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TRADE Focus
12/31/2008
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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 Tuesday evening, December 30. The market analysis and chart sections were prepared during the course of the day on Wednesday, December 31.
We presented the idea last week that the New Year will likely provide many trading opportunities to explore. There is so much going on in the world economically, politically and geopolitically that it would seem difficult for market moving events not to occur. Obviously, 2008 provided huge price moves. From energy and grain to stocks and bonds. News wise too, it was incredible. We saw the change of the face of Wall Street. Could we or anyone have really imagined that one year ago? The saying in physics (we believe it's physics) is to every action there is a reaction. Here is some food for thought as we enter 2009. The S&P 500 reached a low which was almost dead on a .618 retracement of the 1987 crash low to its October 2007 high. In the Dow, the retracement held at .500. Soybeans retraced to a significant level while also holding a critical moving average. Wheat did similarly and may be in the process of putting in a monthly key reversal. The dollar and conversely the euro, staged rather tremendous moves during 2008. It is possible these are ready to provide an answer to us as to whether the initial actionary direction resumes or if the reaction shall turn into one of even greater size and duration than we have already seen occur during the last portion of the year.
We hope these observations help provide ideas to consider and investigate. We have included some chart pictures in our "Chartcast" section of our website at http://www.cbandsbrokerage.com/chartcast/ccindex.html . Let us know if you care to share any questions, comments or ideas you may have.
We now would like to wish all a very Healthy and Happy New Year. We will be looking forward to it.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
Sugar (march) - We believe last week's view remains valid: "Two weeks ago we said that we felt there was a zone of resistance between 1175 and 1205. The high has been 1207 and the market has since fallen to as low as 1076. We initiated our coverage of sugar some weeks ago because of the potential of the market to seek a double top price objective in the area of 900. We hold to that. Similarly, a penetration above 1300 would present a stop and reverse strategy as long as 1044 is not broken on the downside first. A move above 1300 without breaking 1044 would set up a double bottom price objective of 1550. For now however, the short side remains the active trade seeking the area of 900. It would appear to be advisable that if short that stop protection could be reduced to just above the recent 1207 high." |
Feeder Cattle (march) - We find that the short side view presented in our Focus a few weeks ago is still in play. We had pointed to a sell zone between 9265 and 9465. Last week we suggested that if short, stop protection be reduced to a close above 9550 or if preferred to keep on a shorter leash a close above 9465. The high close this week and since we began coverage is 9455. The 50 day moving average has decreased to 9340. This barometer can also be used for stop protection and in fact there was one close above this made on December 24 with that 9455 close. It seems to us, though, that at this stage the price is too choppy around this particular moving average which reduces its benchmark effectiveness at least temporarily. The high has been 9460 pinning it up against the third point in a significant retracement resistance series of approx 9465. The next series above the market is approx: 9705; 10105; 10505. We began this market's coverage based on what we saw as a major top potential based on the monthly chart. Last week we were alerted to caution as the daily chart exhibited a near term bullish construction. But for now the price remains within the parameters stated a few weeks ago and until violated the original "short plan" is in effect. |
 Silver (march) - The price of the March contract has traded both above and below the 107750 level we had mentioned as a potential breakout point. Currently, as we write, it is trading above at 112200. It has, though, remained above its 50 day moving average now at approx. 99770. Since closing above this moving average on December 10 it has not traded or closed back below. This is constructive behavior. We also discovered that there was a possible low of significance made in November of 1971 at 1.375. (Yes, one dollar 37.5 cents). Coupling that with the March 2008 high of 2118.50 (monthly continuation data) that produced a .618 retracement of approx 810.10. The low for the move was made October '08 at 840 (monthly continuation data). That seems very significant and adds additional support to favoring the long side with expectations of initial objectives of 127000 and 140000 feasible. As we said last week we believe this should take time to develop. The nearest retracement support levels are approx.: 104250 (already hit); 100600 (1010.50 low 12/23/08 ); 96950. A close below the 50 day moving average takes us out of bull mode and we suggest that as stop protection for long positions.
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Gold (feb) - Last week we suggested consideration be given to the short side of the February Gold based on one of our resistance levels at approx. 879 and a downtrend line. The stop protection we mentioned was a close above 89000. Since last week's writing, the high has been 89200 but the high close 87530. We also had suggested another approach to the short side would be entering on penetration of 82900. This has not occurred and we believe remains a valid method. It appears to us that the picture may be turning more toward the bull case but until our original parameters are breached this will not be confirmed. A close above 89000 can be used as long entry as well as stop protection for short positions. If this is elected there will be extension targets in play of approx. 91780 and 93660. We suggest if entering long on a close above 89000 that initial stop protection should be employed on a close below 88000.
