Mike Seery back to give our readers a recap of this weeks trading and help us put together a plan for the upcoming week. Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.
Crude oil futures in the October contract settled last Friday in New York at 43.11 a barrel while currently trading at 41.00 continuing its bearish momentum hitting a 6 ½ year low as I’ve been recommending a short position from $59 as we have now rolled over three times as we are now currently in the October contract as we started in July contract as prices still have not hit a 10 day high which currently stands at 46.00.
The chart structure will start to improve on a daily basis starting next week as prices are trading far below their 20 and 100 day moving average telling you that the trend is to the downside as the commodity markets continue to look weak as heating oil and gasoline prices continue to hit new lows as well as who knows how low prices could actually go, however if you have missed the original recommendation sit on the sidelines as you do not want to chase markets as you have missed the boat in my opinion.
The stock market has hit a 7 month low which is also putting pressure on commodity markets as everything looks weak in my opinion so continue to place the proper stop loss as worldwide supplies are overwhelming at the current time coupled with the fact of a relatively strong U.S dollar as there is very little bullish fundamental news except for possible shortcoming to push prices up here in the short term as this trade has been tremendous over the last three months.
Chart Structure: Improving
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Gold futures in the December contract settled in New York last Friday at 1,112 an ounce while currently trading at 1,157 up about $45 for the trading week on massive concerns of global slowdowns pushing stock prices to a 7 month low therefore putting money back into the precious metals as I’m currently sitting on the sidelines in this market getting stopped out around 1,105 or 10 day high around 10 days ago as Monday’s trade certainly will be interesting in my opinion.
The chart structure is extremely poor at the current time as we’ve had about an $80 rally from recent lows as prices traded as high as 1,168 earlier in the trading session but this market concerns me due to the fact that many of the commodity markets are headed lower as this is just a flight to quality here in the short term in my opinion.
Gold futures are trading above their 20 and 100 day moving average for the first time in several months as it looks to me that prices might head up to the $1,200 level but I have a hard time believing that gold will rally as demand from China and India at the current time are weak so look at other markets that are beginning to trend as I went through this before especially in 2008 when stock and commodity markets kept going down including gold as everybody had to sell everything because of margin calls and liquidity issues so keep a close eye on this market but at this time continue to look at other markets to sell which has been shooting fish in a barrel over the last 6 weeks.
Chart Structure: Poor
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The S&P 500 in the September contract is trading below its 20 and 100 day moving average for the first time in several months hitting a 7 month low settling last Friday in Chicago at 2089 while currently trading at 2001 down 88 points for the trading week as I’ve been recommending a short position from 2080 and if you took that trade place your stop loss above the 10 day high which currently stands at 2103 as the chart structure which once was excellent is now terrible.
If you have missed the original recommendation do not chase this market as the risk/reward is not the favor at the current time so look at other markets that are beginning to trend as the energy sector is pulling down the Dow Jones and the S&P 500 rather dramatically in the last couple of days as the commodity markets are showing real worldwide weakness as I will continue to remain short while taking advantage of any price rally.
As I’ve talked about in many previous blogs I hate selling the S&P 500 and I’ve only done it 2 times in the last 10 years but the risk/reward was highly in your favor so I took a shot and who knows how low prices can go as we are still only 5% from the record high as I think the next major resistance level is at 1950 which could be hit next week as volatility is extremely high with major risk at the current time.
Chart Structure: Terrible
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Coffee futures in the December contract settled last Friday in New York at 141.15 a pound while currently trading at 132.50 in a highly volatile last couple of weeks as prices are trading right at their 20 but still below their 100 day moving average telling you that the trend is mixed at the current time.
I’m currently sitting on the sidelines in this market as I was recommending a short position several weeks ago getting stopped out at the 10 day high which at the time was at 128 as the chart structure is very poor currently so I will be sitting on the sidelines for some time as prices did hit a 6 week high last Friday but unable to hold those levels due to the fact of a weak Brazilian Real and weak commodity prices throughout the world.
Volatility in coffee is extremely high as coffee historically speaking is one of the most volatile commodities, but I do not like trading choppy markets and at the current time this market is very choppy so I will wait for tighter chart structure to develop therefore lowering monetary risk with the next major level of support around the contract low of 120 as the soft commodities still look very weak as I’m currently recommending a short position in sugar and cocoa.
Chart Structure: Poor
Sugar futures in the October contract settled last Friday in New York at 10.68 a pound while currently trading at 10.56 trading slightly lower for the trading week on very low volatility as I have been recommending a short position from 11.50 and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 10.93 risking around 37 points or $400 per contract plus slippage and commission from today’s price levels.
Sugar futures are trading far below their 20 and 100 day moving average telling you that the trend is to the downside as the daily chart structure is excellent allowing a tight monetary stop therefore lowering risk as a weak Brazilian Real continues to put pressure on prices coupled with the fact that crude oil has hit a six year low which is also a negative influence on sugar prices as sugar is also used as a biodiesel so continue to play this to the downside in my opinion.
The next major level of support is 10.40 and if that is broken I think we could break 10.00 a pound possibly next week as I see no reason to own any commodity at the current time as worldwide deflation currently exists.
Chart Structure: Excellent
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