FROSTY FUTURES MAY 27, 2004

TECH DATA FOR FRIDAY MAY 28.

DOW R=10223; 10310; 10390. S=10155; 10110; 10050.

SPX R=1125; 1129; 1137. S=1114; 1110; 1104.

NDX R=1470; 1476; 1490. S=1455; 1447; 1440.

USU R=10528; 10608; 10624. S=10504; 10428; 10416.

GCQ R=397; 401; 404. S=393; 389; 386.

SIN R=622; 630; 642. S=606; 595; 587.

DXM R=8900; 8930; 8955. S=8862; 8750; 8700.

CLQ R=3990; 4040; 4115. S=3880; 3785; 3685.

SX R=685; 691; 701. S=670; 663; 655.

WN R=379; 382; 387. S=365; 359; 356.

COMMENTARY

INDICES

The lows of December held and the highs of Feb have yet to be tested. That is taking place now. Trade from the long side until proven wrong.

INTEREST RATES

You were told in this column two weeks ago to be prepared for a rally in the price of bonds. It has come to fruition and appears to have some follow-through. Let’s see what happens to the June bond around 10812. If that area is punched through then more upside in price remains and we can use that as a hint the market is saying that no increase in Fed Funds is necessary for the time being.

METALS

Rallies in the white and yellow metals are testimony to Dollar weakness. Even copper has followed suit since the Buck began to trip over itself. But don’t get complacent or opinionated just yet. More on the Dollar to follow.

CURRENCY

The Dollar Index rested on the 100-day moving average most of the trading day today. It couldn’t break farther nor could it rally. You must be careful around these trendlines. As I have warned you recently, too many times in the last 25-years I have traded these markets, I have seen small profits turned into large losses or small losses turned into big ones. And all that just because of a desire to avoid a commission cost. And you know what? The guys paying $8.00 on line with no service are worse than the guys paying $80 or $90 at Merrill or Shearson. Go figure. Just don’t let it happen to you.

CATTLE

Live cattle are in a broad trading range and, for now, are in the upswing part of the cycle. Bullish enthusiasm is hard to kill in the cattle market, no pun intended. Just like depressed prices are hard to rally, high prices are hard to break. But break they will and in none to short a period. My advice, if you are trading this market, is to take quick profits and keep your stops close. When the cattle market breaks you will think you are trading pork bellies, not live cattle.

ENERGY

Double top on the weekly crude chart indicates a strong signal for bears and a big warning to bulls. But bulls being bulls don’t expect the market to fall out of bed immediately. They will keep throwing money at this sector until they exhaust themselves. Keep in mind not many shorts are going to rush in and cover those short positions anytime soon. The bulls are going to be caught, I believe, in a vacuum. Commercials have sold crude on the Merc exchange all the way out to December of ’09. I don’t doubt that large funds have purchased contracts that far out but I don’t know, nor can I imagine, who is going to buy them back for more than $28, and maybe as low as $22. Just for fun, note that wholesale unleaded has fallen over 18-cents per gallon since the high Monday. How long will it take to filter down to the pumps?

SOFTS

It took cocoa a week to work its way back up to new highs, but the technicals indicate a target of 1540. Basis July, 1400 should be good support. There are now two successive closes above old resistance at 7800 on nearby coffee charts. The freeze premium is being put in. The upside target is now 8900. We have to wait and see whether the divergence in sugar charts is indicating a strong move up in sugar. But sugar won’t be left far behind if cocoa and coffee make big moves. Maybe recent advertising by OJ council touting OJ as good heart medicine will overcome the negatives from the carb counters. If interest rates continue to decline expect an upsurge in lumber demand.

GRAINS

Watch July beans for action around 790, Nov should find price near 650 interesting. July corn will keep bulls enthusiastic as long as price holds above 288, while Dec needs to hold 280. Wheat may stay inside a range between 355 and 385. A break out of that range predicts a move of about 30-cents.

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.