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TRADE Focus
02/19/2009
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 Wednesday, February 18th. The commentary was written on Thursday, February 19th.
We thought we would explore another way of describing reality. Today we hear of new government programs to aid mortgage holders and to help prevent some of the inevitable or potential foreclosures. We will not get into detail or comment on the programs mainly because they are beyond our grasp at this point and beyond our scope. What we would like to comment on, however, is a very general view of what these mean. There are reasons for these additional measures and the reasons are not good. It says to us that the reality of the economic situation is such that more help is needed. We understand that taken by itself this is open for argument, but for our purposes the point is that TARP, the bailouts and all the other plans in operation are not enough to cure this admittedly very ill economy. The stock market has not and is unlikely to place a bottom based on these or other new economic program announcements because not only do they take time to prove their effectiveness, they take time to implement and most importantly they are a definite sign that conditions remain severe. Otherwise additional action would not have been required. We have heard from many so-called or self-proclaimed purists since day one of this crisis that the best course of action is to do nothing. Allow banks to fail if they are going to fail, homeowners to lose their homes and businesses to close their doors. A large part of their argument is that doing nothing would get the job done more quickly and efficiently albeit more painfully. Having the government get involved only forestalls the inevitable. We also must admit that our experience has shown that the more you "screw" with something the better the chance you will screw it up. Unfortunately, we also must admit, that we see to do nothing just seems too impossible in these circumstances. It would be neglectful or at least that would be the perception and that could cost elected officials many votes. The reality we are dealing with though, is a very severely damaged and changed economy. All these plans are changing the economic landscape as we have known it perhaps since the birth of this nation, or at least since the depression of the 1930's. It begs the question too as to what happens after conditions normalize. Does government relinquish its control over that which it has assumed? That is not an easy thing to do. Maybe we should be asking our President, his administration and our legislators what their exit strategy is. Isn't it realistic to be concerned now with long term socio-economic consequences?
Today we saw a news brief posted on a popular financial network that said something to the effect that many Goldman partners needed to borrow money to meet margin calls. This is something that those of you at home should not ever do. The reality of a margin call is that things are not going your way. It means you are wrong. Get out!. You probably should have been out already if you were following a pre-conceived trading plan. But certainly borrowing to meet a margin call doesn't make any sense to us. If there is validity to the story maybe there are underlying circumstances that warrant it in the case of these certain individuals. But for the rest of us mortal human beings we can not imagine a sound reason for doing this.
Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.
 Sugar (May) - We are actually a bit surprised this market has not fallen at this point based on some of the indicators. Last week we mentioned a sell zone between 1335 and 1400. It has traded in that zone much of this week. We maintain our stance that shorts can be initiated between 1335 and 1400. Stop protection we believe is appropriate with a close above 1430. Another method of entry is to initiate upon penetration of today's low of 1291 using 1288 as stop election. If entering based on this approach we believe stop protection can be 1367 intraday. Retracement support levels remain 1265; 1235; 1205.
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 Feeder Cattle (Arpil) - The feeders were unable to advance into the 10175 - 10565 sell zone we mentioned last week. It did, however, collapse to 9000. We will try again to suggest short entries. We see a sell zone now between 9400 and 9500. If initiating short positions there, we suggest stop protection of 9677 intraday. Another approach is entering upon penetration of this week's low of 90000. We will suggest a stop election price of 8987. If filled using this method stop protection should be a close above 9250. We still look for an eventual price level of somewhere in the 6000's.
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 Silver (march/May) - First off, positions in March should be reduced and/ or rolled to the May contract if long. The March is currently at 139800 and the May at 140700. Last week we urged that long positions that may have been established based upon our suggestions or otherwise begin to be reduced. We still believe this and since it is time to roll now may be a good time to take this measure if it hasn't been done already. Clearly, we can be either too early or dead wrong but we trust our reasoning. We consider this a method of preserving capital while maintaining a presence in the market. We realize too that it is more rarely the case that a top or bottom can be picked and that's why we do not suggest liquidating the entire position. The March contract did penetrate, to a small degree, our 141100 retracement resistance. The high both yesterday and today is 143700. There is an old gap that would be filled at 144000 that it left on the way down from last August. We also see the 50 week moving average having been reached on this approximate four month recovery. Our momentum indicators display an overbought condition as well. Therefore reduce positions. Stop protection now based on the May contract should be placed on a breach of 132000 intraday and or a close below 135000. Longs can be reestablished on a close above the gap level, which we shall translate that now to the MAY contract price of 145650. If entering long based on this we suggest stop protection upon a close below 1385.
