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TRADE Focus

09/26/2008

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We have had a full week of hearings and legislative rhetoric regarding the "bailout" proposed to us by Treasury Secretary Paulson. We have heard agreement and disagreement over whether it's a good idea or bad; whether this proposal is the correct one or not etc etc. The point intended here is that something needed to be done and it is likely that this proposal is an educated one. We haven't heard how it was arrived at but there is good reason to suspect there is form and substance to the format and the dollar amount. It is even possible that the infamous 700 billion is an inflated number in order to leave room for haircuts. Whatever the case, the reality of our credit market crisis appears to strongly suggest some action is needed now. Otherwise we would have been saved all the hearings and rhetoric. Secondly, it seems very likely that the proposal and forthcoming action is not so much a bailout of Wall Street as it is a bailout of the American economy, the American people and likely the global marketplace. There is know way to know this for sure of course, but if the economic engine of the US is unable to transact business everyone suffers and its likely that an even greater separation between the haves and have nots would be the result.

Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.

Silver - As of this writing the high of this rally for the December contract has been today's (9/25/08) high of 1388.00. This is the first of the significant retracement resistance levels off of the 103100 low mentioned last week. If long this market reducing some of the position may be warranted. Moving protective stops accordingly is also wise. Until the 138800 is surpassed, the retracement levels of support will be approximately 125100; 121000; 116750.

Gold - Consolidative action for the most part this week following Monday's strong gains. Believe it or not the 92600 high for this explosive move basis the December Gold contract off the 73980 low came within a few dollars of the 3 rd retracement level of resistance at approx 93000. Until that level is penetrated the reactionary retracement levels off this high are approx 85500; 83300; 81100. If long a reduction in position quantity may be prudent. Regardless, adjustment of risk management stop should be made. If you have a bearish attitude toward gold short positions could be protected above the 93000 level.

Euro Currency - This week's high of 14846 in the December contract made Monday the 22 nd was very close to a direct hit on the 50% retracement level from the low of 13811 made 9/11/08 and its contract high of 15907. At the same time the 14846 was made the 50 day moving average was 14866 providing additional resistance to the fierce rally of the past 2 weeks. If long consider reducing or liquidating the position. New highs or a period of consolidation to a retracement support may be needed to regenerate strength. Those bearish the euro versus US dollar and using this level to establish short positions should protect at least above the 14860 level. Retracement levels of support off the 9/22/08 high are approx 14450; 14330; 14210.

Chicago Wheat - This week's price action moved mostly above the H&S neckline on the weekly chart. The USDA Grain Stocks report is due the morning of 9/30/08 . Near term retracement levels of resistance using the December contract daily data have been met this past week. They were approx 726.25; 739.25; 752.00. The next intermediate term levels are approx 789.25; 821.25; 853.25.

Live Cattle - The price action in the October contract stayed below H&S neckline this week. The downside objectives remain 9850 and 9500. If short continue to monitor your risk management stops. The neckline has receded to approximately the 10340 level.

S&P 500 - Last week it was mentioned that a key extension target had been hit at its low from which the market made a sharp reversal. This week saw what those looking to fill space might refer to as "back and filling." With all the commotion surrounding the credit crisis/bailout scenario creating a fairly wide swing it has been impressive perhaps that the reversal low has been maintained. The near term retracement levels off the lows were quickly reached. Basis the December emini S&P 500 contract those were approx 120400; 122550; 124650. The next set of intermediate term retracement levels of resistance are approx. 125275 (hit); 128925 (hit) leaving 1325.75. Using the October '07 highs and this recent low the retracements are approx 132100; 137800; 143520.

Dow Jones Industrial - Last week we mentioned that the Dow had retreated to a previous upside breakout level as shown on the monthly chart. Interestingly, it also reached the smaller of the two extension targets of a secondary down wave. The potential for a government plan to address the current credit crisis feeding on the economy seemed to provide impetus for the market to respect this price level. The most near term resistance levels have been hit as in the S&P. The next levels of retracement resistance basis the cash Dow are approx 11478; 11794; 12111.

Soybeans - Last week we pointed to the significance of the lows reached basis the weekly chart data. This week we will focus on the November contract and its rally to a high of 1212.25 from its low of 1099.50 made last Thursday 9/18/08 . The retracement levels of resistance for the intermediate term are approx 120375 (hit); 1236.50; 1269.00. Remember, USDA reports on grain stocks Sept. 30. There remains a potential for a 1025.00 target level to be traded if, for example, the report or the economy cascades the November Soybeans in to a new low below the 1099.50 of 9/18/08 .

Bonds / Notes - A weekly reversal last week in both the bond and note futures followed up with follow -through to the downside thus far. The reversal and move off the highs have already reached some of the significant retracement values on the daily chart data. We will though, be watching and updating as a potential trade pattern evolves.

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