Mike Seery's Limit Up Commodity Report 12/15/17

15 Dec in Blog

Crude Oil Futures--- Crude oil futures in the January contract settled last Friday in New York at 57.36 a barrel while currently trading at 57.16 basically unchanged for the trading week as we enter the holiday markets which generally experience low volatility.

At the current time I'm not involved in this market as I had a bullish recommendation over the last couple months getting stopped out when prices hit the 2 week low as I now currently sitting on the sidelines waiting for another trend to develop, but for the bullish momentum to continue we have to break the November 24th high of 59.05 and for the bearish momentum to continue we have to break the December 7th low of 55.82 in my opinion.

Crude oil prices are trading right at their 20 day but far above their 100 day moving average as we still are in a longer-term bullish trend as strong worldwide demand for crude oil and the energy sector as a whole continue to keep prices near contract highs.

Volatility in crude oil I think will certainly expand once 2018 comes about as I see sideways action for the rest of 2017 as we only have about 2 weeks remaining, however with worldwide economies improving and especially in the United States as the tax cuts certainly could spur demand next year as I think we could be possibly trade in the $70 range at this time in 2018.

TREND: HIGHER--MIXED

CHART STRUCTURE: SOLID

VOLATILITY---LOW

 

 

 

 

Gold Futures--- Gold futures in the February contract are trading higher for the 3rd consecutive session reacting positively off of the FOMC minutes earlier in the week after settling last Friday in New York at 1,248 an ounce while currently trading at 1,262 up about $14 for the trading week rallying on oversold conditions in my opinion.

At the current time I'm not involved in gold or any of the precious metals as they remain choppy to bearish as prices are still trading under their 20 and 100 day moving average as short-term trend is lower as we traded as low as 1,238 in Tuesday's trade before rallying to end the week.

The U.S dollar continues to move sideways having very little influence on the precious metals as were about to close out 2017 as I'm advising clients to avoid this market so look at other markets that are beginning to trend as I'm just not sure where prices are headed in the short term.

Gold prices hit a 5 month low earlier in the week as this just might be a kickback in price as I'm not convinced the bottom is in place as there's been a lot of year and selling across the board in many agricultural markets as well as the precious metals as the Bitcoin phenomenon certainly has taken the luster out of gold as all of the interest still lies in the U.S equities which hit another all-time high this week and Bitcoin which will start officially trading on Sunday night.

TREND: LOWER

CHART STRUCTURE: POOR

VOLATILITY---INCREASING

 

 

 

 

Wheat Futures--- Wheat futures in the March contract settled last Friday in Chicago at 4.19 a bushel while currently trading at 4.19 unchanged for the trading week experiencing extremely low volatility as I think that will continue until year end as there is very little fresh fundamental news to push prices in either direction.

Wheat hit another contract low on December 12th around 4.10 a bushel as I still remain negative on this commodity as I think we could trade down to the 3.95 level & if you are short a futures contract place the stop loss above the 10 day high which in Monday's trade will be 4.36 as that will also start to improve on a daily basis therefore lowering your monetary risk.

At the present time ideal weather conditions in the Great Plains of the United States continue to push prices lower coupled with the fact of weak demand and huge worldwide supplies as there is very little bullish fundamental news to push prices higher.

Large money managed funds are still heavily short wheat and corn which also hit a contract low in this week's trade as I'm certainly not recommending any type of bottom fishing as that would be counter trend trading as this has been in the bearish trend now for over 5 straight months as prices are still trading far below their 20 and 100 day moving average, however I do believe that the volatility will increase tremendously once 2018 arrives.

TREND: LOWER

CHART STRUCTURE: SOLID---IMPROVING

VOLATILITY---LOW

 

 

 

 

Lean Hog Futures---Lean hog futures in the June contract settled last Friday in Chicago at 83.27 while currently trading at 81.80 down about 150 points for the trading week right near a 3 week low as I'm keeping a close eye on this market for a possible short position in the next weeks trade.

Hog prices are trading below their 20 day moving average, but still above their 100 day which stands at the critical 80 level which is also at major support as we experienced a wild trading session yesterday which is a good thing to see as volatility is starting to come back into the hog market.

