FROSTY FUTURES MARCH 6, 2003
 

INDICES
Here’s the deal on the Dow. The target area, based upon the head and shoulders top formation, is 7700. That has been obtained and the market is now looking for the next rationale. The most obvious is to continue the trend, test the February low and see what happens there. If good news is absent cash stays on the sideline and the markets continue to drift, possibly down into the October low. The configuration is exactly the same for the NASDAQ and S&P. Some stimulation will be needed to get the markets moving upward. And so far that has been lacking.

INTEREST RATES
The long bond is consolidating in a rate range between 4.65-4.71. Price wise that range is 11400-11516. If you can pull up “TNX” or “TYX” with your software (that is the actual rate chart/quote) you will see that the futures are more elastic than the rates in the cash market themselves. Sidelined money is looking for a place to go to work but skepticism remains very high. So don’t be sucked in by the neo-sophisticates and their modern measures of industrial demand worldwide. These guys are touting the end of the bear and believe in what they are saying. Only trouble is, they don’t have any money. They are just selling a product. On the other hand, a couple-three quarters of steady growth will be sufficient to prove their point and this will certainly be visible on the charts.

METALS
Gold is in a 20-dollar trading range, 340-360. For how long I don’t know. Silver is beginning to feel stronger even if it isn’t so on the charts. If that big broadbased double top on nearby copper is accurate you should expect to see lows retested before long. A close below 7350 brings 6950 into range.

CURRENCY
Calls for a weaker Dollar were good “omens” for those who listened. “Where, oh where is my little dollar gone?” is a good cry for currency bulls and folks who don’t care about competing in the export arena. The WTO and its fans want a weaker America and they are getting it. My guess is they will live to rue the day. I listened to Ted Welch, a major Republican money raiser, yesterday explain to a small group that “the world is shrinking and some folks are feeling just a little pain right now.” I wanted to put my foot right up his,,,,oh well. These guys are as far out of touch with reality as George the first was when the headline read> “It’s the economy, stupid.” In this case it means; “It’s our standard of living, butthead.” I don’t know how far the dollar might fall but I would remember that some targeted the 98.50 level, for whatever their reasons. If enough people believe that it will bounce from that area. Watch the chart.

ENERGY
The twenty-day moving average remains just under the trend on crude charts. But nearby contracts are weakening relative to the May charts. The contango (inverted market) remains intact, but the weakening of the spreads is an indication of a loss of momentum and therefore is an indication of a potential reversal. I passed on to a buddy of mine the spike in natural gas so he could put a padlock on his tanks. We both knew that the Alabama gas pirates would fill everyone’s tanks with that $12.00 stuff. You should have heard the screams from the distribution center when the drivers couldn’t load the old boy's tanks. They threatened not to come back. I imagine time will cool the tempers. After that blow-off I think it correct to sell into rallies as they take place. This market is not the place for the undercapitalized.

CATTLE
When the April contract busted 7500 it rang the death knell for that pit. But don’t get too carried away. Cash price for on the hoof cattle are running around 78-79. So that puts the futures at whopper of a discount. Also keep in mind Big Mac is now selling for about $12/shr down from $49.00 in 1999. I don’t see much hope for feeders with the live contract headed south both from seasonal and economic standpoints.

GRAIN
Corn is trying to make a retest of 245-250. Good luck. Beans are starting to feel the pressure from South America more than support from dry lands from Michigan to Wyoming. But keep your eye on that Palmer Drought Index Monitor link I sent you this week and the associated links. As we progress through March that could really come into play. One thing to think about this year as opposed to previous years is that it is possible that wheat may be a leader rather than soybeans if the weather worsens. The crop in South America is huge and that might put a damper on the normal bean surge during a weather scare or drought. At this point that is just food for thought.

SOFTS
May cocoa has some gaps to fill so if you want to trade in that market put sell stops below the current consolidation area and ride along. If May coffee can climb above recent resistance a run to 67 is likely. I remind you to play sugar from the short side as long as that island reversal is at the top of the chart. Establish your trend line and sell the rallies as they come along. I would look for May cotton to test 55-54 before resuming the uptrend. The gap left from the roll from March to May is just too large to stand. OJ is shaping up for a rally. This should be sufficient to signify the end of the bearish winter trend. Keep in mind that, I believe, the crop was damaged and that damage will show up as the season progresses.

CONTACT ME: williamfrost@comcast.net or call 800 825 0109 code 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. No guarantees are made as to the accuracy of the data and figures provided because there has been no independent attempt to verify price data. Nothing contained herein should be construed to be a solicitation to trade futures or options. Hedgers should have a defined plan.