FROSTY FUTURES FRIDAY FEB. 6, 2003

TECH DATA FOR FRIDAY.

DOW R=7935; 7990; 8050; 8120. S=7917; 7880; 7717.

SPX R=845; 850; 860. S=833; 828; 816.

NDX R=985; 997; 1007. S=960; 940; 920.

MAR TBOND R=11228; 11306; 11314. S=11207; 11224; 11130.

APR GOLD R=372; 380; 392. S=368; 365; 362; 360.

MAR SILVER R=475; 482. S=465; 460.

MAR CRUDE R=3450; 3475; 3525. S=3380; 3350; 3280; 3210.

MAR DOLLAR R=99.92; 100.3; 100.5. S=99.5; 99.0; 98.8.

MAR BEANS R=564; 567; 571. S=559; 556; 552.

MAR WHEAT R=329; 333; 339; 347. S=323; 319; 315.

DO IT YOUR WAY BUT I SUGGEST GETTING LONG WHEAT AND CORN.

INDICES

On the 9th day from the beginning of this flag formation on the daily charts the market forged new lows. It is worth noting that the Dow futures did not. As a strict disciplinarian the new low on the cash index implies a target near term of 7717. That being said, that is why futures contracts are called "futures contracts." They make a reasonable guess of what traders think might happen in the future. The SPX index also made new lows as did its futures contract. The NASDAQ 100, however, did not. Some pundits are encouraging investors to begin making long-term investment decisions more aggressively than they have in the past. I would delay that for awhile longer. For example, as many of you know who have followed this column for any length of time, one of my favorite indicators of market forecasting is the common stock of GE. Although I did buy a little (300 shares) on an earlier breakout (near 26) that failure indicated to me, and I passed on to you, that we might have a chance to buy that stock near 15-13. Nothing has changed my mind.

INTEREST RATES

As those of you who could and did open the attachment containing the special report on interest rates know at least one analyst group is calling for a major top in this sector. I pulled out a long-term chart book going back to 1986 (I have charts going back further) just to look at how long, on a monthly basis, this consolidation pattern might last. You know the old saying, "lies, damn lies and statistics?" Well, there is no way to extrapolate from the past how long the current pattern may continue. It will come to an end, when it ends. So watch for standard, recognizable chart patterns and place the knowledge in your hearts that a top might be due and the pattern might be valid.

METALS

Correction! Don’t get rattled. It’s about time. Recall last week I counseled you to "beware the puppeteer." I cleaned most long gold positions off the books but I also plan to re-enter some April and June contracts near the 370 and 360 areas. The strategy we have been using, begin with one unit then add either every $5 up or $10 down, but never repeating a filled slot, has worked very well for us. If you see something out there that will make the secular trend in gold turn into a bear market then you don’t want to follow this system. But if you accept that there has been a turn from intangible assets to hard assets, not just gold but other commodities as well, this is a proven successful strategy, at least for the past two-years. Naturally past performance is no guarantee of future outcomes. The decision is yours. I also plan to add to silver longs near the 460 level. For two reasons I think this will be profitable. First, that level coincides with horizontal support of significant proportion and it is also near the 100-day moving average. The negatives on the trade is that this might be a market that is being manipulated by large commercial operators who hold massive short positions and would find themselves in crises if caught short and unable to deliver silver to the exchange. So many traders are becoming aware of this that it might not take a very large delivery problem to excite the market dramatically. It’s worth a shot, no guarantees. I’m using options.

CURRENCY

It appears the U.S. Government leadership is content with a weaker dollar, in spite of what Mr. Stone said during his confirmation hearings. But, FOLLOW THE MONEY. Chart patterns will tell you if there are interventions strong enough to change the trend. Don’t play games or be stubborn if you want to keep your profits.

CATTLE

I don’t ever remember seeing a pattern like the one extant on the April daily contract chart. The Feb chart expressed a subtle bearish engulfing line, for those of you familiar with candlesticks. Back to the April chart, the bull market would be considered over with a close below 7650. AS one can tell by the feeder charts traders could not be coaxed into staying long or committing to the long side of cattle for extended periods. But I would expect to see some support come into the feeder contracts near 7600-7500. Some calls would be a pretty good bet if you didn’t want to expose yourself to this thinly traded futures market. The options are even thinner but your risk is limited.

ENERGY

Something caught my eye on Futures World News that I pass on to you. Russia is pumping the hell out of oil but they can’t get it to oil ships. Production is so strong that wellhead prices are down near $15/brl as the pipeline is slap full backed up at harbors. There is a lot of politics going on over there now with the infrastructure possibly up for grabs by privateers as opposed to government control. If they can get their act together there will be a sudden wash of oil from that part of the world.

GRAINS

Buy wheat and corn, for the long haul. Do it your own way, in the amount you can handle, but I believe wheat and corn are going to make us money this year. Beans I just don’t know beans about. The South American crop is just huge. Weather seems to be OK as the season progresses. No doubt there will be periods of stress, but this is February and that crop is all but made, if not actually made.

SOFTS

Cocoa is setting back but I don’t know if it’s because hostilities are over in Ivory Coast or if price has rationed demand. Either way the market is heading down and support lies from 2200 to 2050. Coffee remains within a trading range but it is very volatile, so trade with care. Sugar continues its climb. Tech target measures to 940-950. Cotton hit resistance, again, near the 5200 level. Setbacks seem to be well supported. No recommendations at this time from me. OJ continues its slide. But I suggest to you to hold on to the calls we bought some time ago. The fat lady in this pit has yet to howl.

CONTACT ME: williamfrost@comcast.net or call 800 825 0109, code 04 or 615 331 8567.

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 obtained from reliable sources but they are not verifiable so therefore not guaranteed. Ideas and suggestions are the opinion of the writer and are subject to change at any time. Nothing contained herein is to be construed to be a solicitation to trade futures or options. Hedgers should have a defined plan.

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