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TRADE Focus
01/29/2009
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 market analysis portion of this edition was prepared during the course of the trading day on January 29th. The commentary was written on Thursday January 30th.
There is no pressing need to say much about the recent economic data released this week. It has become the proverbial broken record. Housing data continues to reflect the economic decline and the worsening of the economic crisis. Sales of durable goods items, consumer confidence and of course the Gross Domestic Product all are showing how the wheels of business activity are screeching to a halt. Still to come is the monthly unemployment data next Friday and the anxiety the markets will likely experience. We have also had the World Economic Forum taking place this week. Included in the coverage of the event have been interviews with various economists, a few of which have explained how the banks are virtually insolvent and the more than trillion dollar hole they are in. This is a rather frightening thing to hear. We focused on the importance of patience a few weeks ago and things such as this urges us to restate the need for us all to exercise this discipline during this period of time. We do not expect things to show improvement anytime soon. Realization and acceptance of this may make it easier to bear. If wrong about the severity and length of the recession then the worst that can happen is that we become pleasantly surprised. We do not wish to display or suggest a fatalistic attitude or one of despair but it is helpful to mentally prepare for things like this that may enter into our lives. We remember a scene from the movie "Lethal Weapon 2" when Mel Gibson, Danny Glover and Joe Pesci go through the drive through of a fast food place and receive the wrong order and where Pesci says "They (expletive deleted) you at the drive through!" We believe that if we go into the drive through knowing that we're likely to get screwed then the pain is not as great. We are mentally prepared. It may be helpful to expect declining economic data and the resulting effects in order to not only help us accept the pain but to allow us the capacity to prepare for the consequences. What can happen, and what we want to avoid, is to allow fear to take over. Fear is anathema. Preparedness lessens the chance of fear taking over thought processes. Preparedness increases confidence which then can allow for the establishment of faith. There is a saying we have heard and like that "Where There Is Faith There Is No Fear." These two things cannot exist together.
These tenets do have a place in our business of facing and trading the markets. It is virtually impossible to successfully participate in active market trading where fear is present. Decisions cannot be properly made or arrived at. Preparedness, by having a plan, including money management adds greatly to confidence. Putting it into action, working on it and improving it leads to a building of faith in that plan. That establishment of faith provides a peace of mind. This then feeds on itself adding to confidence that the plan works. We heard years ago that even a poor plan utilized is far better than an excellent plan ignored. The preparing and putting into action of a trading plan is as much training as practice is to a ball player. Baseball player Albert Pujols isn't the great hitter he is without his training and preparedness. We believe we can see in him and others of his peers their undeniable confidence. They would be unable to face their opponent if they were not confident and did not have faith in themselves and in what they had done to prepare themselves. They have no fear. This is so true in trading markets. Those we have seen gain success have not done so by luck. They have a plan and execute the plan dutifully, faithfully and therefore, without fear. Trading successfully is a very difficult endeavor. Relying on good fortune alone makes success almost impossible. Approaching the markets with a plan that creates within it a preparedness creates a confidence that will allow the elimination of fear that will then provide a peace of mind to face the risks involved. In short it makes it a more simple process and we find that simple is good.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
 Sugar (march) - We have brought attention to the upside pattern breakout but that the momentum through the second stage at around 1250 was not that great. So far the important 1300 level has stalled the advance as the high has been 1305 in two consecutive sessions and without being able to close above. If long consider lightening positions or flattening with the idea to reenter long on a close above 1305. Retracement levels of support are currently at approx.: 1210; 1180; 1150. If bullish, consider the price area between 1180 - 1150 as a buy zone. Protective stops can be as tight as 1120 or as loose as 1070 depending on the individual and the strategy. Retracement resistance levels remain at approx. 1314 and 1378.
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Feeder Cattle (march) - Last week we said that a close below 9090 provided a method for short entries. This would have been elected and stop protection for now remains 9250 on a closing basis as suggested last week. We believe there is potential to the 8600 region but in the bigger scheme of things we also feel that Feeder Cattle will eventually find their way to the mid 60's or so.
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Silver (march) - Silver bulls had reason to enter or add to long positions as we mentioned in our last edition. We suggested closing above 117700 cleared a significant barrier and if entering on that basis employing stop protection on a close below 112700. We will stick to this at this time but also feel it necessary to continue to voice concern, as we did last week, that momentum to the upside could be waning in this market. Our momentum indicators are displaying this to us even as the price has entered a new and higher level. It may have also satisfied, for now, reaching the upper level of a trading channel with its high this week at 122850. Aside from this, it remains above its upwardly sloped 50 day moving average where it has been since December 10. Retracement resistance levels of note remain approx.: 127800; 141100; 154400. With the recent move to the higher level we will have to wait to update the retracement levels of support.
