FROSTY FUTURES NOV. 20, 2003
TECH DATA FOR FRIDAY, NOV. 21.
DOW R=9685; 9710; 9728. S=9610; 9590; 9550; 9500. (BEARISH)
SPX R=1043; 1047. S=1032; 1029; 1026; 1018. (BEARISH)
NDX R=1380; 1394. S=1361; 1345; 1337. (BEARISH)
USZ R=11110; 11116; 11206. S=11008; 11003; 10920. (FRIENDLY-NEUTURAL)
DEC GOLD R=398; 401; 403. S=392; 390; 388. (FRIENDLY)
DEC SILVER R=535; 538; 543. S=523; 514; 507. (FRIENDLY)
DEC DOLLAR R=9110; 9160; 9190. S=9040; 8980; 8925 (BEARISH-NEUTRAL)
JAN CRUDE R=3205; 3240; 3280. S=3125; 3090; 3030. (BEARISH-NEUTRAL)
JAN NAT GAS R=508; 514; 520. S=485; 455; 445. (ON SUPPORT, COULD BREAK)
JAN BEANS R=760; 768; 780. S=745; 738; 730; 711. (NEUTRAL-BEARISH)
DEC WHEAT R=375; 378; 384. S=365; 361; 344. (NEUTRAL-BEARISH).
COMMENTARY
STOCK INDICES
The Dow has been up as much as 37+% from low to high last spring to date. One
by one, brokerage firms, mutual fund companies and others in the "bad apple"
category are being weeded out. Unfortunately, not many that should be going to
jail are going to jail, but what can we expect from the "real good old boy"
network? The pseudo-aristocrats know that if they don’t put up a good show the
middle class investor is gone, either to gold, real estate or bonds, or, for
shame, cash. Note that Fidelity Funds has been mentioned in the press, but not
a word is heard about the master guru Peter Lynch. Could he possibly be
completely innocent? Maybe, but he is one master good old boy. Again and again
Prudential gets nailed for some scam on the public, whether it’s for tax
shelters or whatever, and the most that happens to the perpetrators of those
scams have been fines that, for some reason, haven’t made much of an
impression on management. But the appearance of "we’re going to hang" Pilgrim
and Baxter (too low on the totem not to sacrifice) is supposed to appease fund
holders. Maybe it’s chicken feed. We continue to hear reports of good
earnings, new developments positive to the future of some of the majors, low
inflation, etc. As things now stand the Dow is near some longterm trendline
resistance and SPX is near a key Fibonacci resistance area. While the Nasdaq
100 (NDX) is up a whopping 75% from the 800 low from September of last year to
date, in absolute terms it is a dead cat bounce from the lofty heights of the
beginning of the Millennium. All this to say I am skeptical-to-bearish on
stocks for the time being.
INTEREST RATES
The longbond is high in its trading range. I will become more bearish as it
approaches the 11200 area. And that, if it can get up there. Short-term
volatility may increase significantly as positions are swapped and decisions
among billionaires are made, remade and entrenched. A huge deficit will be
financed with longterm bonds at low rates. As supply increases and demand
decreases prices will fall like a rock. Watch the premium in the options for
measurements of expected volatility. The greater the premium- factor the
greater the expected volatility. The yield curve may be of some import now,
but I think the option premium will be better evidence.
METALS
If you believe one word of the above two paragraphs then buy gold and buy
silver. Just be patient and buy on weakness. You will make money being long
gold and silver in the long run, but the corrections can kill you. Copper has
topped out for the time being, but for those of you who are short, either
outright on futures or put option holders, don’t lose your profits back to the
market. Follow your trades carefully.
DOLLAR
I think it’s going to 8800 and then 8400. Then we will have to see what our
leadership has in store. Follow "TECH DATA" (subscribe to Frosty Futures) for
guidance on this and 10 other futures contracts.
CATTLE
It would appear the cherry has been picked off the top of the whipped cream on
top of the ice cream on top of the icing on top of the cake that was eaten for
dessert on top of the big meal. In other words, I think the cattle market has
topped out. The best measure will be the lie that cattlemen tell the
government about how many heifers are to be held back for breeding. It is
likely they will say, "I ain’t hold’n nun back." But rest assured as we drive
across the plains next spring, green grass will be covered with #2 O’kies from
wherever they can be had. (For those of you unfamiliar, anytime you see a
bunch of cattle of different and mixed pedigree in a pasture, they are
probably #2 O’kies). So those of you with deep pockets, I suggest selling into
the rich premium option market and enjoy what you can. Wait until after the
cattle on feed report (tomorrow after the close) and maybe even into next
week. There should still be a rally or two left before the bull is stone dead.
ENERGY
Someone with money must know more than I do about crude and its products.
Price is higher than I can see justified. But the market is not wrong, it just
is. Natural gas continues to test support. As weather continues mild and
supplies build price should be expected to break some more. I suggest you
continue to hold purchased call option bull spreads in the Jan, Feb and March
contracts. If you don’t have any of them bought yet, then time is a’wasting.
SOFTS
Cocoa is in a little pennant formation. Go with the breakout for a hundred or
so points. Coffee seems to be headed down to test lows near 5600. Cocoa should
weaken if this is the case. Sugar has run up into resistance. Until
commodities are under full buying "worship" then I expect support and
resistance levels in the softs to be respected. Trade war rhetoric has gotten
into the cotton trade. So there might be another couple hundred points, or
more, on the downside before new buying comes into play. An announcement of
resolution re the trade war will reverse cotton to the upside in a flash. Keep
in mind that cotton is one of the markets where many do the same thing at the
same time so the ship can begin to roll over and over. On the way up,
producers sell into rallies. On the way down users are smart enough to stand
aside and let it fall without any help. On OJ monthly charts there is a double
bottom near 6600. Get long. Use stops. Buy call options, buy futures, use
stops. Get long.
GRAINS
As the world fills with people getting American jobs, bean production is being
utilized. The Indians and the Chinese are using beans as protein and as income
improves so does diet. South America is coming out with a 90-million tonne
crop, between Brazil and Argentina. With the Dollar sinking, our beans are
cheap in the world market. Traders will buy in the US and sell, speculating,
on the world market in Euro’s. Maybe some smart farmers will buy Euro’s and
use that as a bean price hedge. Probably not. But you can. Corn and wheat,
like the softs, are not under the influence, yet, of all out commodity demand.
CONTACT ME: williamfrost@comcast.net
or call 615 331 8567.
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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
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