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TRADE Focus
01/15/2009
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 Thursday evening, January 15th, as well as the market analysis and chart sections
One of the key ingredients to any success we believe is patience. It is the P of our 3DP Principle - Desire, Determination, Discipline and Patience. Patience is an important aspect in trading for many reasons. Often potential trades need time to develop and to provide confirmation allowing for the entry signal to be given. A real nemesis of traders is not exercising the necessary patience, which can lead to the forcing trades for example. Forced trades probably end up badly 90 pct of the time which qualifies it for our 90 pct rule. Patience is not just an important element for trading success but for most all endeavors. It is indeed, we believe, a part of the maturation process. The purpose of our focus on patience this week is to stress its importance to, and how it relates to the global economic crises. Central banks and governmental bodies throughout the world have enacted measures to combat the crisis. The crises are not situations where any one thing went awry and where there is a known fix for the problem. Many things happened and developed over a long period of time and there is no known cure. President - Elect Obama has said the economy is very, very sick. The old saying goes that "time heals all wounds." It's going to take a long time to heal these economic wounds. It will require patience to allow time to do its job. We believe the effect of the "perfect storm" that has wracked most of the world is one of having shrunk its economies very significantly. Measures taken by the various banking and governmental authorities have been to feed money back into the system so that it can be lent back out. But these funds apparently have not been made available in a size and at a speed as was hoped or expected. It may be that funds were needed to restore reserves and balance sheets so that the banks and businesses receiving the bail-out funds could continue operating. We see it almost as a huge margin call which needed to be met with an immediate injection of new funds in order to maintain existing market positions. These institutions and businesses did not have excess funds to add to their positions; only to maintain those they had on the books. It will take time for favorable action to develop allowing them to attain stability and then to allow them to expand their business operations.
Economic news has not shown signs of an improving economy. Most of the data continues to reflect decline and to meet gloomy expectations. There have been a few reports that have not been as bad as their expectations such as we saw with some of today's releases, but this is not enough to inspire great confidence. We realize and are aware that stock markets normally place in bottoms well before economic data begins to show the type of improvement warranting the higher prices. It seems to us that it is still too early to expect the stock market to sustain a momentous price increase in anticipation of economic recovery. There are too many media pundits saying the second half of 2009 will bring growth and some prosperity. It seems too many participants are fixed on the sidelines waiting for this to happen. We think there are many hearts yet to be broken. That's why we are stressing the value of exercising patience with you this week. Let the market do something to signal it is anticipating better times. Picking bottoms is another qualifier for the 90 pct rule.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
 Sugar (march) - A pattern is forming that appears triangular. We estimate upside breakout in the area of 1250. This will decline over time as the topside is descending. To be safe we estimate the bottom side breakout in new low territory under 1044. Measuring implication is approx. 250 points in the direction of the breakout. The double bottom scenario calling for a close above 1300 to signal its activation remains in effect. We feel however, that if this is not achieved in a reasonable period of time that its effectiveness and reliability is reduced. We will advise when necessary. But as it stands, its measuring implication is between 1500 and 1550.
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 Feeder Cattle (march) - We continue to monitor the feeder cattle market with our eye toward finding a short entry. Signals are a bit mixed at this time. They may in fact, and hopefully, favor the upside for the time being. If our assessment is correct, though, we believe the price will eventually fall into the mid 60's.
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Silver (march) - There has been little change in the past week for the silver picture except that the 50 day moving average is now 102830 as we write and today's low thus far has been 103200. We have been saying for a few weeks at least that a close under the 50 day moving average is negative for the silver bulls. That's still true. There is still a key low at 101050 as well to keep in mind. It does not appear that this market is in any kind of hurry to go anywhere but sideways. Closing below 101050 could lead to an eventual move to 860 - 875. Silver bears may want to consider that. Until such a development, however, the overall pattern of the last 3 months or so appears to have a slight bullish edge. 118450 or so is still a formidable barrier and above that the retracement resistance levels remain approx: 127800; 141100; 154400. Retracement levels of support continue at approx.: 105250 (hit); 101400; 97550.
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Gold (feb) - Since stopping at its downtrend line and virtually against a 3 rd level retracement resistance level of 87900 mentioned a few weeks ago when we said short positions were worthy of consideration, the February contract has fallen back to its 50 day moving average in the area of 80200. We would suggest tightening stops on short positions and feel they do not need to be higher than 85700 at this time. Some traders may choose to lighten some of their position where multiple units are held. There may be room to the downside but as of this writing gold is respecting its 50 day moving average quite well and may be indicating a bounce is in the works. Use positive market action here, at least, to help make the decision for you, such as a reversal bar up like is developing now. Retracement resistance levels are approx.: 83530; 84600; 85700. Retracemnet support levels below are approx.: 83450(hit); 81660(hit); 79880. The next series of support levels below these are approx.: 81450 (hit); 79020; 76610.
