FROSTY FUTURES
Friday April 29, 2005

STOCK INDICES

The Dow is in a consolidation pattern bounded by 10,000 and 10,250. Trendline resistance from the top coincides with horizontal resistance near 10,250. Next week, absent surprisingly bad news on the economic or political front, I expect a trading range similar to this week’s range with a probability of this week’s high being tested. Should bad news hit the fan support is weak and scattered all the way down to 9700. The S&P Index, while presenting the same general pattern, is supported by the 100-week moving average near 1139. Resistance will be found at the juncture of the 50-week and the 9-week moving averages, near 1170. Should bad news destroy the current pattern support is lacking on this index until 1150-1060 is strip is tested. I have to be this general because there is no way to know, in advance, what type of news might hit to generate such a sell off. The big tech index (NDX) is in a vulnerable spot whether one looks at the daily or weekly chart. Today’s reversal in price following the downdraft in crude price shows good monetary velocity, but is not assuring in the intermediate term outlook.

THE LONGBOND.

President Bush today mentioned the possibility of more demand for bonds by Social Security investors. With a limited supply of the 30-year bonds, that end of the yield curve dropped in rates following a trend since mid-March. If the calm becomes the status quo the trend will continue, with the first target near 117, and eventually the old high.

METALS

The general trend in gold and silver prices remains higher. I base this on price action and relative strength readings and a belief that steadily higher lows take precedence over once-in-a-while lower highs on periods of spikes. Any close below 635 in silver or 410 in gold changes my outlook.

DOLLAR INDEX

Politics and economics are at a crossroads as viewed by currency traders. It’s not so much a case of how strong or weak the US economy, it’s more a matter of lack of choice. How much more capital can go into India and China? What are the benefits of going into European currency at these levels? So asks one of my more astute clients. Good questions. And if an answer is not forthcoming I would look for a sharp rally in the Dollar reflecting short-covering.

ENERGY

Crude price pushed past my targeted 5600-5800 target by a few cents but have reacted significantly since then to the downside. This is to be considered a broad distribution top, with downside targets undefined for the moment. A strict classical analysis indicates the probability of a test of 4400, but support is strong in the 4500 area. And even at that, this market is so volatile that tight analysis is to be taken with a grain of salt.

SOFTS

Sugar and cocoa appear to have bottomed so trade from the long side on corrections to recent consolidation low points. Coffee is stumbling around at lofty levels absent a more serious weather scare.

Lumber remains a potential run away bull if/as good weather sets in so that deliveries can be made to waiting construction sites. There is an amazing correlation between lumber price and Walmart’s weekly same store sales numbers. When weather is bad for Walmart customers there is little demand from builders for new studs. That’s a hell of a note, isn’t it?

GRAINS

Beans being beans should find good support near the 600 level. Resistance is stable near 650 until a weather phenom comes into play, either in South America or our own grain belt. Bean rust in Georgia is being noted, but it’s just the analysts trying to stimulate a rally. July corn should be supported through spring above or near the 205 level. The top is undefined because we don’t know what stimuli will propel it. Wheat should rally off current lows as downside risk appears to be limited. Position traders can buy three July 340calls and sell one July future at current prices.