FROSTY FUTURES

AUGUST 19, 2005

INDICES

This week I heard spitten’ and spewin’ Cramer tell people he wanted to take some money off the table. Given the looks of the charts I have to agree. The Dow appears to be forming a saucer top, the S&P and NASDAQ have a trend going that looks negative for awhile to come. But this is all in the face of a reduced budget deficit, static jobs picture (so we are told) and a massive roads bill.

LONGBOND

This week’s consolidation, if it weren’t so high in the trading range, would portend a rally in price. I am skeptical, but that is all. If bond price breaks out to the upside, we should expect a proportional rally, of about one full point.

DOLLAR INDEX

The buck failed to penetrate the 30 and 50-day MA’s on the close for the week. If there had been sufficient strength they would have made that technical breach. That failure may have significance for next weeks trade.

METALS

There is support for gold at 436.60 spot contract. The fact that level was not hit, or barely tested today indicates that gold and the Dollar Index are not disconnected. If today’s high in the Dollar Index holds get long gold for a rally back into resistance 448-452 next week. Silver has held above 692 as though it were on a magic carpet. Maybe that’s spillover strength from copper, maybe it’s of its own volition. Whichever, it appears to be a base. Copper closed less than a mere 3-cents lower this week than last. That would not tell me the bull market is over. We may very well see a retest of the recent highs.

CATTLE

The cattle on feed report was given a bullish interpretation, but there offsetting factors readily available to dampen bullish enthusiasm. Allow a day or two for any anxious trap setters to rally the market, then step in and sell it. Ditto feeders. But remember to keep your risk within sensible parameters.

ENERGY

After testing support near 6300 this week prices rallied on Thursday’s hammer formation. We should expect a test of 6600 early next week and perhaps a retest of the high at 6710. One caveat is the roll from Sep being the spot month to the Oct. The high on the latter contract is 6775. If it should be the case that unleaded gas contract assumes leadership it is worth noting that contract could not rally and close back above the 9-day weighted moving average. The same can be said should heating oil contract assume leadership. Either contract could pull crude lower, and if both contracts come under liquidation then crude bulls will be caught, at least for awhile.

SOFTS

Cocoa is building a small bullish formation that usually precedes a rally. A realistic target is 1420. There is sufficient divergence in the coffee technical indicators to call for a rally. It’ll take a close above 9825 to lock in the floor, but once done, a target that should be met is 10250. Sugar has put in a top indicating a potential drop to 915. Cotton is in position to do something of magnitude, maybe 500 points either way. OJ appears to have run the bull into the ground. This week’s weak close should stimulate trade from the short-side. The 100-day MA is a good target. Lumber has not been able to find a floor and the search continues. It will find sponsorship somewhere around here, but I don’t know where. Obviously I pulled the trigger too early on my call options, but that’s why I suggested buying calls and not futures. Lumber is like that…unpredictable.

GRAINS

The continued sell off is corn and beans is not surprising. Hope you are making money on them. Your wheat trade, long the Dec bull call spread is about even. Hold it for a few more days, and if it doesn’t turn profitable by the end of next week, salvage what you have left and look for another trade.



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

TO SUBSCRIBE: www.frostyfutures.com.

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.