I think the June hogs topped out around the 84.40 level just a couple of weeks ago and now have been in a slow steady downturn and I do think that level will be breached the coming weeks ahead as we are experiencing holiday markets which generally are nonvolatile, but we are entering the month of January as the volatility generally increases tremendously.

The chart structure at the present time is solid, but the trend still is mixed so I will be patient before entering into a short position as the risk/reward could change next week. Many of the agricultural markets have sold off in recent weeks due to year-end selling in my opinion as I think that hog prices are too expensive compared to the rest of the markets as we are only 250 points or so from their contract high.

TREND: LOWER--MIXED

CHART STRUCTURE: SOLID---IMPROVING

VOLATILITY---INCREASING

 

 

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Orange Juice Futures---Orange juice futures in the January contract settled last Friday in New York at 152.85 while currently trading at 146.10 down nearly 700 points for the trading week continuing its bearish momentum right at a 10 week low.

I have talked about orange juice lately with a bearish bias as I thought prices were headed lower and if you are short stay short in my opinion with the next major level of support around the 141 level & if that is broken I think we could test the contract low which is around the 130 level which was hit in the month of July as excellent weather conditions in Brazil and the state of Florida continue to pressure prices here in the short term.

Orange juice prices are trading below their 20 and 100 day moving average as the trend clearly is to the downside as we have now declined for 8 straight sessions as I still don't think were in oversold conditions as I still believe there could be room to run to the downside.

Volatility in orange juice is average at the current time as it should pick up tremendously in the month of January as that's when the frost or freeze possibility can take place in the state of Florida which can send prices up tremendously, however the weather forecast at this time still have above average temperatures with no frost on the horizon.

TREND: LOWER

CHART STRUCTURE: POOR

VOLATILITY---AVERAGE

 

 

 

Cotton Futures---Cotton futures in the March contract is trading sharply higher for the 3rd consecutive session after settling last Friday in New York at 73.72 while currently trading at 76.13 hitting another contract high blowing through major resistance up about 240 points for the trading week.

I have been recommending a bullish position from around the 70.50 level & if you took the trade continue to place the stop loss under the 10 day low standing at 72.10 as the chart structure is poor at the present time due to the recent run-up in prices, however the stop loss will be raised 3 days from now therefore lowering the monetary risk.

Strong demand for this commodity continues to push prices higher as this is by far the strongest agricultural commodity as most of the other sectors continue to melt away, but this trend is getting stronger on a weekly basis.

If you take a look at the daily chart the main reason for the recommendation was when prices broke out of a 9 week tight consolidation as the original risk was around $1,000 per contract plus slippage and commission as I will not add any more positions as the risk/reward at this time is not in your favor, but I do think we could head up to the 80 level in the weeks ahead so stay long & continue to place the proper stop loss.

TREND: HIGHER

CHART STRUCTURE: POOR

VOLATILITY---AVERAGE

 

 

 

 

S&P 500 Futures---The S&P 500 in the March contract settled last Friday in Chicago at 2654 while currently trading at 2678 up about 23 points for the trading week hitting another all-time high as I sound like a broken record as this market continues to move higher on a daily and weekly basis as I see absolutely no reason to go short the entire equity market as the Trump rally is extremely strong.

The tax cuts are getting finalized today as that is pushing the market higher once again as growth above 3% has entered this economy for the 1st time in nearly a decade and it's going to increase in 2018 so stay long & continue to place the proper stop loss standing at 2622.

I had been advising clients to take something off the table about a week ago as this has been an incredible rally over the last several months so stay long remaining contracts as I so see no reason to exit as I believe we will close right near yearly highs on the last day of December.

The S&P 500 is trading far above its 20 and 100 day moving average as this trend clearly is to the upside & has been the strongest trend in 2017 and I think in 2018 could be a remarkable year as well as optimism about the U.S economy is at an all-time high as that's what reducing regulations and implementing tax cuts can do.

