| |
TRADE Focus
11/20/2008
If any questions, comments, observations or more importantly any answers, please feel free to contact us at : 1 800 321-5810 ; email cbands@cbandsbrokerage.com
The market analysis and commentary section of this edition of Trade Focus was prepared and written during the course of the day on Wednesday November 19. The charts were prepared and added the morning of Thursday Nov. 20.
Economic news continues bleak for the most part. Housing data, particularly the building permits number, we thought was quite dismal. Minutes from the last FOMC meeting were released and placed more fear on the outlook going into the middle of next year. They emphasized that conditions for growth and employment had deteriorated considerably. The auto industry pleaded its case to Congress for a bailout package and there appears to be a good deal of uncertainty whether one will be offered. On top of the news itself is that even with the influx of cash into the financial system that has taken place, banks remain reluctant to lend. We believe it's likely they are afraid they won't see them get paid off.
Economics is an inexact science. We have heard so much disappointment expressed toward Treasury Secretary Paulson because of the decision to not buy the toxic mortgage paper as originally planned. He has instead told us that a Plan B would be more effective to help the country and possibly the world through this economic crisis. Things changed in the time that the original buyback plan had been considered and sold to us all. We believe that each crisis is its own unique situation and Secretary Paulson said as much we believe, when he said that basically there is no one sure fix for something that has never happened before. The universe changed so it was time to execute a Plan B. Maybe the guy deserves some credit for this. This in fact very well could be part of the bigger picture management plan. If this, then do that. If this changes, we then do this. This may be somewhat like trade management.
Play the hand you are dealt is a common saying and applies to many things. Life being a good example of one of those things. But it may not be any more applicable than about the world of trading markets. One of the biggest killers among traders is allowing emotion to take charge of decision making. Forgetting that it is always darkest before the dawn and whatever other suitable catchy phrase we want to use. The idea is that just because a market may be falling fast it isn't necessarily bearish or necessarily going to continue its fall if it has yet to violate its support. Likewise with rapidly rising markets. Too often traders and brokers alike will be watching as a market is on a run and allow the emotion of its speed or the fact that his quote board is all red or green get the best of him. This leads to many executions becoming selling support or buying resistance instead of the other way around as it is supposed to be. Another way to describe this phenomenon is micro trading a macro position: getting in too soon or out too early because of the fear emotion or the phony adrenaline rush, watching a micro move taking place. If a market is trading within a pattern and the plan is to execute once the pattern is broken, then exercise patience in allowing the market to do its thing and tell you when to pull the trigger. We once heard it said to let the market force you to make the trade and believe that is a wise approach. Let the market make your decision. Be prepared but do not project a trend change, for example, until the market price has done so. This is the point of trading management. Before a trade is executed it has to be thought out as to where to enter, what the price objective is and as to where it has to go to prove the trade wrong. The appropriate orders are placed for entry, loss protection and exit all at the same time. This keeps emotion from running the program. This is also why so many traders have adopted auto trade methods. The program does these things for them.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
 Silver - Not much new to report here this week. There was a period of consolidation with a test of a downtrend line that started in the latter part of September. Retracement resistances are approx.: 104750 (hit); 1112.00; 1177.00. If new lows through 840.00 basis the December contract extension targets of approx 810.00 and 685.00 would be activated.
|
Gold - We mentioned last week that the gold had consolidated forming a pennant which it had broken out to the downside. It was a brief break and appears to have created a larger pennant formation to which it has retested its upper boundary as we are writing today. Since there was no follow through on the initial breakout we will reevaluate any measured price objective when appropriate. If a new low below the 681 basis December is made, extension targets of approx. 625 and 590 will be activated. Retracement resistance levels remain approx.: 778; 808; 838.5.