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Gold (April) - Last week we suggested raising stop protection for long positions that may have been initiated back on January 23 using our 89200 closing level entry. We also noted extension targets of 96000 and 98500 in last week's edition and these have been satisfied. Those were suggested as price levels to be used to reduce positions. Stop protection for longs can be raised again to an intraday penetration of 92000 or upon a close below 94000.
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Euro Currency (march) - Reiterating from last week, "We have stated that 2 short entries we suggested many weeks ago were satisfied by January 5. One was the sell zone between 14230 and 14340 and the other was upon penetration of 13790. We remain comfortable with the short position and believe that stop protection remain at 13090 on a closing basis (this week's high as of this moment 13087). This protection can be lowered to a close above 12955 if the March contract closes below 12695. New or additional short positions can be entered with the close below 12695 using the 12955 closing basis stop protection. This event will activate extension targets of approx. 12425 and 12280. This week there was a close below the 12695 level, but quite a bit lower at 12577. This means based on our suggestion that stop protection could have been lowered and new short positions added or initiated. We now suggest stop protection for the new positions be brought down to a close above 12860. We suggest lowering all stop protection for short positions if there is a close below 12500 to the same 12860 closing price basis. There has once again been a triangle formation from which the euro has broken out of to the downside. We believe this provides an objective between 12200 and 12100.
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|  Japanese Yen (March) - One of our suggested short entry methods was satisfied this week with a penetration below 11020. As we write the price is trading 10603. Stop protection should be lowered at least to break even on these entries. In addition, the idea of capital preservation applies in this case and therefore reducing the number of positions makes sense. We suggest though, that these be reentered or added to with a close below 10567. We have mentioned this as a trade entry for several weeks and it is still valid as it should be confirmation of a double top scenario with potential below 10000. The sell zone noted last week between 11160 and 11240 was not reached and is no longer operative at this time. Retracement levels of support are approx.: 10550; 10255; 9965. Retracement resistance levels will be updated when appropriate.
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 Canadian Dollar (march) - We believe there is a short position entry developing in the Canadian Dollar. It has formed a triangle and breakout confirmation to the downside we believe is achieved with penetration of 7830 basis the March contract. If initiating short positions on that basis we suggest stop protection of a close above 8025. |
 Mexican Peso (March) - In some ways similar to the Canadian Dollar the Mexican Peso has formed a triangular formation from which it has already broken down. We believe the objective is the 625.00 - 600.00 area. |
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S&P 500 (march emini) - Last week we said, " We believe a close below 79750 opens the door to a test of the lows down at 73725. Extension targets of approx. 78650 and 76700 also become active with such a close. If initiating short positions on this basis we suggest stop protection on a close above 82000." There have now been two closes below 79750, the first being 78550 on February 17. There is still an extension target active at approx. 76700. For now maintain stop protection on a close above 820. |
Chicago Wheat (March/May) - It is time to roll positions in wheat from the March contract to the May. There has been an active short position since our suggested sell zone of 585 to 595 was satisfied some weeks ago. The March is currently at 518.50 as we write this and the May is at 531. We suggest stop protection of a close above 580. In the grand scheme of things we still believe prices will achieve a significantly lower level and would like to remain on board. It will most likely take a long time perhaps spanning more than one year. |
Soybeans (march/May) - With value of hindsight we would like to say that we wish we had been more stubborn with our attempts to suggest the short side of the Soybeans. We recently had a closing basis short entry below 957 for the March contract elected and initiated at 946 but quickly stopped at 981. Last week we said we thought the pattern to be conflicting and therefore did not have a new short entry suggestion. As we write this week the price is 881. Coverage now rolls to the May contract in the Soybeans. We maintain a negative attitude and at this time will suggest that a recovery rally to between 925 and 950 be used to initiate short positions. Stop protection for this would be a close above 965.
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 T-Bonds (march/June) - We had suggested short positions from a sell zone between 136-24 and 137-00 and also on penetration below 131-23.5. Our suggested stop protection of a close above 129-04 was elected this week with the close at 129-11. As we write this week the current price is 126-16. We now roll coverage to the June contract. We believe short positions can be reinitiated on penetration below 123-21 in the June contract. If this is elected we suggest stop protection of a close above 124-24. Retracement levels of support are approx.: 125-18.5 (hit); 122-03.
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Ten Year Notes (March/June) - There have been two approaches to short positions active in the March T-Notes. One was using the suggested sell zone between 126-00 and 126-20 and the other was upon penetration below 123-09. The stop protection was moved last week to a close above 124-22. The high close this week was 124-14. It is also time to roll the position from March to the June contract. March is currently at 122-17 and June is at 120-20.5. Stop protection for the June contracts should be on a close above 122-17.5. Retracement levels of support are approx.: 120-00.5 (hit); 117-30; 115-27.5.
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