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TRADE Focus
11/06/2008
We would like to begin our commentary this week with congratulations for President-elect Barak Obama on his election victory and becoming the 44th President of the United States. Likewise, we feel it appropriate to congratulate Senator McCain for the difficult campaign he ran and the odds he faced. In the end there were too many obstacles to overcome.
There are times where trading markets reach a point when they need to get "flushed out" before they are capable of restoring energy and staging new advances. There certainly have been many markets of recent note in this regard and examples include the U.S. dollar, energies, grains and of course stock markets around the world. There is an old saying around here that goes, "the cure for lower prices is lower prices." The thought has occurred to us that it is possible this applies to other spheres such as economic, political and societal. As difficult as these times are to endure it may be what is needed to reenergize political and socio-economic systems providing a platform from which to launch to new levels of achievement. We have seen many times where markets reach blow-off phases at either highs or lows. The past several months have provided many examples of both and prior to the Great Depression there were the Roaring Twenties.
Here we are now mired in what we perceive as dire economic straits where the banking system we knew just a few months ago no longer exists. Gone are the major big, brand name investment banks. President elect Obama told us it is time to come together. It is always time to come together. And what an opportunity this just might be. It is an opportunity for a leader to lead. To lead by his example. To lead those who were afraid to aspire to aspire. An opportunity exists to renew the energy to face that which we face today and will tomorrow. Mr. Obama says, "Yes we can." We prefer to believe Yes We Will!
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
Silver -  Last week provided an upside reversal on the weekly charts. Thus far there has been some follow through but we notice that the high of this day has touched just slightly through a downtrend line that started back in July. Poor economic data has pressured many markets since the election and silver has now seemed to join in. Retracement resistance levels remain the same as last week: 1112; 1177. We had pegged a downside target at 860 which we mentioned last week had been satisfied for now. There is a small extension target of approx 108850 above which it has just fallen shy of in this morning's session.
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Gold - The past week saw consolidative action continue off the recent low of two weeks ago. Gold remains in a downtrend and subject to outside influences from other commodities, the US dollar and the general economy. There was a reversal bar the day of the low which remains intact and suggests that even within the downtrend there is some chance of trading to levels above current prices. We noted last week that near term retracement resistance had been hit at the 778 level with 808 and 838.50 still in play.
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Euro Currency - The pattern since the low for this downward move in euro, made Oct 28 at 12326, has provided small extension targets of approx 13095 (which was hit Nov. 5) and 13220 to the upside. The action has swung back and forth giving almost a 600 point range in the week since we last wrote. Beneath the market, a recent swing pattern has created potential extension targets of approx 12380 and 12188. What we believe are the major retracement support levels we are revising to approx 12165 and 11265 from what we stated in a previous Trade Focus edition. The trend is down but with some signs of recovering from very oversold conditions. The 13277 high of Oct. 30 and low of 12326 of Oct 28 appear to be good parameters for protective stop placement.
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 Canadian Dollar- We introduced the Canadian Dollar into our mix two weeks ago because of a significant price level it reached on the downside. Actually it exceeded the 8028 basis the December contract we mentioned, reaching a low of 7686. That decline started from a level above 11000 . It has since recovered to as high as 8715. We suggested pursuing long positions. If long make sure to adjust protective stops accordingly. Retracement levels of support are approx 8330; 8205; 8085. |
| Chicago Wheat - The wheat remains bearish. Since the 496.5 low Oct. 24 it has traded in somewhat of a bear flag pattern reaching a high of only 587.75. We mentioned retracement resistance levels of 597; 628; 659 which remain intact and a potential 485 near term target on the downside. New lows below 496.5 will negate the resistance levels and we believe create new target levels. We shall update those if activated. We also have said the past two weeks that, "wheat seems to find its way back to the 2.00 area after hitting extreme highs such as in 1973 and 1996. We will stick with that for now. |
S&P 500 -  As we prepare this section the S&P is under heavy pressure for the second consecutive session following the presidential election. The week or so leading up to it saw a rally off its 825 (December emini) low to 100850. There has been poor economic news and anxiety ahead of Friday's (Nov. 7) October unemployment data. Retracement resistance levels are approx 100200 (hit); 105725; 111250. Retracement levels of support are approx 93975 (hit); 91775 (hit); 89675. So far the low has been 89700. The accelerator pattern mentioned last week has been negated and we will be watching further developments. Stocks remain volatile and traders need to remain nimble. Often we would consider the third support in a series a potential buying opportunity but with the report tomorrow morning at 7:30 am Chicago time, the likelihood of moving significantly through that point is increased. |
| Soybeans - The ability to gather strength and steam has yet to materialize. The trend certainly remains downward. New positions from the long side should certainly use new lows to protect. We believe that new lows would also signal another leg in the direction of the current trend and short positions could be entered on that basis. Since the trend is downward and the old saying says, "The trend is your friend," we believe it would be wise for us to focus on that until further notice. |
Bonds / Notes - The low since our last edition for the December t-bond contract was 112-19.5. Last week we stated, " We still believe the bigger picture will see lower prices with ideas of 105-00.0 in our mind.  The price level of 112-16.0 basis the December T-bond remains a significant level of support and warn of establishing new short positions too close to this price." Since the 112-19.5 low November 3 the high has been117-12.5. There is resistance in this price area with the 50 day moving average at approx 117-16.5 and a .618 fib retracement of the most recent daily bar swing downward at approx 117-03.5. The volatility of the past few days raises some extra need for caution in our opinion. A close above the 50 day moving average would be a good signal to exit short positions and closing above the 120-00.0 basis the December t-bond would be cause for us to reassess at least the intermediate term prospects of this market. |
Coffee - We added coffee to our coverage last week based on a significant 50 pct retracement level being met. Commodities in general have taken it on the chin these past few sessions and some rather dramatically. Certainly penetration of the 10505 low basis the December contract would signal an exit to any long positions. We might also add here that if you are not in it there doesn't seem to be any rush to do so. We will watch for new developments. Penetrating the low may eventually lead to a move to near 9000.
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 Crude Oil - We are adding crude oil to our coverage only because it has fallen to a significant .618 retracement level using all the data available to us since 1983. It is probably best to allow a "buy signal" of your choice to surface before entering this very volatile market. One in mind would be a daily reversal. We will continue to monitor for opportunities. If long positions, or short for that matter, are entered make sure to utilize money management and protection techniques. |
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