FROSTY FUTURES FEB. 12, 2004

TECH DATA FOR FRIDAY THE 13TH.

DOW R=10725; 10748; 19780. S=10620; 10570; 10500.

SPX R=1156; 1158; 1162. S=1150; 1142; 1135.

NDX R=1508; 1516; 1525. S=1498; 1490; 1475.

MAR TBOND R=11216; 11224; 11303. S=11205; 11126; 11118.

APR GOLD R=415; 418; 423. S=410; 407; 403.

MAY SILVER R=674; 682; 686. S=652; 642; 630.

MAR DOLLAR R=8555; 8580; 8660. S=8520; 8500; 8450.

APR CRUDE R=3360; 3400; 3450. S=3325; 3290; 3250.

APR NAT GAS R=543; 550; 567. S=521; 515; 509.

MAY BEANS R=830; 839. S=812; 805; 795.

MAY WHEAT R=396; 400; 403. S=390; 387; 380.

COMMENTARY

INDICES

The Dow did take out resistance at the target of 10700, but has had no follow-through as of yet. Today’s activity was a mark-time-mark. And I don’t expect much more tomorrow because of early closings on some financial markets. But one can never tell in advance about holiday markets. The SPX kept up with DOW but NDX is lagging. Let’s see what happens next week before making any big conclusions unless volume gets heavy and prices are trending.

INTEREST RATE

The longbond has had one of the largest 4-week trading ranges I can see on charts, at 4-points. Option premiums in the March contract expire next Friday (20th) so those premiums are going to shrink rapidly next week. Chairman Greenspan’s testimony this week warned of higher interest rates in the future, with emphasis on future. The double top at 11320 on the March contract remains valid. Support at 11018 (now the 50-day MA) may be tested next week given some stimulation. Expect increased volatility.

METALS

Gold is going to test resistance at 415, from the looks of the chart. A close above that mark indicates of retest of 430 is forthcoming. In either following or leading, silver could jump 50-cents from the top of resistance at 680-May. I think it was last summer I mentioned in one of my columns that some NY traders were making the rounds of copper mining companies around the world to convince them to curtail production. Well it looks as though production was curtailed just when increased production was needed. Now you can expect a blow-off and collapse. If you are gambler enough to want to play that strategy, buy an out of the money May call option and if/when the blow-off takes place, sell the futures and exercise the option. If the market doesn’t blow-off then you will probably lose the option premium. Do not do it unless you understand options, exercise thereof and like the trade.

CURRENCY

The buck is retesting the 8500 level. If a double bottom is put in here, (or a bullish engulfing line) an indication that all the bearish rhetoric has played itself out will be at hand. On the other hand, if support at this level does not hold then we should expect a decline to the 8200 level.

CATTLE

Cash price to feed yards are still pretty strong but sporadic. When packers need cattle they rush in and buy what they need then disappear. Prices spike and then decline. This is no way to run a railroad, as the cliché goes. My cattle are hedged, the hedge is hedged and the most I can lose on this 100-odd head is about $3,000. After the debacle in this market, I consider that excellent. As far as trading futures is concerned, there is a time to be in a market and a time to be out. Let the floor traders and insiders fight it out.

ENERGY

Lots of rhetoric out of OPEC this week about cutbacks in production but Mexico and Russia is saying "no deal." Who wouldn’t just pump the fire out of it at current price levels? Refco’s analysts don’t expect a big drop in price but are more bearish than bullish from current price levels. I concur. Trade the charts, use stops and take profits. Natural gas price is in a flag formation. The larger picture is a head and shoulders top. That is where the talk of end of season demand is coming from.

SOFTS

Cocoa is in the 9th month of trade within a range between 1400 and 1800. How much longer can it last? I’d let coffee make one more range up before establishing short positions. Plenty of sugar means no big price ranges to the upside for now. Sugar will probably will establish resistance at 600 and support near 450. Cotton fundamentals remain bullish but this thing going on with China is putting a crimp on demand for our fiber. It stays in a downtrend until China comes in to buy. Finally, it looks like 60-cents is cheap enough for OJ. But how far can it rally? Not much for now.

GRAINS

A retired Northern Illinois farmer, in true farmer tradition, relative to beans says, "They’ ain’t none." Said statement is reminiscent of one of my cotton clients in South Georgia who said the same thing in the spring of 2001 when cotton had dropped from 5500 to 4500. I reminded him of the size of world cotton stocks but he ignored me. Cotton then went to 3000. This makes me suspicious of the bean situation domestically. Maybe our beans are tight, but Brazil and Argentina have huge crops coming along, even with the dry weather in the latter, the crop is big. I like corn because of the price differential between corn and beans and the outlook for corn. The caveat here is Asian bird flu. Wheat seems to be in the middle of its recent trading range. Expect tests of both extremes.

CONTACT ME: williamfrost@comcast.net or call 615 331 8567.

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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.