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TRADE Focus
10/03/2008
Many commodity sectors suffered this week along with the nation's stock markets. Fear and economic confidence, or lack of it, prevails. The much awaited bailout bill finally was approved by both houses of congress and signed by the President Friday afternoon. The markets, unfortunately, were unable to hold on to the gains made prior to the vote. What lies ahead? We shall soon see.
The importance of risk management in trading is so very vital to the ability to be successful in any trading environment but especially so in the volatile markets we now experience. Trading discipline utilizing this tool should be utilized without any doubt or question.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
 Silver- Last week we said that the 1388 high basis the December contract was at the first of the significant retracement levels of resistance. The market has sold off appreciably since trading below the 125100, 1210 and 1167.5 levels mentioned in the previous week, but has still held the significant low of 1031. If this price is breached it might well set the stage for a test of 950 and possibly 850. On the upside, if the 1388 is penetrated the next levels to watch for would be 1480 and 1590.
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 Gold - December Gold traded as high as 93200 on Monday the 29 th which satisfied the third retracement level of resistance. We suggested last week that "if long a reduction in position quantity may be prudent. Regardless, adjustment of risk management stops should be made. If you have a bearish attitude toward gold short positions could be protected above the (93200) level." Since the high at 93200 it has retraced just into the support zone between 83300 - 81100. A breach of this could lead to a test of targets at approx 79500 and then 76600.
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 Euro Currency - After reaching a significant level of resistance at 14846 following the 13811 low made back on September 11 (see the Sept. 12 edition) the December euro currency fell through the retracement supports and into new low territory. As of this writing the low has been 13691. Last week after hitting the 14846 resistance we said, " If long consider reducing or liquidating the position. ....... Those bearish the euro versus US dollar and using this level to establish short positions should protect at least above the 14860 level." If bearish and now short, adjust protective stops accordingly. Target levels below the market are currently at approx 13550 and 13275. There is also a significant retracement level of support at approx 13325 basis weekly chart data.
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 Chicago Wheat - The Chicago Wheat has fallen decidedly below its Head and Shoulder neckline on the weekly chart. The normal measuring objective is almost unmentionable here as it seems so unlikely. The distance from the head to the neckline is approximately 6.00. The break of the neckline was approximately 720. So that makes the objective ~1.20 per bushel. We are not so bold! However there are more realistic targets now in play which are approx 610 and 575 basis weekly data. |
 Live Cattle - The low this week and as of this writing, reached 9557. The objectives we have noted since discussing the prospects of the October Live Cattle contract have been 9850 and 9500 since the break of its neckline up around 10330. Perhaps its time to say "close enough for government work." In other words consider declaring this mission accomplished. If not move protective stops accordingly. |
 S&P 500 - S&P 500 breached the extension target low we had pointed to at approx. 113315 (see Sept 19 edition). The low basis the cash S&P 500 we show as 110639. The low for the emini S&P 500 has been111200. It appears that there is a definable trading channel that can be drawn where this low falls on the bottom end. Using this low and the high of August 11 at 131525 we get retracement resistance levels of approx 118900; 121300; 123725. As we are writing this Trade Focus the bailout bill has been voted on and passed. Now we shall see what happens next. If trading from the long side the channel may help determine the risk. If short adjust stops accordingly. |
 Dow Jones Industrial - We have mentioned an old area of breakout that actually occurred in 2006. The process of retesting this level continues. |
 Soybeans - Last week we concluded our comment saying, "There remains a potential for a 1025 target level to be traded if, for example, the report or the economy cascades the November Soybeans to a new low below the 1099.50 of 9/18/08 ." The USDA report on Sept. 30 and the stock market probe into new lows for the move and for the year following the House rejection of the bailout bill early in the week amid the continuing credit crisis forced the Soybeans through the former low and beyond the above target area referred to. It appears there is a possible Head and Shoulders pattern projection to below 8.00. |
 Bonds / Notes - We pointed to weekly reversals in both bonds and notes last week. This week we will add the monthly downside reversal posted in the T-Bond contract. It appears that opportunity to short exists above the120-00 level exists with protective stops at or just above 121 -10. We will continue to monitor as this situation evolves.
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