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TRADE Focus
12/17/2008
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 Trade Focus commentary was written the evening of Tuesday December 16. The trade analysis portion was prepared during the course of the trading day on Wednesday December 17.
The Fed's policy announcement appears to send the message of drastic measures for drastic times. It is historic. The FOMC voted unanimously for a 0 to .25 fed funds target along with additional measures and indications it will go to virtually any length to infuse cash into the financial system. They are telling us that this system is very broken. We have already seen ZERO percent T-Bills and T-Bond futures now at all time all time highs. The appetite for security of the US government backed treasuries being insatiable. This can only tell us that there is an awful lot of fear out there. Stock prices, however, rallied sharply following the Fed's announcement and policy statement. In fact the S&P futures surged out of a well defined trading channel and settled above its 50 day moving average for the first time since September. We caution though that the cash chart of the S&P 500, although closing above its 50 day moving average, remains within its respective channel. It may be that the strength exhibited on this Fed Day was a sort of "irrational exuberance" and investors may need to maintain a cautious view until further evidence is given supporting this momentum. But markets are markets and they are forward looking. The stock market, we are told, represents a value of perceived future earnings. We wonder how far off in to the future these expected earnings will be warranted. We must ask and be concerned if these measures adopted by the Fed and our Treasury Department will be capable of fixing this system in such disrepair.
Trading markets, despite what any one of us may personally think at any given time, need to be respected. A market is a collection of buyers and sellers willing to transact at an agreed price at a point in time. When trading, we are but a participant. A trade is just a trade. It is as an at bat is to baseball. When we have determined, based on the tools we employ, that a position long or short is warranted, believe it or not, we could be wrong. And we could be very wrong. If we respect the fact that this can happen we take protective measures such as protective stop placement so that we do not allow the possibility of just being wrong turn into a financial disaster. Lately being on the wrong side of the Euro upon its breakout or T-Bonds on their relentless surge higher has provided good examples of the need to respect the markets. Good hitters in baseball have a batting average of .300. That means more than two thirds of the time they take a turn at bat they do not get a hit. In trading good traders do not "bat a thousand" either. Good traders know how to accept and take a loss. It is a key to success, according to many successful traders. Respect the markets and employ trading strategies with built-in protective and money management measures. In the big picture, trading markets is a game of percentages too and it helps to make them work for you.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
Sugar - Last week we said that a zone of resistance appeared to exist between 1175 and 1205 basis the March Sugar contract. The high in the week since we last wrote has been 1207. We stated then that a close above 1300 looked like a sign that sugar could be confirming a double bottom and to use that as a stop and possible a reverse to long entry. We hold to this belief. If short we believe the objective to be the 900 area.
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Feeder Cattle - We wish to stick to what we stated last week: " We believe a sell area falls between the 9265 and 9465 resistance levels and if entered short on this basis stop protection is suggested on a close above 9550. That would put it above the third resistance level, the 50 day moving average (currently 9556) and a significant downtrend line. This also causes us to amend what we said last week regarding 9310 being the price level which would negate this trade idea. It becomes 9550." The downtrend line alluded to comes in now at approximately 9360 and is descending. The 50 day moving average we show as of this moment 9450. |
Silver - We mentioned last week the high end of the trading range for March Silver being 1077.50. It has emerged above this level reaching a high of 1161.50. We had suggested using a close above 1077.50 as a method of entry. Yesterday's official close was 1070.50. It appears as we prepare this that it will settle well above the signal level. We believe the price objective initially comes in around 1270.00 and suggest that entries at this point be made according to individual risk tolerance. The next retracement resistance level above the current trading price (1144.50) is approx 1184.50. The next series of retracement resistances above this are approx.: 1278.00; 1411.00; 1544.00. Make sure to implement money management strategy upon establishing a position.
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Gold - February Gold pushed through its 842 - 846 resistance level mentioned last week. It also has surpassed the 851 target. The high made as we are preparing this (current price 868) has been today's high of 883.60. That put it just slightly above the 3 rd retracement resistance of the second series of resistance levels stated last week. There is a downtrend coming in at approximately 890 and this is descending. A close above the downtrend line could suggest a retest of the contract high near 1025 or higher. We will be attentive to this if it occurs.
