FROSTY FUTURES

SEPTEMBER 10, 2005

INDICES

Highly liquid trading money came back into the stock market in sufficient amount to rally all the major indices across the board. The Dow cash index did not manage a close above a key resistance level, however, at 10,705, nor did the S&P close above key resistance at 1246. NASDAQ Comp. hasn’t even come close to testing its old high. On the other side of the coin, all those same indices are above key moving averages (MA’s). Therefore, the trend is up. Regarding my thesis of last week (See last week's column for support points) about the insurance and re-insurance companies liquidating stock and bond holdings to meet claims, that might still be valid. The first four words of this paragraph may be the critical idea.

LONGBOND

Price is stuck between the 9-day MA for resistance and the combination of the 30, 50 and 100-day MA’s for support. Go with the breakout in either direction. I’m sitting here thinking about the money coming in from the Treasury, foreign countries, private citizens, businesses. It’s quite a mix and I can’t foresee what effect that is going to have on bond prices.

DOLLAR INDEX

The trend in the buck is down. This week’s hesitation, at a point that is near the .618 retracement of the move from April to July, is just that, a hesitation. A 250-billion dollar hit has to weaken our economy to some degree. And if it doesn’t, then there must be an explanation for why. The damage to the southern coast is like getting hit in the nuts by Mike Tyson. Anyone dumb enough to think that’s not going to double you over is just plain full of ..it. I don’t care what kind of economic “cup” we might be wearing. The buck goes down.

METALS

If the dollar goes down, gold goes up, copper, at least stays strong, and silver waves back and forth between demand for industrial use and keeping up with the Jones’ in gold.

CATTLE

Good store specials increase demand for beef should be the headline next week. Charts indicate another 150-points, or so, to the upside on the live cattle contracts. I expect the feeder contracts to top out shortly. But remember, I have confessed that I am out of touch in the cattle market because I no longer feed cattle. Some very good analysts think that the market is due for a blow-off top.

ENERGY

Crude oil price as reflected on the Oct contract is showing critical support at the 6290 level. If it breaks the market CAN fall to 5500. Resistance is up near 7000. Nearby natural gas has support at 11.45. Should that level break then a correction should follow down into the gap with support near 10.10.

SOFTS

Cocoa charts presented a warning to bulls as a bearish engulfing line defined action Friday. The bullish argument is upheld by the fact the 9-day MA held price into the close. Coffee charts are presenting a trading envelope. No reason to believe that pattern won’t continue for awhile longer. Perhaps a saucer bottom is forming. If you are a sugar bull with, perhaps, a Feb time horizon here’s an idea for you. Buy 50 of the Mar 14-cent calls for 7 (or so) and sell 3 each of the March 11 calls (at 59) and March 10 puts (at 33). Total outlay, not counting commissions (negotiate with your broker if you need to) is about $830.00. Span margins should be low, but YOU MUST CHECK WITH YOUR BROKER’S MARGIN DEPARTMENT TO VERIFY MARGIN REQUIREMENTS. This is not a solicitation. Just an idea. Of course if you want to do it, I’d be happy to provide the service. You can adjust strike prices and raise costs some and be closer to in the money if the market goes up, but that’s up to you. Cotton is having trouble near the 52-cent level on the Oct contract. OJ shows decent support near 9000 so maybe 9500 is a valid draw. And finally, how can lumber not go up? Even if they recycle every board from every building in every city affected the price of lumber absolutely should to go up. When, is the question?

GRAINS

If you are a grain trader you should know what the basis is. Until the basis gets stronger, showing that river elevators want grain off the farm, price will languish in the corn and bean pit. Wheat showed some signs of life this week but we have to wait for follow-up to get excited.



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.