FROSTY FUTURES JULY 17, 2003
TECH DATA FOR FRIDAY
DOW R=9090; 9127; 9155. S=9020; 8980; 8910.
SPX R=988; 1000; 1003; 1009. S=975; 965; 961.
NDX R=1268; 1280; 1301. S=1250; 1230; 1222.
USU R=11226; 11316; 11412. S=11129; 11113; 11103.
GCQ R=345; 348; 353. S=342; 340; 338.
SIU R=471; 474; 477. S=466; 461; 456.
DXU R=9755; 9775; 9825. S=9680; 9640; 9600.
CLU R=3095; 3120; 3140. S=3040; 3015; 2920.
SX R=527; 533; 538. S=513; 510; 507.
WU R=330; 334; 338. S=323; 320; 315.
STOCK INDICES
The Dow is currently wrestling with the 100-week moving average.
Consolidations such as this do, usually, resolve themselves continuing the
direction from which they began. That is to say, I expect, shortly, for the
Dow to lead the way higher, but for NDX to be the money leader followed by the
SPX. There is always the danger that I am too optimistic. After all, my own
personal key indicator, GE common, has been down for 8-days in a row. Not much
strength coming from that. I will feel better if that stock holds above 26.55.
NDX has penetrated its 100-week MA, but SPX, as is the Dow, still wrestling.
INTEREST RATES
There is no reason that I can come up with immediately that prevents me from
forecasting a long bond price near 108 before a significant rally comes into
play. The yield curve continues to steepen and Fed Chairman Greenspan seems to
be only moderately surprised that traders are reacting with such vehemence. If
one listens to the populist argument against the Chairman, it is easy to
conclude that he, the President, a majority in Congress and the wealthiest of
the wealthy could care less if current stimulation leads to inflation a couple
years down the road. They know what to do, are prepared to do it and so,
What’s new? The impact such inflation undoubtedly will have on we majority is
insignificant as far as the aristocracy is concerned. Remember these words,
for they are one more nail in the coffin of said aristocracy.
METALS
Gold may test 336 this coming week, or come very close. I don’t think that
level will be violated. But if it is, the violation should be short lived.
Fact of the matter is that trend is down in the short/intermediate term but
year on year the trend remains up. Silver might spend another week or so
consolidating or even going down before it firms up enough to break through
overhead near 490 and march higher. Sell nearby put options and if exercised
roll the contracts into the Dec contract. Then buy nearby puts to place a
floor under the trade. Stay cheap as you can, and as an alternative consider
buying a vertical put spread on Dec. I don’t think there is any probability of
silver dropping more than 50-cents at this point in the cycle. And if it does,
utilize your franchise to bail out. Copper has not followed stock indices
downward, and there is a reason for this. The failure this afternoon is a
warning of possible further weakness in stocks (read economy) but I believe
stocks will find support and look for a mere retracement in copper price.
CURRENCY
Some of my clients are determined that the Dollar will not penetrate 9800. My
reaction was muted by manners, not by agreement. I think the Buck is in the
beginning of a recovery back to par and then some. Tell me, someone, why
wouldn’t the world be very happy with the Buck trading in a range from 92.00
to 120.00? Rolling economies around the world, sharing the stimulation of
lower or stronger currencies from time to time. Is it true that a moving mass
is easier to manipulate than a static mass? Of course!! It has direction,
momentum and, therefore, forecastability. Shake the dust off your clocks. It
is time to move.
CATTLE
Summer doldrums have had less effect on cattle price this summer than normal
because of the Canadian border being closed to beef transfers. OK, that only
throws a minor monkey wrench into the cycle. The important answer to find is
to the question of, "Once the border is open how much of an impact is supply
going to have on cattle futures?" I suggest looking to the Oct or Dec
contracts. Support on Oct is near 6800-6750 and under Dec near 7100. A sharp
increase in supplies of well-fed cattle could and should take price under
those levels by several cents. So for all you would be cattlemen out there who
are just itching to go buy some feeders and wear both pants legs inside your
boots (like the rich dudes do) be warned that you better have some puts under,
or at, cost of production or you are going to lose your boots and pants and
butt all together. This warning will not keep feeder cattle from being bid up
so if you want to trade these from the long side, wait for, as mentioned in an
earlier column, 150-300 point breaks.
ENERGY
Crude appears to be losing its momentum but I have lost enough money in this
market to be wary, to say the least. I guess the thing to do at this point is
to have sell stops under the market and hope to get swept along with the
break, if and when it comes. I do have some puts bought but as some of my more
astute clients have asked me; "What happens if one or more of the Saudi
princes are shot?" $50.00 crude? You all should know from Hightower that
demand for unleaded has dropped. But crude builds are not there as we
expected. This is not a good thing for cheaper oil price. You can bet the big
money will know far in advance when supplies will really begin to build, so
once again, follow the money.
SOFTS
Cocoa is being bought on a scale up basis off support around 1480. Resistance
between 1700-1750 is the target for recovery. Should coffee close above 6390
chances are great shorts will be forced to cover and technicians will begin to
claim objectives near 7000. A close below 6150 stimulates shorts to add and
longs to liquidate. I begin to suspect sugar running out of energy near 690.
Cotton may come back to test a 50% retracement but the fundamentals remain
favorable. This market and lumber are testimony to the condition of the
economy, not just domestically. Buy OJ. Try Dec or even go out to March. Both
will soon be putting in freeze premiums.
GRAINS
Seems like I remember mentioning to you that wheat, on the long side, would be
a good approach as stated "from the tombs." Also that wheat as the long leg on
spreads between corn and beans, for those that can take the risk, might be a
good play. Be careful with profits if you were smart/lucky enough to get in on
that action. Nov beans are very near my target of 505 and wheat is getting a
little high at current levels.
CONTACT ME EITHER AT EMAIL:
williamfrost@comcast.net or
Call 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. 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.
