FROSTY FUTURES AUG. 21, 2003

TECH DATA FOR FRIDAY AUG. 22.

DOW R=9450; 9482; 9740. S=9390; 9352; 9320.

SPX R=1004; 1010; 1016. S=999; 995; 991; 980.

NDX R=1320; 1350; 1370. S=1305; 1300; 1289; 1281.

USU R=10623; 10705. S=10524; 10512; 10424.

GCZ R=366; 370; 373. S=359; 357; 354.

SIZ R=505; 510; 513. S=493; 487; 477.

DXU R=9898; 9914; 9950. S=9833; 9770; 9730.

CLV R=3240; 3250; 3275. S=3160; 3105; 3038.

SX R=582; 583; 590. S=568; 557; 552.

WZ R=381; 385; 392. S=373; 367; 362.

COMMENTARY

INDICES

Dow has broken out of its range to the upside. It is now in position to rally to the extent of the breadth of its previous range, i.e. about 550 points. I doubt if it will be straight up. The weak close today indicates a lot of skepticism. That and low volume makes me concerned that bears with large cahones may step in and force prices lower. If you are bullish pick your spots carefully by recognizing that the market might become very volatile over the next few sessions as a real war might be going on between money managers. Next month is the end of the third quarter so there will be decisive moves made by these guys because they can’t be out if the bull is back and they can’t lose what they have made if the breakout proves premature. It doesn’t matter which index you play, the logic is all the same, so trade off the tech data I provide, or do it on your own.

INTEREST RATES

The longbond is consolidating above my downside target of 10216. This indicates that support is good down there. Bulls are willing to step up to the plate above there and bears are afraid to press. This means news will drive market price. Money will follow news. No reports tomorrow (Friday 22) so next week will become interesting for all of us.

METALS

So while rates on the long end stabilize the buck rallies and gold is put under pressure. But that pressure is not too demanding. Charts indicate a range trade formation between Dec 457-370. If you haven’t done so in awhile, start keeping track of Thursday’s money supply numbers. They were so popular during the 80’s that we used to have office pool’s to buy squares on how much M-2 supply would be up or down. History will repeat itself so get ahead of the curve and begin to track it. As the supply curve steepens upward above targeted levels gold will accelerate to the upside. And vice versa. I doubt if silver could get below 481, or if so, not for long. Buy some far out call options for between 15 and 30 cents and just hang on. By far out I mean Dec 04 or July 05. Sell a couple kids if you have to, but don’t sell the good ones, find something else. Or rent out your mother-in-law. Just be sure you put the money into silver options. Then, if it turns out to be a bad bet you haven’t lost much.

ENERGY

Well, I don’t feel too smart about my energy play this year. But maybe some of the pundits are right and it’s just that all the stars are lined up in favor of higher oil and gas prices for now. The damn word "if" is kicking my butt. If oil were to flow as I had expected it to by now we would have our money back. If the players weren’t so frightened of Some Saudi Prince getting whacked they would be more aggressive toward the bearish side of the trade. If there weren’t the real possibility of getting bogged down in another foreign country whose patriots just don’t want us around we could get things going "over there" and "things" would get to where we want them. Get it? I wish the folks that are going to play natural gas would get there account papers in and checks cleared.

SOFTS

Cocoa’s consolidation was over by Tuesday. Now resistance at Oct 1690 is the barrier with 1550 appearing to be a strong floor. Coffee, coincidentally hit a bottom at about the same time. Referring back to the comment made earlier about money supply, the softs are not out of the link relative to inflation. From current levels use sharp breaks to accumulate calls, or if you have a large enough account, collect long futures positions. Same with sugar. Supply, as far as I know, is not large enough to send sugar down into the 4- or 3-cent level. Risk is pretty low. Profit potential is pretty high. The real demand is for patience. Not a commodity common in the futures trade. There is now an island bottom on cotton charts. Get long, use stops, and hang on. Ditto OJ. I’m telling you now.

GRAIN

Treat the gap in Dec corn from 223-227 as a breakaway gap and judge, by whatever method you choose, a target for a measuring gap. We should expect a test in Nov beans of, at least, 558-552. But that market is just giving us a warning of things to come on the upside. The island reversal on wheat charts must be traded, or respected, as a signal of topping markets. Whether Chicago Soft Red or KC Hard Red or Minn. Soft White this signal is a big red flag. It doesn’t mean the future doesn’t hold higher prices, just not right now. Plus, keep in mind, that negating bearish signals is a real sign of bull markets.

CATTLE

Spring cattle contracts are not being led to higher ground by nearby contracts. Future supply potential have hedgers aware of profit/loss potential and they are taking no chances with unhedged cattle. At least the ones whom plan on staying in business. Once the hedging cycle is over and cattle either show up or don’t the next leg will begin in those very spring contracts. Once again, as long as April manages to stay above 7590, the warning line, there is bullish expectations in the market. Below that, fear sets in and below 7560 longs will exit like a flight of geese heading south at the first freeze in the arctic. They all get the same idea at about the same time.

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.