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Euro Currency - The March euro currency continued higher following its breakout we spoke of last week and has exceeded the measured price objectives of approx. 13700 and 13865 we mentioned. It has reached a high of 14403 as we write. The nearest and last in the series of retracement resistance levels is approx. 14430. If long, based upon the pattern breakout scenario we outlined continue to utilize money management strategy and protective stop movement. We suggest a close below 13600 as the lowest level for stop protection needed at this time.
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| Canadian Dollar - Last week we wrote "The entire pattern that began back in late October is another triangle formation and this week did see a breakout to the upside. Our conservative measurement suggests a price objective of approx. 8560 while the more aggressive measurement yields approx. 8890. There are also now two separate double bottom possibilities where a close above 8254 produces an objective in the area of 8800 and where a close above 8705 produces an objective in the area of 9675." The March Canadian Dollar contract has now also closed above the 8254 level therefore the 8800 level is yet another possible objective. The 8315 retracement resistance was hit as the high has been 8367. As there were a series of waves on the way down in price there are a series of retracment resistance levels. The next level above the current market is approx. 8400. Following this there is a series at approx.: 8460; 8700; 8940. A close above 8705 will provide the larger double bottom confirmation with a target of approx. 9675. We believe that at this point a close below 7950 negates the trade idea from the long side. |
Chicago Wheat - The March Chicago Wheat contract is attempting to make a close above its 50 day moving average of approx. 551. If it should do so it might provide momentum to some higher level of resistance. Let us restate from last week: "We view the rally as temporary and shall present another selling opportunity. There are a number of retracement series' of which the two nearest have resistance levels of approx.: 523.25; 539.50; 555.00 and 589; 625.25; 661.50." We feel it wise to be cautious before suggesting short entries at this time but because we remain longer term negative we will be patient and wait for additional signals. |
S&P 500 - The March emini S&P emerged out of the upside of the trading channel we mentioned last week and it closed above its 50 day moving average for the first time since early September. We have one bit of caution to note and that is that the cash S&P did not close out of its respective trading channel as of yet. We suggest it best to wait for that to occur before making an entry based on the previously mentioned breakout. Retracement resistance levels we feel significant right now are approx.: 94000 and a series of approx. 95775; 102600; 109400. With the continuing release of negative economic news, which included housing data this week and the Feds policy statement, we find it remarkable we are speaking of an upside breakout potential. We feel it necessary to urge caution and to urge strict adherence to trade management strategy, particularly protective measures, upon any long or short positions entered. Basis the cash S&P we believe that trading channel upside breakout level to be approx 94000 and is descending. If this were to occur the measuring implications are in the area of 110000. Hard to imagine we know. |
Soybeans - Our outlook remains negative and like our attitude in the wheat we have developed a bit of hesitancy in suggesting initiating short positions at this time. We believe it best to exercise patience, but won't lose sight of our downside bias and objectives just yet. This week saw the rally continue and it so far has stopped just shy of the second retracement resistance level in the most near term series of resistance levels which is approx. 886.25. The next in that series is approx. 911.50. The active extension targets remain approx. 750 and 698.
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Bonds / Notes - The march higher continued and was catapulted after the FOMC meeting and policy announcement of Tuesday. New highs were made in T-Bonds and T-Notes negating all the retracement levels of support until a new semblance of a high, and negating the small double top potential we had mentioned. The long term channel we have been keying in the bonds was in fact penetrated to the upside. Since it is based on the monthly continuation data we should be patient until month's end before making a final evaluation but needless to say it is incredibly noteworthy. If T-Bonds remain above the channel the measuring implication suggests as high as 160-00. That seems scary to us.
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Coffee - The extension target in the March Coffee contract at 103.55 was hit the previous week leaving the 9935 still active for now. Retracement resistance levels are approx.: 11115(hit); 11395 (hit); 11675.
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| Crude Oil - We will resume coverage of the crude oil next week with the February contract. The January crude oil is expiring at the end of this calendar week and has made a new low for the move and the life of the contract. The February contract remains above its previous low of 4251 made December 5. There is an active extension target basis the February Crude at approx. 3750.
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