FROSTY FUTURES JAN. 29, 2003

INDICES
 A week of consolidation is all that can be said. Ultimately the target for the pattern developing over the past three months, a classic head and shoulders, is 7500. The only chance for the market to disrupt that probability, in the near term, is for the market to reverse direction tomorrow and put in a double-bottom, take out overhead resistance and march on up from there. And there is little likelihood of that. But one will know that by the close tomorrow. In tech jargon this week’s activity is called a "flag." Usually this type formation is resolved in the direction from which it began, in this case down. There is some significant divergence in patterns on some other index charts. Study the NDX and compare it with the SPX and Dow. You will see what I mean. If you need help, subscribe.

INTEREST RATES
 Wave followers soon will be counting fingers and toes in order to keep track of the number of waves on the Tbond daily chart. The answer to the question of from where and when this corkscrew action will come to an end is beyond my capabilities. If any of you has an answer please let me know. Thanks. For now, support at level one is 11016 and level two is 10816. Resistance is up near 11316.

METALS
 Support for gold grows. New buyers coming into the market cut opportunities for pullbacks short. I identified the probability of a setback this week and entered orders to buy at 361.50 "market if touched." But the pit wouldn’t accept the order that way so I replaced them to buy at 362.50 "or better." As it happened, support came in at 363.50 and left me, my customers and my hoped for additions in the dust. The game becomes riskier at this point. People who are willing to sell into this market realize that buyers are becoming more willing to pay up for ownership. So they are less willing to offer gold for sale at lower prices. This is implied by the fact that the market will not fulfill technical targets when momentum appears to wane. You may choose to infer this is a sign of increased strength. My opinion is that it shows better "puppetry." Beware of the puppeteer. Silver continues to show one bullish chart formation after another, but just can’t find the buyers to blow it out through the top. This is a warning signal. If it finally does take off, be ready for one hellacious run. Copper did break out to the upside today and is approaching 80-cents lb. The way the chart is shaping up a target of 94 is reasonable, but not quite defined as of this writing. I will keep you posted.

CURRENCY
 The buck stopped dropping this week just below par (100). What’s next? Ask the President. Outgoing Treasury Secretary O’Niell (sp?) visited "Squawk Box" this morning and made some radical statements relative to the tax package, corporations paying taxes (or not paying them) and the need for radical tax code reform. This is the most radical statement I have ever heard coming from a corporate insider, much less a cabinet member. Eventually Mr. O’Niell will go down as either a hero of the American Progressive movement or in a box. Maybe both. He might as well of had Noam Chomsky at his side; he couldn’t have created more consternation in the boardrooms. Be that as it may, the future of the Dollar is in the hands of foreigners and their decisions to hold or dump.

CATTLE
 Feb cattle have reached nearly record high levels this winter. But the spreads between that contract and the deferred tell us the insiders are unwilling to bet that the trend is a long-term one. Feeders (March contract) are nearing support, and this is the contract to watch. If support breaks that tells us the insiders are not willing to pay up for feeders. If support holds, that will tell us insiders are willing to bet the trend is more secular and deferred live cattle contracts will begin to rally.

ENERGY
 There is no let-up in the rhetoric relative to Sadaam and Iraq, Venezuela and oil exports and our President and his decision, or not, to act unilaterally relative to any or all of the various "hot spots." I am long but with puts under my contracts. I have written call options to match my long contracts and defray the cost of the puts. I have a cap on my profits but a floor on the potential for loss. I figure we can make about $1500 every month or month and a half with this strategy, per contract spread. That’s a pretty good return. Products are taking on a formation of their own as heating oil demands increase and driving demands wane. Natural gas, to repeat myself, is unregulated, so don’t fight the formations. Or just stay out of it.

GRAINS
 Corn and wheat are in steeper downtrends than beans, so we must accept that demand for beans and products are sufficient to overcome, or are expected to overcome, the huge bean crop growing in South America. Wheat is on a small support base so we will see what happens from here. Corn is mid-range and can go either way, pulled by beans.

SOFTS
 Cocoa is back on a tear nearing contract highs. No settlement in Ivory Coast is behind the movement and cocoa demand is strong. Coffee is mid-range and near the 100-day moving average. Expect some bounce off that level. Next important resistance level on nearby sugar is 940. Cotton continues in a sideways range with a slight downward bias. OJ is acting like there was no freeze in Florida. OK, the powers that be in the pit can do whatever they want for a limited amount of time. Sit on your call options, or if you don’t have any, buy some. OJ will rally.

CONTACT ME: williamfrost@comcast.net or www.frostyfutures.com or call 800 825 0109, code 04.

Trading futures is for individuals willing to assume greater risk for the opportunity of greater rewards. Only speculative capital should be used. Information contained herein is believed to be reliable but sources have not be verified therefore there is no assumption as to accuracy made. Ideas and suggestions are only that. Nothing contained herein is to be construed to be a solicitation to trade futures or options. 

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