FROSTY FUTURES

AUGUST 5, 2005

INDICES

Over the past two weeks the major indices have not been able to plow through overhead resistance. It isn’t because there is a lack of cash out there, it’s simply because there is a lack of confidence. Downside target on Dow-30 is 10,450.

The rest of the indices will follow suite, more or less.

LONGBOND

The long bond is coming back as a cash instrument. Can’t blame the government for wanting to finance longterm debt at low rates. But you would have to be in dire need of fixed income to buy them at current yields. New target on Sep bond is 11315.

DOLLAR INDEX

May have hit support, for awhile at least. Expect the buck to bounce up to 8882, but there is resistance at 8825 so watch that.

METALS

Gold should weaken unless peripheral actions take precedence. Strikes, terror, surprises of one kind or another. Ditto silver which should fall with a correction in copper, which is under way. Support for the orange metal is 160.

CATTLE

It didn’t take long for the splash and ripples to settle. If you caught it, good job. If not, wait for the next bounce and sell again. There may be a small hammer bottom on the August and Oct contracts so let that pattern play out. Then sell again, and again. Feeders have run into a ceiling, with resistance near 10950. A close below 10785 Sep nails the coffin shut on bulls for awhile.

ENERGY

This week’s consolidation was a pretty tightly packed little package in the crude pit. This could mean that there was some doubt about putting new money in at these lofty levels and that this weeks trading range was a reflection of locals swapping dollars. And it could presage, and it’s my bet it does, either a breakout to 6550 or a break down to 5650. If the latter, then there may be a broad distributive top developing. If the former then a new trading range will be established between 6200-6550.

SOFTS

Cocoa hit a little support near 1450 but not much can be told from that. Longs will be tempted to place stops at the gap, so odds favor a break to clean them out. Coffee should find support 10300-10180, resistance at 10700. Support for sugar lay at 935 or so, but resistance is not to be found unless it is today’s high at 1035. Cotton is finding time to collect more information. As long as manufacturing numbers stay strong demand for the puff should be solid. The reduction in manufacturing employment numbers should be taken, and probably were taken, as a shot across the bow of the bull market. OJ found support near 9500 and may take another run at the highs. I’d rather be a buyer than a seller. I expect lumber is putting in a bottom. You should have begun to collect Nov call options in the 330-350 strike price range. They are not too expensive and they do hold good potential. Even if the long bond goes to 5.5% or 6% that will not kill the housing market.

GRAINS

My shot at the long side of wheat didn’t work, but for a very small loss. Good control is key. But the short side of beans and corn has played out very well. If you followed my advice your doing just fine. If you followed the players who buy the breaks you’re down if not out.

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.