August 5, 2003

Refco Affiliates

Monthly Account Maintenance Fee

After receiving input from many brokers, Refco has re-evaluated the timing with respect to the initial implementation of the account maintenance fee.

The initial fees will be posted during the 1st week of September based on accounts with no trading activity from August 31, 2002 through August 31, 2003 and have combined related balances of less than $5,000.

Thereafter, all accounts that fall within the following parameters will incur the $15.00 fee:

Accounts that have combined related balances of less than $5,000 and are inactive during the month will be charged during the first week of each subsequent month. Accounts with open positions and accounts with no money and positions will not be charged. This fee will not cause any account debits.

We thank all affiliates for their input and regret any aggravation caused by the previous memorandum


FROSTY FUTURES AUGUST 7, 2003

TECH DATA FOR FRIDAY

DOW R=9135; 9210; 9240. S=9060; 9030; 9000.

SPX R=976; 983; 988. S=969; 964; 960.

NDX R=1225; 1240; 1255. S=1213; 1195; 1180.

USU R=10808; 10816; 10914. S=10708; 10624; 10600.

GCZ R=355; 358; 361. S=351; 348; 345.

SIZ R=508; 512; 518. S=498; 495; 492.

DXU R=9630; 9660; 9690. S=9567; 9550; 9490.

CLV R=3228; 3275. S=3170; 3140; 3050.

SX R=519; 525; 532. S=513; 509; 500.

WZ R=374; 378; 382. S=367; 362; 358.

COMMENTARY


INDICES

The Dow is in the process of checking support at the 9000 level. The first test held and presented a small rally, now underway. The extent of this rally remains dependent on subsequent reports, indicators, earnings, etc. Note the rejection from above 9300 has been, so far, much stronger than support at 9000. If SPX can close above 977 at week’s end the bulls will have a better grip on things than bears. Absent that success the bears will quickly regain the upper hand and more downside is expected. The big tech’s, as represented by NDX, are in trouble relative to the charts, or else they are oversold. It will take a week’s end close above 1250 to stimulate big money back into this area.

INTEREST RATES

Last Thursday’s intra-day admonition to buy bonds has paid well for those who followed the suggestion. I thought we would have a nice thousand buck trade, but it has turned into more than that for those who have stayed the course. Next question: How high might the longbond go? Anyone’s guess is as good as another, but the mid 108’s look pretty well defended. As you know, I believe the longbond will test 10216 before the downtrend has ended. And another reminder to yield curve players, if you haven’t already done so, take profits on yield curve spreads.

METALS

Chop describes the metals in a word. Gold remains in a slightly more bullish configuration than bearish. Silver remains in a double-top formation that indicates that there is a good chance of a repeat of previous years when after a large runup in summer months a dramatic drop takes place into fall. You should still expect a test of 8000 on Dec high grade copper contract.

CURRENCIES

My client who said that the Buck wouldn’t make it though 9800 looks pretty smart now. The double top on the market has convinced me, for now, that the buck has more downside to go. The sudden gap in the Yen has the earmarks of central bank intervention so we don’t know what to expect next. A one day thing or is there more to follow?

CATTLE

Cattle feeders were able to put yearlings in the yards at a 75-cent break-even and had the opportunity to forward contract to packers for 77.50. The problem is the deal with Canada. If Canadian beef comes back into U.S. markets prices will drop, I expect, about 5-cents per pound, and perhaps a few more. If that meat is held out then prices will rise, who knows how high, maybe 80 or even 90-cents per pound. Nearby contracts took a licking today, but most of the real activity is in the Dec and behind contracts. Those held as nearby longs were forced out. Feeders are finding themselves in high ground near the 90-cent level. We can consider the past couple weeks work as distribution and sell using close stops.

ENERGY

Don’t fight the tape. There is so much BS out there now about production, manipulation, expectations and on and on. Technically the market looks to be tiring. But that doesn’t mean a thing now. I am short a few contracts, now back in the Dec contract, but only because I am bound to get my money back if I have to wait a year. It could be one of those "spend $100,000 to make $15,000. "

SOFTS

Cocoa continues to trade off the base near 1400. No info there. Coffee has broken out and appears to be on the way higher. Intermediate term target basis Dec is about 7200. Sugar might be in for a bounce as stops are hit below the 650 area. Watch that one. In cotton, an inside down day doesn’t tell me much. Fundamentals remain strong. And OJ I like. I bought the Jan today with the idea that after the freeze premium is put in I would sell the futures and buy calls for the winter.

GRAIN

Corn may be headed for 225-230 basis Dec. But there is a big crop out there and plenty of competition. Beans are base building, but I don’t think it will hold. Beans should test 488 before bears give up. This basis the Nov contract. And what is the deal with wheat? As long as funds remain buyers, no one is going to stop them.

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.