FROSTY FUTURES

JUNE 24, 2005

INDICES

Several indicators came together this week warning of a market decline. The first was the inability of the COMP to get into the 2100 numbers. The second was the inability of the S&P to break into higher ground and that, coupled with a double-top formation on daily charts added to the doubt factor. The third was the inability of DOW to get to its technical target of 10,715. All these plus low volume convinced traders to force the short side and so it went. What’s next? For the DOW there is support at 10,265 and 10,175 and 10,050. For S&P support should be found at either 1187, near the 100-day MA, or 1177 near the 50% retracement of the recent rally. For COMP it’s either 2046 or the gap from last month near 2000. I suggested to you last week to expect a sharp drop in the market if positive elements were missing this week. “Absent that there is a potential for a double top to form which could be disastrous for the market.” This last sentence was the exact quote from last week’s INDICES section.

LONGBOND

The 11700 level couldn’t hold price down and short covering rallied price back into resistance near 11900. Should trend continue the target is 12316-12400. Support is centered around that 11700 level, again.

DOLLAR

A pennant pattern has developed which indicates an inclination to expect higher price. The target is 9096. Support is close at 8837, 8793 and 8777.

METALS

Another strong weekly close on gold indicates a break between the price of the yellow metal and the strength of the Dollar. To me that means gold bugs sniff inflation smoke. Fundamentalists can rationalize it anyway they want to, pro or con. I couldn’t care less. The fact remains that money is flowing into the gold market even as crude price and gas price rises. If the charts indicate a target of 490 that is what I will report. For now resolution in the near term indicates an attempt at 450. Support is near 437 and 431. Silver also shows an up bias, with support near 725-717. A close above 737 should be sufficient to propel price to 780.

CATTLE

Mad cow. Now we will see if the public has become immune or desensitized to those words. But first we’ll see if grocers have become desensitized. They do the buying before the public. A friendly cattle on feed report last week stopped the drop in prices and consolidation has begun. This will be a test of support under the market. You have to allow for a few days of down just to give Harriet Housewife time to digest the news. If she ignores it price will settle in for the summer doldrums. If she backs away from beef we can expect another significant drop in beef prices. If it’s the latter I expect feeder prices to drop down into the $1.00 range.

ENERGY

Crude will be either 62 or 55. Maybe both next week.

SOFTS

No one wanted to take cocoa home over the weekend. At least not near 1600. Support is 1512 and 1476. Coffee is weakening but should find support either at 103 or 95. Sugar made it up to 910, close to my 920 target. But no one wanted to go home long from that close to the tech target, either. Support at 890-886 should hold. Manufacturing numbers were sufficient (or something was) to stimulate buying cotton. At least that’s what I told you last week to expect. So until high crude price offsets the increase in manufacturing numbers keep buying cotton. Some dry weather may be impacting price, but cotton is a dry weather crop. OJ is on a stair step to higher price. The target remains 105-110. Don’t know what’s down with lumber. Weather is dry, new houses are selling, there is no oversupply. It should rally but the tech target, after this week’s failure is 305. Buy call options for Sep or Nov and see if you don’t make some good money. Be careful about your executions and try to buy them when price is going down. The locals and dealers are more prone to selling them at those times.

GRAINS

Strong closes today indicates a dry outlook for next week. HIGHER!

CONTACT ME: williamfrost@comcast.net or call 615 331 8567.

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