Saturday, November 21, 2015

Mike Seerys Weekly Recap of the Crude Oil, Gold, Coffee, Sugar and Markets

Over the past few weeks, the likelihood of a December rate hike by the Federal Reserve Bank has grown substantially. Both economic data and hints from a number of Federal Reserve policymakers now point towards a December rate hike and now on Wall Street 70% of investors polled believe a rate hike in December is possible. 

So let us take a look at the data and what Fed officials are saying that is making investors believe a hike is coming. Our trading partner Mike Seery  is back to give our us a recap of this weeks trading and help us put together a plan for the upcoming week.

Crude oil futures in the January contract are up 90 cents this Friday afternoon in New York settling at 42.00 last Friday while currently trading at 42.60 as this market has been on the defensive for quite some time due to the fact of massive worldwide supplies as I’ve been sitting on the sidelines at the current time. Oil prices are trading below their 20 and 100 day moving average hitting a double top at the 52 dollar level with the next major level of support at the contract low which was hit in late August around 40.00 as we could be entering a short position next week as the chart structure is starting to improve dramatically on a daily basis. Crude oil has stabilized in recent days due to the fact of terrorism and especially the possibility of that spreading to the Middle East, however worldwide supplies are massive and that is the real problem coupled with the fact of a strong U.S dollar which is higher once again today as the Federal Reserve basically will raise interest rates in the month of December which is also another negative, but as a trader I look for risk/reward to be in your favor and that could be in next week’s trade to the short side as I’m not convinced that prices are headed lower. In my opinion think if the oil market moves higher you’re going to need OPEC to cut production and I’m not sure if they are willing to do that at the current time, but if that does happen that would certainly put the short term bottom into this market.
Trend: Lower
Chart Structure: Improving

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Gold futures in the December contract settled in New York last Friday at 1,081 an ounce while currently trading at 1,081 unchanged for the trading week still trading below its 20 and 100 day moving average telling you that the short term trend is to the downside, however I’m sitting on the sidelines in this market as prices have dropped $100 in the last three weeks as the chart structure is awful at the current time. Earlier in the week prices traded at a new contract low of 1,062 and now has rallied for the 2nd straight day as I still see no reason to own gold at current time as money flows are coming out of the precious metals once again and into the equity markets as I think that trend will continue for the rest of 2015. Gold prices have stabilized here in recent days due to the fact of all the terrorism that is occurring throughout the world and it looks to me that that probably could continue here in the short term, but the easy money to the downside has been made in gold as I think you will start to see a consolidation of the recent downdraft in prices so avoid this market at the current time and look at other markets that are beginning to trend with less risk.
Trend: Lower
Chart Structure: Poor

Coffee futures in the March contract settled in New York last Friday at 115.80 a pound while currently trading at 122.75 up nearly 700 points for the trading week having one of the strongest weeks in quite some time bottoming out at the 115 level. As I’ve written about in previous blogs as I think coffee is in the process of bottoming, however at the current time I’m sitting on the sidelines waiting for a trend to develop as prices are trading above their 20 day but still below their 100 day moving average telling you that the trend currently is mixed. The contract low was hit around the 115 level as prices are getting very cheap in my opinion as we are starting to enter the volatile season as I think we are squeezing blood out of a turnip at these levels, but I will be patient and wait for better chart structure to develop therefore lowering monetary risk as I think over the long haul prices are headed higher. The next major resistance is at 125 which is just an eyelash away as the soft commodity markets except for cotton have rallied over the last several weeks as traders remember in early 2014 a drought hit key coffee growing regions in the country of Brazil sending prices sharply higher in just a matter of weeks.
Trend: Mixed
Chart Structure: Poor

Sugar futures in the March contract settled last Friday in New York at 15.04 a pound while currently trading at 15.04 unchanged for the trading week still in a very volatile trade as prices are swinging up and down on a daily basis as the chart still looks bullish in my opinion, however I am sitting on the sidelines as the chart structure is poor at the current time. Sugar prices are actually trading above their 20 and 100 day moving average which is one of the only few commodities you can say that about as the trend still remains higher with major resistance at 15.50 as strong demand continues to prop up prices here in the short term coupled with the fact of lower production numbers coming out of Brazil. Sugar prices have rallied around 35% over the last three months as this was a very bearish trend for the several years as prices used to trade in the 30’s in 2011 as that’s how far prices have come down due to over production in Brazil, but that scenario has changed going into 2016 as weather is now the main focus to drive prices higher.
Trend: Higher - Mixed
Chart Structure: Poor

Mike Seerys Trading Theory
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.

Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets. Get more of Mike's calls on this Weeks Commodity Markets


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