FROSTY FUTURES JULY 24, 2003

TECH DATA FOR FRIDAY

DOW R=9170; 9250; 9285. S=9100; 9050; 9040.

SPX R=987; 994; 999. S=980; 976; 972.

NDX R=1266; 1278; 1288. S=1241; 1223; 1216.

USU R=11008; 11024; 11104. S=10914; 10900; 10812.

GCQ R=364; 366; 370. S=359; 356; 352.

SIU R=517; 519. S=505; 501; 487.

DXU R=9590; 9625; 9675. S=9535; 9490; 9450.

CLU R=3040; 3085; 3115. S=2985; 2940; 2910.

SX R=517; 527; 532. S=508; 503; 497.

WU R=346; 356. S=335; 328; 323.

COMMENTARY

INDICES

This arena remains within a trading range. After today’s reversal it is very likely the bottom of the range of each major index will be tested. My belief is that the support will hold, albeit after a swipe at the stops. I came out of longs that I had established earlier this week on the Dow and S&P. We left some money on the table, but came out with a small profit.

INTEREST RATES

The longbond consolidated this week in its new lower range. My target remains the 10800 area. Resistance on Sep at 11116 should hold next week until the 10800 area gets tested and some sort of bottom formation develops.

METALS

Trend in gold is strong and no reversal signal has as yet been identified. Resistance at 574 should get tested. Support at 352 is a long way down from here. So don’t get caught too long with too many contracts. Before you allow yourself to get too bulled up on silver, go back to a 5-year or longer monthly chart and check out the action in the months of May, June, July and August after big run-ups like we just experienced. The bull-headed got wiped out. And then there is copper. If you believe the economy is improving, buy a setback from current levels. If you don’t, then try a short with stops above 8000 on the Sep contract.

ENERGY

Crude got hit and is trying to recover based on supply arguments, demand arguments and fear. The death of Sadam’s sons is going to make someone about 30-million so at least someone is going to get rich off this debacle. As for those of us in the energy market, it appears we will have to be patient before we get our money back from earlier shorts, but I think the time span between now and then is getting shorter. Try buying three Dec 28 puts and go long one Dec future. If oil price explodes then the long will pay for the puts. But if it collapses the puts will more than cover the long future. I want my money back. How about you?

SOFTS

Cocoa is validating the base of support near 1425 Sep. Upside targets are 1550 and 1640. Coffee is vulnerable to a test of the 50-cent level. It is tempting to get long in this area because of the season and the reduction in supplies. So think in terms of options and futures. Like I mentioned above in crude, but in reverse. Buy multiple calls, sell one future and let it ride, if price declines to test the 50-cent area that should pay for the calls. If price goes up the calls will more than cover the short futures. Oct sugar needs to hold 680 in order to keep bullish momentum going. Today’s reversal was another sign, as mentioned last week, of sugar losing energy. An island reversal in cotton is a very bullish signal. Tops achieved earlier in the month should be tested. Keep stops on longs deep into the gap. Bullish engulfing line in OJ is another bullish sign. One of my clients who follows the commitment of traders told me the commercials are at their longest in years. Big specs are at their shortest. Something is going to give shortly. That big double top on lumber hasn’t been completely played out yet, so keep your chart open and watch for a test of 256.

GRAINS

Corn appears to be trying to put in a bottom. Lower acreage and good demand make that a real possibility. Beans remain weak with a huge crop, good competition and prices that can easily get to 490. Wheat can’t continue to rise forever. And the reversal today may have sounded the death knell for this phase of the rally. Some people are trying the KC/Chi wheat spread but before you get too carried away with this one, keep in mind that hard red winter is having one of the biggest and best harvests ever.

CONTACT ME: 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.