|
Euro Currency -  The December euro staged another upside reversal after we wrote this section last week. It had emerged to the downside out of a smaller pennant or triangle pattern but did not follow through and may have just created a larger one. As we write this morning it has made the attempt to break out to the upside but the gains could not be maintained and it has fallen back within the pattern and appears ready to test the lower end. The stock market's influence remains an issue and its move lower once again took the euro along. The November 13 th reversal day's range for the December euro contract may provide the parameter to guage a breakout for either direction. That would be 12848 and 12372. If entered either long or short based on these levels we suggest making sure it closes in your favor to determine if wise to hold. Retracement resistances remain approx. 12716 (hit); 12823 (12800 high); 12930. The next series above the market utilizing a larger portion of the downwave are approx.: 12896; 13075; 13255. We will reassess price extension targets and measured price objectives.
|
| Canadian Dollar - We have advocated the long side of the December Canadian dollar since it had reached a significant retracement level of support back in late October. The market proceeded to rally up to a .500 retracement level of its last major portion of the move down. It then fell to retracement support when last week we said, " We mentioned last week that the retracement levels of support were now 8330; 8205; 8085. With today's low of 8044 (at the time we are writing this) we consider this retracement satisfied and believe new long positions are reasonable. Make sure to utilize protection and we would suggest that a close below 8000 for the December (contract) would negate this approach for now. Penetrating the 7686 low would give strong reasoning we believe, to establish short positions." We will stick to this analysis. |
 Chicago Wheat - Wheat remains bearish but holding. We are revising previous targets upon the making of new lows below the 496.50 of October 24, basis the December contract. If this should occur, the extension targets will be approx.: 425 and 390. The retracement resistance levels remain the same at: 597; 628; 659. The potential for wheat to eventually trade in the 2.00's and possibly in the high 1.00's we believe still exists We mentioned wheat versus corn spreads in last week's edition. This idea is still intriguing but not yet compelling. We will continue to monitor.
|
S&P 500 - We began last week's comment with, " The recent lows are being assaulted as we are writing this." Ditto.  In fact a new low has been posted at 80425 basis the December emini contract as of this moment. A close below 81675 activates the targets at approx.: 720 and 658. The chart formation that has been hashed out since the first in this series of sub 900 lows resembles a right angle triangle. We believe a close under 800 will suffice to call it a breakout and the price objective based on that formation we believe to be the mid to low 600's. We suggest using a close under 800 to establish short positions with these targets and objectives in mind. |
 Soybeans - We will reiterate last week's comment as nothing has changed. " Last week we said new lows would also signal another leg in the direction of the current trend and short positions could be entered on that basis. . "A close below 850 basis the March Soybean contract we believe activates targets of approx. 750 and 698. Currently retracement resistance levels are approx.: 1000; 1043.5; 1089.5.
|
Bonds / Notes - Treasuries caught fire the past four sessions. Attempts at shorting at the 119-17.0 level in the December contract should have been stopped on the close above 120-00.0.  We suggested to establish long positions on that basis. As we write, the December T-bonds are trading 122-19.0. We felt this close above 120-00.0 confirmed a double bottom whose price objective is now approx. 127-09.0. If long employ your money management strategy, including moving stops accordingly. We suggest locking in break even at a minimum. In case following or trading the t-notes, the same double bottom pattern did not exist in this market so we felt less prone to make a trade suggestion at this time. We will continue to follow however.
|
Coffee - We suggested long positions could be initiated basis the March coffee contract using the price of 11500 as a benchmark. The protection we suggested would be beneath 11000. The low of the week we show as 11060 so if long we believe protection should be maintained at below the 11000 level with consideration to reverse short, particularly on a close below that 11000 price. We still need more development in order to provide retracement and extension levels. |
|  Crude Oil - We had mentioned the possibility of a significant retracement low having been met in the crude oil and consideration to long positions based upon a buy signal of your choosing could be used. We gave an example of a daily reversal as one method. This would have been enacted the day we last wrote. The market has not held however and long positions do not appear appropriate to hold at this time. We believe new extension targets of approx. 4325 and 3700 are now active.
|
Archive
|
