TRADE Focus

09/24/2009

We invite you to call and ask about any of these market situations we have discussed or to ask about our considerations for the best trade opportunities for the day or for the week. We also welcome any comment on our weekly commentary as well. We believe, through our years of experience, that what we offer is of value. We are confident enough, in fact, to say to you to tell your friends, relatives and neighbors about us too. Please feel free to contact us at 1 800 321-5810 or email to cbands@cbandsbrokerage.com

Both the Trade Focus commentary and the market analysis section were written during the course of business on Thursday, September 24th.

The U.S. stock markets reacted rather wildly following the release of the FOMC statement Wednesday afternoon. Initially there was a surge to new highs for the move started in March but this was followed by a swarm of selling that pushed prices not only lower on the day but below even the previous day's lows. The selling pressure has continued in to Thursday morning as we write. Basis the S&P 500 the market is 30 points off its high with the Dow 240 points from its high.

We thought we would take a look at what was said in the Fed Committee's statement as it seemed to have quite an impact. It started off by saying that "Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn." This is slightly different from the previous meeting's statement where it was concluded that "economic activity (was) leveling out." In fact it presents a somewhat more positive view. The statement then went on to say that "household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit." The last sentence we will include verbatim is, "Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability."

None of this was a surprise and, by the way before we forget, they kept interest rates unchanged. That issue was very much expected. There was one other aspect of note that was addressed and it regarded the Fed's purchasing of Mortgage Backed Securities and Agency debt. The amounts, 1.25 trillion and 200 billion respectively, were kept the same while the Fed said it would slow the pace of its participation in these operations while extending the time it will allow for their completion. We have read where a number of analysts consider that this move demonstrates and acts upon Chairman Bernanke's recent allegation that the recession was likely over.

Many may wonder, then, why has the stock market reacted so negatively. It is not a new phenomenon for markets to turn strongly on news. There is the old saying "Buy the rumor, sell the news." The stock indices have been on a steep upward course for a number of months and considered in "overbought" territory. It is not unusual for corrections of this nature and under these circumstances to occur. We will warn, however, that reversals of this nature deserve great respect. Yesterday saw "outside key reversal days" where both the high and low exceeded those of the previous day and in this case closed below the previous day's low. At this point the Dow Jones and S&P 500 have retraced slightly less than 50 percent of their move from the all time highs of October 2007 to the March 2009 lows. The NASDAQ 100 we note has retraced just 20 points shy of what would be its .618 retracement, an important Fibonacci ratio.

There are many who feel this may mark the end of the bear market rally. We believe it is too early to tell but there has been a warning shot fired.

Note: We are archiving the Traders Focus from here on so that those interested can follow more easily.

Natural Gas (Nov.) - Two weeks ago we introduced this marked to our coverage and actually saw a suggested long entry be elected. That is from a price level of 4025. We noted last week that the rather quick run up had touched against two points of resistance and that some participants might choose to reduce the size of the long entry position. Remaining long entries from the initial suggestion we believe can raise stop protection to intraday penetration of 4369 or a close at or below 4425. We also suggested last week that new or additional long entries could be initiated with intraday penetration of 4830 which has been penetrated. Suggested long entries from this entry approach we believe should place stop protection at intraday penetration of 4540. We believe the next area to expect stiff resistance should be 5320 or so and some long entrants may choose to reduce position size in that price area. Retracement areas of resistance are approx.: 4874 (hit) 5308; 5743. Extension targets active are approx.: 5019; 5155 and approx.: 5205; 5381.

SUGAR (Mar) - The originally suggested short entry from 2350 in the October contract was rolled to the March contract at 2266 and 2393 respectively. We believe stop protection should be reduced to intraday penetration of 2446 or a close at or above 2406. Retracement levels of resistance are approx.: 2357 (hit); 2408 (hit); 2459. Retracement levels of support are approx.: 2257 (hit); 2143; 2030. We would like to reiterate what we have said about this particular entry position over the past few weeks since initiation. That is that only those on the email list would have seen this in time due to the delay between the time the email can go out and the time to finish preparations and then to post to the site. Certainly all brokerage clients are not only on the email list but have direct access to us each and every day. If this is something that you would want please let us know.