As I've talked about in previous blogs I thought the S&P 500 could hit 2700 come year-end as I still think that is going to happen as J.P. Morgan stated today that they believe the S&P 500 will be trading around the 3000 level at the end of 2018 and I agree with them so stay long as there's no reason to exit.

TREND: HIGHER

CHART STRUCTURE: SOLID

VOLATILITY---LOW

 

 

 

 

What’s the difference between old crop & new crop in the agricultural commodities? When analysts and traders talk about agricultural commodities such as soybeans & corn the one thing they generally mention is old crop versus new crop and that might confuse some beginners on what exactly is the difference.

I will keep it simple because the only difference between old crop and new crop is that old crop in soybeans is any month other than November as an example is March or May and all months that were grown last year while the new crop is the November soybeans and will be harvested this October of 2017 and will be grown this summer.

That’s why sometimes there is a price difference between the old crop and the new crop because of the fact that this year’s harvest in soybeans could be as high as 4.5 billion bushels pushing prices lower in the November contract as old crop and new crop can also have different carryover levels or supply levels.

Old crop corn is any month other than the December contract while the new crop is only the December contract which will be grown this summer and harvested in October and sometimes there’s a price difference between old crop and new crop as well because as we will be harvesting around 14 billion bushels in October which is the reason why the December corn can be lower than the May corn because that was old crop which was harvested last October also having a different supply situation.

Many of the agricultural commodities are affected by old crop & new crop including the grains, meats, coffee, and cotton so if you need help understanding which month you should be trading feel free to give me a call at any time & I will be more than happy to make sure that you are trading the correct month.

 

 

 

 

Corn Futures--- Corn futures in the March contract are currently trading at 3.46 a bushel after settling last Friday in Chicago at 3.52 down another 6 cents for the trading week still experiencing extremely low volatility which I think will continue for the rest of 2017.

Currently I am not involved, but I've written about in previous blogs I think prices can head down to the 3.25 level in the month of January as the real volatility will not take place until early spring when we will have concerns about the 2018 crop.

If you are short a futures contract place the stop loss at the 10 day high which in Mondays trade is 3.56 as the chart structure is excellent at present time. The grain market in general continues to melt down on a weekly basis as I think that will also continue in the weeks ahead as I see no reason to be involved with positions at this time as the fundamental and technical picture still remain bearish across the board.

Corn prices are trading below their 20 and 100 day moving average telling you that the trend is to the downside as this trend has been bearish over the last 5 months as I do think prices are getting cheap, but I think they can still get cheaper in early 2018.

For corn to sustain any type of bullish trend I think we have to suffer some type of drought in the Midwestern part of the United States like occurred in 2012 sending corn prices to around $8.50 a bushel, but that's not going to possibly happen until the summer months as large worldwide supplies are keeping the lid on prices.

TREND: LOWER

CHART STRUCTURE: SOLID

VOLATILITY---LOW

 

 

 

 

Natural Gas Futures--- Natural gas futures in the January contract settled last Friday in New York at 2.77 while currently trading at 2.62 down another 15 points for the trading week continuing its bearish momentum despite the fact of cold temperatures entering the Midwestern part of the United States.

If you take a look at the monthly chart multi year lows were hit on February 29th 2016 around 1.61 while then the multi year highs were also hit on December 26th 2016 around 3.90 & at today's price level that is right around the 50% retracement as I'm still looking at a bullish position in this market.

If you have been following my previous blogs you understand that I thought prices could go to 2.60 as they did that in today's trade, however I will be patient & see what Mondays trade brings as year-end selling across many of the commodity sectors continues, but I think we are really close to a bottom.

Natural gas prices are trading below their 20 and 100 day moving average as clearly the trend is to the downside as the volatility should expand to the upside especially in the months of January and February as we are experiencing oversold conditions at the present time as a bottom is looming in my opinion, but be patient as 2.50 could be hit next week.

TREND: LOWER

CHART STRUCTURE: POOR

VOLATILITY---INCREASING

 

 

If you are looking to contact Michael Seery (CTA—COMMODITY TRADING ADVISOR) at 1-630-408-3325 I will be more than happy to help you with your trading or visit www.seeryfutures.com

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