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 Euro Currency (march) - Last week we confirmed that both suggested methods of entry for short positions in the euro would have been satisfied. One was a sell zone between 14230 - 14340 and the other sell upon penetration of 13790. The low since we switched from a long to short preference has been 12999 which was made today. The retracement support levels have all been exceeded to the downside. There were extension targets activated on penetration of 13283 earlier in the week at approx 13120 and 12982. The lower target was not quite attained. Finally, we shall point out that it is about to register its third consecutive close below its 50 day moving average, currently registering 13186. Sound money management suggests moving stop protection as close as your strategy allows. We would also suggest that some portion of short positions be liquidated where allowed. We suspect we will be looking for a price area or pattern development that will suggest to add to or to re-short the euro. Initially, as long as the 12999 holds, the retracement resistance levels are approx.: 13290; 13381; 13473. The next series above is approx.: 13640; 13840; 14040.
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| Canadian Dollar (march) - Last week we suggested using the 50 day moving average as a barometer for stop protection if long positions were held. This week the 8161 close did that so we believe it is time to watch for new developments to occur in the Canadian Dollar.
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Japanese Yen (March) - We began covering the Yen a few weeks ago with the idea of a directional change to the downside about to occur. We suggested that short positions could be initiated on penetration of 10950. By last week's edition this had taken place and with a subsequent drop to 10567 before a rather precipitous rally then ensued. Last week we moved the suggested stop protection upward slightly to 11035 on a closing basis. This was elected quickly with a close at 11070. We believe that the short side can again be attempted, now on a close below 10975. If this is initiated we suggest stop protection on a close above 11070. More aggressive traders with a bearish attitude toward the yen we believe can do so anywhere they are comfortable from this current price of 11150 but knowing stop protection is penetration of 11335. |
S&P 500 (march emini) - We suggested long positions could be established on what we saw as a channel breakout using a close above 91875. This did occur and if initiated the suggested stop protection was also elected with a close beneath 885. The market is now back into its former channel and also back below its 50 day moving average. This average may become unreliable as an indicator for a while as it has become choppy around the number. The recent low now in the March emini is today's low of 81275. We had a 3 rd retracement supported noted last week at 81575. Coincidentally that was today's early low for a while. We have noticed that these third levels of retracement are often breached by a marginal amount before the market responds. If using them for trade judgment you may want to take that into account. Currently we see a possibility of a bounce. The short term retracement resistance levels are approx.: 86175; 87725; 89275. We view the area between 87725 and 89275 as a comfortable sell zone. Stop protection of a close above 908 can be used initially. We will update additional retracement resistance levels next week if applicable.
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 Chicago Wheat - Previously suggested long positions on a close above 617 that could have been filled at 643 should also have been stopped out if following our recommended protection of 592. Those who have a bullish attitude toward the wheat can use the area between 558.50 and 538 as a buy zone. Initially it looks like 514 will be needed as stop protection on an intraday basis.
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Soybeans (march) - The USDA report created a rather large reversal on the chart for the soybeans. It appears to us that further downside correction is likely. There is a gap between 920 and 923.50. If there is a close beneath that the soybeans would likely follow through lower and we would asses its potential at that time. The accelerator pattern we mentioned last week has now been violated. If bearish, short position can be initiated on penetration of 957. Be prepared to act if the gap cannot be filled. Stop protection should be initiated above 976.25. There are retracement levels of support at approx.: 954.50; 921.00; 887.50. Retracement resistance levels begin with approx.: 954.50; 1009.75; 1064.50. The next series above are approx.: 1016.50; 1089.50; 1163.
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 Bonds / Notes (march) - Last week we suggested a sell zone for the T-Bonds between 136-24 and 137-00. The high so far since last week's edition has been 137-31. We believe it is possible to reduce stop protection to a close above 138-05. The approach to sell on penetration of 131-23.5 can still be used with the same stop protection of 134-00 on a closing basis.
In the Ten Year Notes the suggested sell zone was 126-00 and 126-20. This too would have been elected and the suggested stop protection we believe needs to be maintained on a close above 128-00. The other short entry approach upon penetration of 123-09 we believe is still valid, maintaining the same suggested stop protection of a close above 125-00. |
Crude Oil (march) - We will reassess the crude oil market and likely not reinitiate coverage until a new trading position develops.
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