FROSTY FUTURES

MAY 13, 2005


STOCK INDICES

The Dow is breaking down as I write this at 2:04 PM. Next week we should expect a test of 10,000 and then 9600 unless some very positive news comes to save the day. Tuesday the 17th is a day of important econ reports and a good possibility of added volatility. A close back above 10,370 removes much of the risk of a further decline. Both S&P and NDX are similarly configured, only the numbers differ. You might watch GE for some leadership. It’s vulnerable to a fall down to 34, but if the 35 level holds, that might be a signal the Dow has found support at whatever level it might be at that time. I know about the tail wagging the dog, but it does happen from time to time.

INTEREST RATES

I decided to maintain positions in the long call/put bond trade I recommended last week. The sudden reversal in price and strong close today indicates a test of 11700-11716 might be in order. The reward seems to be worth the risk. There is always a chance of a runaway bull getting temporarily ahead of itself in these large markets.

THE DOLLAR

The Dollar Index has shot through of an area of resistance and will test the 100-week MA next week. A close above 8670 could be an indication a new up-leg is underway with the possibility of reaching into weekly resistance near 8900.

METALS

Needless to say, if the Dollar continues its rally gold will be hard pressed to rally very much. Silver may show more strength based on the economic news next Tuesday. Weak numbers will weaken silver.

CATTLE

Summer contracts look to me to be near resistance, if not at it. Some put plays or call writing could be in order. The more daring may try outright short futures plays but it is likely the inside players will go after the stops. It will be a good idea to play it that way during the rest of May, and maybe into the first week of June anyway. Look for statistical anomalies in pricing futures too close to current cash price and strike then.

ENERGY

Crude price has reached it’s first targeted support area. It may take some bump and grind to get it lower next week. Chart configuration indicates an eventual test of 4600. However, some back and fill action could take price up to 5200-5400 before the next leg down takes place. Take careful note of recent trading ranges, week to week.

SOFTS

Support did not hold at daily support levels in cocoa. If Monday comes and goes without good support we should expect a test of new lows to find where support is. May coffee is in position to test 11570. But this might be confusing as May goes off the board to be replaced by July. Be careful during this transition. Sugar found support near the consolidation lows on daily charts this week. A weak short covering rally into the close was the highlight. Look for a retest of those lows next week. July cotton should rally off trend and Moving average support near 5200 the first time it gets tested. Be ready for a quick trade in that area. OJ may clear stops in the area between 9000-8500. But should that test be made, take the opportunity to get long for a rally back into resistance at 101, with an outside chance of the old target of 105-110 being reached. And last, lumber overshot its tech downside target near 340, but gapped higher Thursday morning and closed out the week with some strength. Look for higher prices, but don’t get dogged stubborn about it. Walmart warned about future sales levels, and there is that correlation between Walmart’s sales numbers and lumber price.

GRAINS

Beans are testing support just above 600. Corn is in a support zone 200-205 with a chance of retesting 195. Wheat is also on support near 305. Over the years, particularly the past 10 or so years these support areas have been quicksand to bullish traders . I suggest qualifying bullish positions with downside protection. To repeat my wheat recommendation, buy three July 330 or 340 calls and sell one futures contract for each three calls purchased.

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.