FROSTY FUTURES
THURSDAY OCT. 28, 2004


TECH DATA FOR FRIDAY

DOW R=10045; 10103; 10115. S=9953; 9888; 9841.

SPX R=1131; 1135; 1142. S=1120; 1115; 1107.

NDX R=1493; 1507. S=1475; 1466; 1457.

USZ R=11322; 11407; 11417. S=11221; 11206; 11121.

GCZ R=429; 432; 436. S=421; 418; 416.

SIZ R=737; 740; 745. S=700; 691; 680.

DXZ R=8565; 8594; 8615. S=8485; 8425; 8319; 8287.

CLF R=5160; 5220; 5260. S=4975; 4883; 4800.

CCZ R=1500; 1530; 1545. S=1467; 1449; 1430.

KCZ R=7890; 7925; 8090. S=7630; 7510; 7440.

SBH R=880; 888; 906. S=845; 830; 820.

COMMENTARY

INDICES
The three major indices remain within the confines of their weekly pattern. The NDX and COMP show a little more strength than do the Dow and SPX. For the moment, things are on the upswing with no definite pattern to project change either to the upside or downside. The elections are but a few days away and then the after-fighting can begin. Until it’s all over and the results are definite, I suggest you to expect more of the same. Follow “Tech Data” for trading parameters.

INTEREST RATES
Creeping disinflation is being credited with the reduction in longbond rates. The 10-year met some resistance at the top of the weekly chart pattern and traders have taken a few long contracts off the board. Draw your own conclusions what effect a dramatic drop in energy prices may have on interest rates.

METALS
It’s interesting to see gold and silver mirror the chart pattern of long-term interest rates. That is a very unusual coupling. Ask yourself why the price of gold would be trending higher at the same time interest rates (the cost of money) would be coming down (or the price of bonds going up)?

CURRENCY
One reason metals have gone higher, of course, is the Dollar Index has dropped to resent record lows. But why would the price of Bonds be higher? Be prepared for a snap that will make sense later as you look back and say “How could I have missed that?”

CATTLE
Feeder charts suggest that live cattle price will remain high as long as money is cheap and corn and beanmeal is cheap. If that formula changes, so will the relationship of live cattle to feeders and the individual price of each.

ENERGY
A break has begun. Bulls are looking for a normal corrective type of move. I am more inclined to believe the top is in and the ship is rolling over. Once momentum picks up the rats will be seen leaving the ship, swimming for their lives. No one is going to throw life rafts out to save them, after all, they are RATS!!! I will say it again, I hold to my view that the energy markets will become oversold, and in crude that means it could go as low as $20.00/brl. It’s just a matter of time. For several reasons, I will repeat here. First and foremost is the China factor. China is not an open market economy. They are very controlled and in no way are they following the Western model of developing Capitalism. When the Chinese government says they are going to slow down growth, they mean it. Western capitalists may bet that China’s government doesn’t dare slow down growth rates. But they will lose that bet. China, as of last year, is the second largest consumer of crude oil, so it is stated. If the second largest consumer, within a controlled economy, says they are going to slow growth, what will that do to the oil market? T. Boone Pickens has focused his attention on forecasted oil demands to the tune of 85 million barrels a day by mid next year and has said he thinks this will force oil price up to $60.00/brl. If China does not slow growth I will admit to being wrong. Take your pick. Another reason I believe oil price is coming down is because the vast preponderance of oil participants are speculators, not consumers of crude. When that money leaves, consumers are not going to run in to save them by paying up.

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 just that. Nothing herein should be construed to be a solicitation to trade futures or options. Hedgers should have a defined plan.