FROSTY FUTURES JULY 31, 2003
TECH DATA FOR FRIDAY AUG. 1.
DOW R=9300; 9362. S=9165; 9090; 9040.
SPX R=999; 1005; 1009. S=984; 977; 975.
NDX R=1290; 1299; 1309. S=1262; 1255; 1238.
USU R=10712; 10808; 10916. S=10520; 10503; 10409.
GCZ R=360; 363; 367; 370. S=355; 353; 349.
SIZ R=524; 534; 544. S=510; 505; 502.
DXU R=9730; 9755; 9825. S=995; 9667; 9640.
CLV R=3055; 3070. S=3010; 2960; 2940; 2880.
SX R=512; 515; 518. S=507; 500; 488.
WZ R=365; 373; 380. S=354; 348; 344.
COMMENTARY
INDICES
The Dow, after penetrating resistance and making a new high on this leg of a
new bull market reversed and closed with only a minor gain. We should expect
to see a wave of selling come into the market and last from 3 to 5 days. That
will depend on economic news validating good news this week. The better the
follow-through the fewer days down. Follow "Tech Data" daily for support and
resistance numbers that will reflect trader’s targets in the days to come.
There might be just a little too much bullish talk from the media as they
interview traders and economists. We have to watch out for that. Should we
become stubborn bulls rather than traders we will get hurt.
INTEREST RATES
Those of you astute enough and having time to analyze the yield curve and
trade it should have done well, you have had sufficient warnings in previous
columns and from the floor itself if you watch CNBC. As for your author, well,
all I can say is; I was too busy making a living to make any money. Although I
expect a test of 10216 in the near future we can’t discount a bounce. So for
the aggressive and fleet of foot trader buy a Sep Tbond and if it doesn’t go
up smartly from early on, sell a Sep 106 call for about a point-and-a-half. Or
if the rally has already begun, go up to the 107. Come out of part, if not
all, your yield curve spreads. You have had one hell of a month, so book it
and go on.
METALS
Gold ran into a little wall near the 370 level and has retraced. The 353 level
basis the Dec contract should be well supported. If that should hold true then
390 comes into play from the technical side. Caveat might or might not come
from the silver market. Remember to go back on monthly charts at least 5 years
and look what has happened to silver during the summer after it has had sharp
runs up. As of today’s close there is a perfect double top on the Dec contract
at 523. Take care. Copper found support from either reduced supplies or better
demand. I am guessing but it probably comes from reduced supply. Whichever,
the breakout deserves respect because of the momentum. A month’s end close
above 8200 brings 8500 into play.
CURRENCIES
The Buck is back. My client whom said that the Buck wouldn’t make it past 9800
was a pretty smug cat, silent but I could just hear that undertone of "what
did I tell you?" in his voice. Oh well, the game ain’t over yet so we’ll see
if he banks his profits. My council to you all is the same as before. You must
ask yourselves, "What is to prevent a trading range in the Dollar from 92.00
to the 120.00 area?" If you have a good answer, good for you. If you don’t, my
advice is to play like there isn’t anything to prevent that.
CATTLE
Once again cash, as tight supplies support markets, is leading cattle in the
absence of Canadian beef. How much longer this might last is an unknown, but
you can tell by the action of the deferred contracts skepticism is showing up.
I have tried to get my hedgers to buy puts under their Feb, Mar and April
production but must be a bad salesman because they don’t have the first put
bought yet. They think it will last forever. Well, it won’t. And with that
kind of stubbornness feeders might go to a dollar.
ENERGY
Depending on where you draw your lines, crude is in a band between about
2900-3200. As time progresses the band narrows. The sooner it breaks out, the
bigger the expected move. If it dwindles toward the far right hand angle then
odds favor a drop. So looking at it from that way, odds are 66.6% that oil
price will come down. Keep your risk to a minimum, anyway. Mr... Greenspan’s
warning about tight natural gas supplies must have struck industry insiders
who knew better as funny. Since his ominous warnings the price of natural gas
is down only $2.00 bcf. That’s $20,000.00 for you uninitiated. Maybe we should
be looking at the long side from around this area. After all, I am sure the
Fed knows more than we do about the macro side of natural gas supply and
demand.
SOFTS
Cocoa continues to base build off the 1425 level. There doesn’t seem to be
sufficient freeze in the mountains of coffee growing regions to stimulate the
price for the berry to get past 6700. At least not so far. I would use that
level as stimulation to act should it be exceeded. Sugar merely paused in its
climb. This looks like a much better market than it did earlier. But I would
bring protective stops up close. Cotton touched support briefly today and
rallied into the close. Stops below today’s lows will be accumulating, so the
floor boys might go for them before the rally continues. It really depends on
what the commercial and large spec segments do ( a truism, I know) in the
short run. Not many stops at new contract low in the OJ pit. For the umpteenth
time, get long OJ the best way it fits into your portfolio. Whether it’s with
options outright, bull spreads in options or outright futures with puts bought
for a floor, whatever. Get long OJ. I can’t say anything good about the
outlook for the economy looking at lumber. Let that be our caveat. In capital
letters, let that be our caveat.
GRAIN
Corn continues to attempt to bottom while wheat continues to climb. I think
corn might be under pressure from spreaders but I can’t swear to it. If your
software allows spread charts keep your eye on that for some indication of a
reversal. Beans appear to my eye to be headed for 488. At that point longs may
be forced to exit pressuring the market even more.
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.
