"For those who have already accepted the discipline of trading based on fundamental relationships across contract months and among commodities, Scarr Visual Trading might be all they need." - Futures Magazine - April 2005, Software Review




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Purpose

I started Scarr Visual Trading in order to provide sound, accurate studies and charts for the analysis of the futures market. When I began my study of the futures market in 1994, most of the technical analysis I saw either had no sound basis or failed rigorous backtesting. My research into fundamental analysis showed that readily available data on supply and demand was immediately discounted by the market, giving no chance to profit. The only research I could base my trading on was that based on sound statistical and economic principles such as seasonal trends. But, when I tried to find seasonal charts with the features I wanted, I came up empty. So, I began writing programs to generate my own custom charts.

Background

I am a self-employed researcher with a background in the hard sciences. My formal education includes a B.S. in Mechanical Engineering and an M.S. in Physics from Old Dominion University in Virginia, and an M.S. in Math Modeling from Humboldt State University in California. I brought this education and experience to my study of the futures market and began writing programs which have greatly helped me in trading spreads and outright positions. These programs work for me and they can work for you as well.

My Pledge

I promise that the charts and studies presented on this site will be as accurate as I can make them. I also promise that there will be no “magic indicators” or “black-box” systems – all charts and studies will be fully explained. I will always be available to you for technical support and to quickly answer any questions. And finally, no program or system can make you rich overnight in the commodities market - anyone who tells you their system can is being un-truthful. I can tell you that if you use the programs on this site they will improve your trading. That is my pledge to you.

Dan Scarr

Scarr Visual Trading server1: 104.130.207.140
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Finding Trades: Outright Positions
Market Inversion

For many markets, a change from the "normal" condition of contango to backwardation signals a shortage of supplies and the beginning of a bull market while the change from backwardation to contango signals the end of the bull market.

We can use the Open Contracts Spectrum program to generate charts like the one on the right and quickly see which markets are in backwardation and which are in contango. It appears the Oats market is experiencing a shortage. We can now use the Open Contracts Charts program to see how long these conditions have existed.

Here we see that all the contracts except O2012Z were in contango (notice that the colors occur from top to bottom in nearly the opposite order as in the legend at the right) until February. Then the order changes. This looks like the beginning of an uptrend.



Market Extremes

Most traders need to know where the markets stand with respect to their historical ranges. Using the Price Range Percent program we can see this across the markets at a glance. From the chart above, one can see that natural gas is near its 20-year low while metals are high and bonds are very high. Corn looks like the strongest grain while lean hogs looks like the weakest of the meats. It also shows that the interest rates and currencies have the smallest ranges.

Market Divergence

Profitable trading opportunities can exist when the normal relationships between related commodities are out of line. Using the Group Price Charts program we can spot divergences within a commodity group. The marked area shows natural gas making a larger upward move than the rest of the group in May and then coming back into line within a couple of months. A trader could have profited from this divergence (assuming that it was considered a reliable enough relationship to base a trade on) by establishing a long crude oil/short natural gas spread.

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