FROSTY FUTURES APRIL 11, 2003

INDICES

Students of technical analysis will be watching Friday’s close on the Dow carefully. Depending upon the thickness of the line one draws, a close above 8250 will be encouraging to the bulls and frightening to the bears. A close above 8350 will force most bears to rethink their positions. I return to a thesis I presented to you some weeks ago of the opinion that the stock markets had bottomed. I repeat that admonition now. If you are going to short into this market do it with the idea that your stay will be short lived. Repeated concerns about earnings are getting the attention of many pundits and amateurs but if you study the chart formations of the market leaders you will see many more bullish configurations than bearish ones. What is tempting to bears, and me as well when I am wearing my tradering hat, is the formation that might be confused with a double top on the Dow daily and weekly charts. The formation is particularly stimulating if you look at the futures charts as opposed to the cash indices. However, if you use a little imagination and simply turn the chart upside down, then it becomes a head and shoulders formation with the neckline near the 8500 level. So, with the island reversal bottom in place on the futures chart near 8085, the formation leans heavily to the bullish side.

INTEREST RATES

If the above thesis is correct, rates are headed higher.

METALS

Just as a fulcrum on a lever moves little to none, so might gold. But I doubt it. The balance theory, i.e., if intangibles go up, tangibles must go down is out of place at this time. The Fed has been extremely liberal, as has the Treasury. Liquidity abounds and this is a recipe for inflation, whether of great proportion or not. The 100-month MA comes into play near 312 with good support visible at 318-315. This week’s test of 320 held and shorts covered. A retest may happen if fresh news isn’t forthcoming. Silver, has come back to life after being the dog for many months. Perhaps it is short covering, and perhaps there is something else going on not visible except on the chart. Don’t argue with the tape. Copper still looks to me like it wants to test 7000, but now a technical target has become the 6900 area.

CURRENCY

I don’t know what the central banks will do relative to the Dollar if our stock market proves to have discounted all bearish news. Multi-national exporters who want a weak dollar will lobby hard to get their way, as opposed to domestic corps that want the dollar strong for the benefit of less expensive foreign raw materials purchases. Flip a coin or answer the question yourself. I can’t pretend to know.

CATTLE

My friend Dan Vaught from A.G. Edward’s, Inc. is warning summer contract traders not to get too bearish on the July and August live cattle contracts. They are already heavily discounted and the market may have overcompensated for large poundage vs. lower inventory numbers. It’s worth noting, but I can’t see the June contract trading much above 7300-7400. And the low’s, near contract expiration, may be in the mid to upper 60’s.

ENERGY

The tail is wagging the dog and no analyst knows anything. An honest one will tell you that he has no clue. It all depends on da, di da, di da da da. You can put in there anything you want. Or read Hightower. He always has something to say.

GRAINS

Beans have a double top on the July daily chart at 606. Sell them until you get stopped out. Corn and wheat aren’t going up if beans get pulled down. If the locals try pulling a fast one, for example taking out the 606 level be prepared for a reversal down. These guys play fast and loose with your money so stay sharp but remember there is a huge crop coming out of South America and the Palmer Drought Index isn’t showing any serious problems in major areas of the grain belt that we don’t already know about. Caveat is this: the market knows there is a huge crop in South America. And if the commodity cycle has come back into play, then grain prices will follow that trend. Sorry.

SOFTS

I don’t have anyone trading cocoa, so if you want something let me know. I don’t expect to see too many closes on July coffee below 6250. If you get the chance, and I mean the first chance, to buy one below that level intra-day, do so. Keep it as long as it closes above 6250. That’s for small traders. If you are well financed you may want to see if it can stay above 6190. Small traders may use this as a guide. Sugar remains under the influence of the island reversal top. If 715 fails to hold, then 670 becomes the next target. This on the nearby contract. Cotton is very sensitive to inflation as well as weather and foreign supply. Watch the chart. That’s all I can tell you. The locals in the OJ pit cleaned out all the small futures contracts players on the dip this week. But note that price came right back and total supplies are down by over a million boxes. This is just the beginning in my opinion. That freeze last winter did more damage than the industry want to admit. I don’t know why.

Bless all our troops.

CONTACT ME: williamfrost@comcast.net or www.frostyfutures.com

Call; 800 825 0109, code 04 or 615 31 8567.

Trading futures is for individuals willing to assume greater risk for the opportunity of greater rewards. Only speculative capital should be used. Past performance is no assurance of future profits. Information contained herein is believed reliable but original sources of data have not been independently verified therefore is not guaranteed. Ideas and suggestions are the opinion of the writer and are subject to change at any time. Nothing herein should be construed to be a solicitation to trade futures or options. Hedgers should have a defined plan.