Silver (DEC) - Last week we suggested that short entries could be initiated on a close at or below 169200. The close on Monday the 21 st was 168800 electing the entry. Stop protection for this suggested short entry we believe can be reduced to intraday penetration of 172600. Retracement levels of support are approx.: 161040; 156120; 151210.

Gold (Dec) - We will stick to our suggestion of last week: "We believe that short entries can be initiated with a close at or below 97750. Stop protection for this we believe should be amended to intraday penetration of 100940. Retracement levels of support are approx.: 98990; 97870; 96760. The next series below is approx.: 98090; 96690; 95290.

Euro Currency (Sept/Dec) - Last week we paid service to the run up in the euro currency having missed suggesting this for several weeks. We also said however, that it wouldn't surprise us if it was close to its end at least a temporary end. Yesterday's action (Wednesday) marked a reversal day as it did for stock indices. We feel we can suggest, for the more ambitious at least, that short entries can be initiated at a price level of 14725 or better. Stop protection if elected we believe should be intraday penetration of 14856. Another approach to entry we believe is a close at or below 14325. Stop protection for this short entry approach if elected should be intraday penetration of 14546. Retracement levels of support are approx.: 14593; 14514; 14436. The next series below is approx.: 14430; 14301; 14172.

Mexican Peso (Dec) - Our suggested long entry approach with intraday penetration of 74625 had been elected just prior to last week's edition. We believe stop protection should be intraday penetration of 72750 and we can suggest that it should also be used as a short entry. If elected on the short entry at intraday penetration of 72750 we believe stop protection should be intraday penetration of 74725.

British Pound (Dec) - Our suggested short entry with a close at or below 16425 would have been elected with the close of 16271 on Friday the 18 th . Stop protection for this short entry should be reduced to intraday penetration of 16588 or a close at or above 16485. Retracement levels of support are approx.: 16067 (hit); 15768; 15469. The next series below is approx.: 15838; 15468; 15099.

Canadian dollar (Dec) - We will stick with last week's suggestion that we believe short entries can be initiated with a close at or below 9136. If elected stop protection we believe should be intraday penetration of 9346. Retrracement levels of support are approx.: 9102; 8994; 8887.

S&P 500 (OCT) - Suggested long entries from the price level of 103600 we believe should raise the stop protection to a break even area with intraday penetration of 103700. A key outside reversal day was recorded in the major indices on Wednesday the 23 rd following the FOMC announcement on rates and accompanying statement. For those looking to be short this market we believe we can suggest short entries can be initiated at a price level of 105000 or better. If elected stop protection we believe should be intraday penetration of 107900 or a close at or above 107650. Retracement levels of support are approx.: 104225; 103160; 102100. The next series below is approx.: 99450; 96920; 94375.

Feeder Cattle (OCT) - There is an active suggested short entry position from the price level of 10250. We believe stop protection can be lowered now to intraday penetration of 9920 or a close at or above 9890. Near term retracement resistance levels are approx.: 9782 (hit); 9830; 9875. The next series above is approx.: 9825; 9885; 9945.

Soybeans (Nov) - Still remaining sidelined until further development

Wheat (Dec) - We believe long entries can be initiated with intraday penetration of 48550 or with a close at or above 48250. Stop protection if elected we believe should be intraday penetration of 44500 or a close at or below 44900. Retracement resistance levels are approx.: 50125; 51725; 53325.

T-Bonds (Dec) - There were two active long entry suggestions. One from 119-05 which had been rolled over from the September contract (initiated at 119-10 and covered on the roll at 120-12) and another from intraday penetration of 120-02 in the December contract. These both saw stop protection elected with this week's intraday penetration of 118-11.

Ten Year Notes (Dec) - There is an active suggested long entry f room 116-16.5 which had been rolled to the December contract from the September contract. We believe stop protection should remain as intraday penetration of 116-15. Retracement levels of support are approx.: 116-16; 115-27; 115-07.

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