FROSTY FUTURES

MAY 13, 2004


TECH DATA FOR FRIDAY MAY 14.

DOW R=10075; 10125; 10175. S=9970; 9940; 9850.

SPX R=10103; 1110; 1120. S=1091; 1087; 1077.

NDX R=1426; 1440; 1465. S=1405; 1395; 1385.

USM R=10406; 10418; 10430. S=10316; 10300; 10224.

GCM R=378; 385; 395. S=373; 371; 364.

SIN R=565; 575; 584. S=551; 545; 535.

DXM R=9260; 9280; 9300. S=9190; 9140; 9080.

CLN R=4110; 4155; 4210. S=4050; 4010; 3980; 3815.

SN R=985; 995; 1010. S=960; 955; 945.

CN R=299; 302; 310. S=292; 288; 285.

WN R=374; 383; 385. S=366; 360; 355.

COMMENTARY

INDICIES

Whoever it was that invited us to live in interesting times. Both Dow and SPX have made new lows in price but some tech indicators are showing gaining strength. NDX has twice tested the island bottom left in place last March and found sufficient interest to rally price. Taken as a whole we can accept the market has sound economic fundamentals driving things along. The caveat comes in the form of duration. Have you checked your insurance bills lately? Are you keeping track of your gasoline expenditures? Have you purchased any beef lately? The Corporations have so many straws stuck in my checking account that when I drive by the Bank I can hear the sucking sound. Think about the families whose two income earners have two cars getting around 20 mpg driving an average of 16000 miles each per year. Things are getting tough for Joe and Emily Average American, with Dick, Jane, Spot and Puff. Corporations and business in general can do well sucking the juices out of consumers for awhile but eventually the wells run dry and then the sh.. hits the fan. THE event of the week sickened every American and most of the world. I had no idea how angry I was until I got into my vehicle to go somewhere and damn near ran every driver in my way off the road. That anger (and I know I am not alone) is going to find an outlet. What form it will take is not going to be limited to aggressive driving. There will be economic ramifications that will be reflected in the price of stocks. Exchange rates will be effected. The Fed will not be forced to act, not because of rapid growth in money supply, because the money supply will be disbursed over such a wide geographic area it will be like a spray compared to a thunderstorm. When managers running billions realize that I expect interest rates will decline again. More on that down the line.

INTEREST RATE

The longbond is sinking about a point a day. The technical picture indicates a drop into the low 90’s upper 80’s, and that could still happen if data doesn’t indicate more slowing in coming weeks. Obviously, it is my belief this sudden upsurge in productivity is temporary, particularly as it reflects domestic productivity. Information traveling at the speed of light and reactions being immediate, we shouldn’t be surprised by a sudden rally in the price of bonds.

METALS

A 12% drop in Gold’s price and a 36% drop in Silver’s price with a 18% drop in the price of copper should be a big warning light to all market participants. Trouble is it means different things to different people. For inflation hawks the drop implies a reduction in fear of inflation. For currency hawks it means the Dollar is expected to strengthen and profit needs to be taken before the Buck bangs back. To me it implies that rather than the stagflation of the 80’s returning we are going into a different type of economic cycle. We could coin a new term and call it "infression." That is inflation and depression at the same time with too few people having too much money.

CURRENCY

As the Dollar rallies closer to the 25% retracement target the rhetoric about future Dollar strength increases in volume and timbre. I think it’s a sucker play.

CATTLE

I hope you got short. If so, stay so.

ENERGY

All I can say is that I remain of the opinion one of the biggest bull traps in history is being set up in the oil pits. I am long the Dec 28 crude puts from 50 and am scaling up as price increases. The Dec 29’s closed at 45 today but I got no trades done because there is very little liquidity. Be patient.

SOFTS

Place buy-stops above the market in July cocoa and go with the flow. Coffee is showing the freeze premium in place. It’s a sell but you mustn’t get caught in a freeze scare. Keep your trading eye on sugar. I can’t tell yet if it is going to break or rally from current lows. The next step up in July cotton is 7000 with resistance showing at 6800. Support is down at 6200. Grocery stores are trying to give away OJ. Who knows?

GRAINS

Old crop bean charts saw the gap closed at 970. A close below that targets 935. New crop beans remain is a broad trading range, 700-800. Old crop corn is about to fall on its butt. A weak week’s end close should shut the door on bulls. New crop corn appears very similar to old crop. Wheat may sidestep a decline in price of corn and beans.

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.