoming process. While the coffee trend still appears to be higher the chart structure is well....awful.

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