FROSTY FUTURES

NOVEMBER 19, 2005

INDICES

Pundits are bullish as major indices take out or approach old highs. So it’s time to take care. Tax breaks for the wealthy are really coming under fire as the rhetoric takes on new, higher decibel levels. Media mongers are making the news rather than reporting it, as usual, and they smell blood. The VP is not only a draft dodger but also a liar, so the story goes and the Pres is not only a spoiled child but also a dupe having fallen for false intelligence reports at the hand of an Arab anti-Saddamite, or so the story goes. There is some momentum behind the rise in the intangibles, read stocks, and tangibles, read some commodities, as petro-dollars are invested. With the breaking of the energy market bubble, for the time being, it stands to reason the influx of investment capital from that source should be near an end. Then what? Until something happens to make crude, distillates and nat gas go higher new capital flow will slow, bullish momentum will wane, patterns of distributions will dominate the charts and a fall will ensue. Just that simple.

LONGBOND

The Dec treasury contract is just below the 50-day MA, with support just about 11205. If that cracks then the next support is 11127 or so.

METALS

I missed the run up in gold from 468 to 490. Confusing chart patterns on gold, silver and the Dollar befuddled me. And I remain befuddled relative to the charts. I can rationalize, easily, the action but I lack any confidence in the ability of the metals to sustain this sudden jump. Yes, I remain longterm bullish gold and silver. And, yes, it is one mark of a bull market blow out bearish signals. And that is what we have. But we must be conservative if we are not going to just transfer funds from ourselves to someone else by chasing technical blow-outs. We will re-enter long gold and silver positions, but not right here. If you have been reading the daily updates I have sent out on copper you know the possibility of a radical move, in either direction. At this point I lean to a liquidation phase forthcoming and plan on using that as an entry avenue to gold and silver long positions.

DOLLAR INDEX

In the last Frosty Futures comment (Nov 5) I mentioned that the target on the Index was 9530 but that resistance would be encountered at 9250. Consolidation just under 9250 has been the action this past week. But support has held, the trend remains higher for the time being so support should hold above 8925.

CATTLE

Technical signals weaken as price slides sideways with a slight upward bias. This time of year the beef market is susceptible to a drop with a shift to ham and turkey. With all the cross-currents flowing this year that seasonal trend may be denied. So be careful should you decide to attempt to sell into the current resistance patterns. In the hog market we pulled a successful trade out of the hat thanks to a call from our friend at AGE, Dan Vaught who suggested to us that there might be a good rally off support near 6000 on the Dec contract. Thanks Dan. I don’t like the hog pit, but I did like the idea and I hope more of you made money than just those who have their account open with me and who did the trade. Past performance is no guarantee to future successes, but a trade like that can pay for a lot of months of subscriptions and even a Christmas present or two.

ENERGY

The target on crude’s continuation chart is 5425. The market is weak, the trend is down so there is no reason yet to believe that target will not be obtained. Except for the fact that heating oil is near it’s first tech target near 1.7430 basis the Jan contract. Unleaded is not responding to its technical indicators at all. By chart rules the trend and price should be nearer 1.40, but as you can see price is closer to 1.46. This could mean there is an opportunity to buy heating oil and sell unleaded as we get into the winter season and temps become more seasonal.

SOFTS

We have the cocoa trade on the March options. The contract is at resistance and we expect further unrest in the major producing nation to have a bullish influence on price in the near future. It’s a calculated risk. Support for coffee is just above 9500. Tests of that level can be used as entry points, expecting a rally into longer term overhead resistance near 110.00. Sugar is back into a consolidation pattern so traders may want to look at selling premium and managing stops. Cotton traders are waiting to take profits on short positions on a test of 5100 basis Mar. Recent consolidation does not reflect, so far, any real strength. OJ has developed as good a bear pattern as we are likely to see in this market. We have discounted wind damage, smut damage, Brazilian crop size and fear of all. Now the weight from supply will work to overcome that fear as the decline begins, but if Coca-Cola Foods and the co-ops decide to take it higher, so it will go. The uptrend in lumber is underway, supply has been discounted, demand has won the contest. Lumber does not trend well so expect ragged price action as small specs get mopped up.

GRAINS

Beans are closer to a bottom as harvest nears an end and Brazil’s and Argentina’s crops are discounted in early planting periods. A good possibility this year may be the meal/oil spread basis the July contracts. In corn, price may go lower but the spreads look rich to me. There is probably at least 4-cents to be picked up in the Mar/Jly spread at current prices and maybe more than that if weather becomes an issue this winter or spring or demand picks up. Bullish justifications in the wheat pit have amounted to a hill of beans or less as price declines have dominated. The technicals will have to run the course before price reflects the bullish arguments.

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.