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Euro Currency (march) - Prior to last week we had long positions that were previously advocated remaining in play. We suggested, though, that it appeared time to change course when we said in last week's Trade Focus, "We believe that it is time to consider short positions. If still long from previous suggestions we believe tightening stops or liquidating on a rally is warranted. One method of protecting longs and / or entering shorts would be on a penetration below 13790. We see current retracement resistance levels of approx. 14125; 14230; 14340. The area between 14230 and 14340 may be used as a sell zone if the opportunity presents itself. Stop protection of just above 14400 on a closing basis appears within reason. " The 13790 strategic low has yet to be penetrated but the high since our last writing has been 14334 which is within our stated sell zone. If entering on penetration of 13790 we suggest using stop protection of 13900 on a closing basis. Retracement support levels are approx.: 13798; 13521; 13245. The retracement resistance levels have been hit but as a reminder they were/are approx.: 13630; 14029; 14428. The series we mentioned last week using the recent swing of significance are approx.: 14125; 14230; 14340. We believe there may be a move of substance in the making. It is even possible that if our initial idea of the "short side" is not correct that a move could be equally dynamic to the upside. We will advise as this develops.
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| Canadian Dollar (march) - We have been favoring the long side as it first broke to the upside out of a triangle formation and then also closed above 8254 confirming a double bottom. It has not been gaining or declining and remains within our parameters of a long position. Also key at this point is that it is above the 50 day moving average for what will be the 11 th session today as long as it closes above 8139. The current price as we write is 8222. The next series of retracement resistance levels not yet hit are approx.: 8460; 8700; 8940. Retracement support levels are approx.: 8165; 8075; 7985. We suggest that a close beneath 7950 negates our long side trade idea. |
 S&P 500 (march emini) - Over the past few weeks we have described a trading channel for the March Emini S&P that has seen the price trade both upward out of the channel and back into it. We also explained that the same channel basis the cash S&P 500 has yet to break out at all and that remains the case. We still believe we cannot suggest the long side for positions until this is achieved. In fact last week we suggested to bearish traders that short positions could be initiated in the 880 - 885 area and that stop protection above the recent high of 91875 should be the maximum to risk. That opportunity has presented itself as the March Emini S&P has traded well through the 885. The position is still in play as the high since has been today's 90425 as we write. To turn bullish we feel patience is necessary. We will stick to a close above the recent 91875 high as the trigger to enter long positions.  If such an entry is initiated we suggest stop protection of a close under 885. Retracement resistance levels of approx. 902 and 940 are the nearest of significance. The next series above is approx.: 95775; 102600; 109400. Retracement support levels are approx.: 85075; 82900; 80725. We would like to add though that the November low was nearly a direct hit on the .618 retracement of the 1987 crash low to the October 2007 high. It certainly is possible that a recovery within this enormous bear market move is possible.
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Chicago Wheat - The case for a wheat rally seems to have strengthened. This month it put in a monthly key reversal. The lows over the past three months now have come in the area of 500 to 450 basis the monthly continuation data. Today the 50 month moving average registered 529.75. The market has not closed below this benchmark and now with the reversal we would expect higher prices lie ahead. There should be notable resistance levels along the way. The first series of retracement resistance levels are approx.: 587 (hit); 624; 660.5. We also noted last week that there had been a break out from a trading channel which we believe the measurement to be in the 625 area. The March contract is approaching this and we see that it lines up with one of our stated resistance levels. If there is continuation to the upside the next series of retracement resistances are approx.: 676.5; 740.5; 804.5. One method of entry would be on a close above 617. If initiating this way we suggest stop protection of a close under 585.
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 Soybeans (march) - We believe more firmly that soybeans may have seen their low for some period of time. We noticed that the market paid respect to its 50 month moving average as well as holding a .618 retracement level using lows dating back to 1968. This combination we feel has significance and gives confidence to approaches from the long side. As we mentioned last week there is a seasonal tendency for soybeans to move upward between now and February. We believe longs can be established in the 950 area and if so use stop protection on a close beneath 919. At this time we can see a possibility of 1100 being reached. Retracement resistances to be aware of are approx.: 954; 1009; 1064. There is an upside gap at 1021.25. Retracement supports need to develop and we will provide those as soon as we can. The extension targets below of approx. 750 and 698 are far away and become negated with a close above 995. Another method of entry would be on a close above 995. If doing so utilize stop protection on a close below 970.
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 Bonds / Notes (march) - In the bonds the last day of the week, month and year saw quite a loss. But in percentage terms not so big. After breaking upward out of its long, long term trading channel the bonds still need to fall further to get back inside. Until then picking a top and being a hero is not for us. In the notes, a similar trading channel produced on the monthly chart shows prices remain near its top end. If negative price action warranting a position should occur we will do our best to note it here.
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Crude Oil (march) - In last week's edition we mistakenly notated coverage as March but it is in fact the February contract. We apologize. We mentioned active extension targets of approx. 3418 and 3015. The low on December 24 th was 3513. Today's action saw more than a 600 point rally to a high of 4554. It is difficult to judge whether this is truly meaningful or not but the fact is that it did occur and that it counts. The most near term retracement resistance levels we had were approx.: 4190 (hit); 4400(hit); 4610 (nearly hit). The next series above the market are approx.: 4935; 5384; 5833. |
|  Japanese Yen (March) - We are initiating coverage of the Japanese yen at this time. It has had a powerful price appreciation during the course of the second half of 2008. The move came mostly in two large stages. We believe there is a correction that could occur and we believe that a method of entry would be to go short on a penetration of 10950. Begin stop protection immediately if it closes back above 11000. If stopped out we suggest reentering again on a close below 10950 and utilize the close above 11000 as stop protection. Retracement support levels are approx.: 10926; 10749; 10573. The next series below is approx.: 10623; 10351; 10080. |
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