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 Gold (April) - We switch our coverage to the April contract with this week's edition. One final note, however, regarding the February contract is that for gold bulls having used the close above 89200 as a method to add or initiate longs should roll to April. The current price for the April contract as we are preparing this section is 905. We believe stop protection for long April positions can be based on penetration of the 875 level. (Today's low thus far 87570). We need to mention here that a major downtrend line has been reached with this week's move higher as well as an extension target at approx 915 having been met. Retracement levels of support are approx.: 87450; 86100; 84750. The next series below is approx.: 85180; 83100; 81050.
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 Euro Currency (march) - The euro remains below its 50 day moving average where we now show it registering 13268. The high for the week was 13321 just slightly above the .500 retracement resistance level we posted last week at 13291. This was in the nearest resistance series and may be a demonstration of inherent weakness. In our December 24 th edition we suggested two short entry methods. One was a sell zone between 14230 and 14340 and the other upon penetration below 13790. Two weeks ago we suggested reducing positions and tightening stops as much as the individual strategy would allow. The high since that issue has been 13364 on January 19. Short positions can use that level on a closing basis for stop protection if positions remain and the strategy allows. We believe the direction remains down in the euro but with all the economic data due in the next week anything can happen, likely will, and this requires adherence to money management discipline.
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| Japanese Yen (March) - The double top scenario remains in development. It will take a breach of 10567 (we prefer closing basis) to confirm.
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 S&P 500 (march emini) - The S&P was able to rally off last week's lows as some optimism was created over the stimulus package and hope for the administration's economic team to define and then deal with the so-called "bad banks." The optimism ran out of steam amidst poor economic news and expectation for more as tomorrow's GDP data is released. The rally extended to 87600 which put it between the second and third near term retracement resistance levels of 86935 and 88670 posted in last week's edition. The extension targets mentioned last week at 78550 and 76825 technically have been deactivated by the rally to 876 and more will need to develop to determine new levels. Retracement levels of support are approx.: 84625 (hit); 83700; 82775. Retracement resistance levels in play remain approx.: 85205; 86935; 88670. |
Chicago Wheat (March) - Last week we flipped our preference in wheat from long to short even though long entries had just been satisfied via our previous week's edition. First of all we apologize if any confusion was caused by this. Long positions from the posted buy zone of 55850 to 538 did have the opportunity to cover as the price proceeded to 611 and never traded below 557 since we last wrote. We will forget the long side for the time being as short positions could have been initiated based on the sell zone between 585 and 595 we suggested. Stop protection will remain at a close above 610 for our purposes but move them closer if your strategy allows. We also suggested short positions could be initiated on a close below 548 with stop protection of 560 on a closing basis. We will stick with that as well. Retracement levels of support are approx.: 56000 and 538.75.
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Soybeans (march) - We continue to favor the short side and stick with our suggestion that short positions can be initiated on a penetration of 957 using 981 as stop protection if traded intraday (as opposed to close only). We are adjusting our retracement levels of support to approx.: 953.00; 919.75; 886.75.
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 T-Bonds (march) - Three weeks ago we had provided two suggested methods of entering short positions. Both were satisfied by last week's edition. We had marked a sell zone between 136-24 and137-00. The high was 137-31. The second method was using penetration of 131-23.5. Currently the March T-Bonds are 126-25. We believe that stop protection for both entry methods can be 131-23 on a closing basis. There are extension targets now active at approx. 125-00 and 124-17. We feel these can be used to lighten positions but feel maintaining a core of short side trades remains warranted. Retracement levels of support remain approx.: 130-02 (hit); 126-12(hit); 122-23.
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 Ten Year Notes (March) - Both methods of suggested short entry methods have now been satisfied. The first being the sell zone between 126-00 and 126-20 which was reached two weeks ago and the penetration of 123-09 elected today. The T-Notes will now post the second close below its 50 day moving average. Initial support may be seen at approx 122-00 with a parallel channel line and with near term extension targets of approx.: 122-09 and 121-23.5. We suggest that stop protection for either entry method can be a close above 125-00. Retracement levels of support remain approx.: 124-07.5 (hit); 122-27.5 (hit); 121-14.5. The next series below is approx.: 121-30.5; 119-28; 117-25.5.
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