Wednesday, September 21, 2005

Traders Helping Traders Big Weekend Edition - Part Two

PLEASE NOTE: Erich has some technical problems this weekend and won't be able to produce Part One of the Ezine.
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the Another week in the books and half of September is gone. This brings me closer to the October/November crush. Jacki's birthday is 10/10. She has mastered the process of making the whole month hers. November 1st we will celebrate our 25th Anniversary. With the trip to New Orleans off the table the pressure is on to find a substitute activity with sufficient pop to appropriately celebrate the best thing that ever happened to me. The thinking cap is on.

The week past treated us well … a pretty typical week, in fact. Steady, no big surprises or upsets and no big scores, either … just the way I like it. Let's go close out our remaining trades from Friday and move on to the coming week.
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TRADE REVIEW
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DECEMBER TBonds
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We sold 114-28 and got stopped out at -31 TWICE. Down 6 ticks, $187. We then sold -29 just in time to catch a run down to 114-15. We bailed at 114-17 for 12 ticks. That was the end of my day as it turned out. There were some opportunities to do buys at -21. I didn't see any green and after a while the volume dried up to the point there was no sense in attempting anything.
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MARCH 06 Eurodollar
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We had sold 95.825 on Thursday. Friday gave us a nice pop lower. I had planned to hold the trade over the weekend but when we got to .730 late in the day I thought it was a great what's most likely number after a quick look at the chart so I took it … out at .735 for $225.
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DECEMBER Mini Russell 2000
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I was a bit cautious entering on Friday. When the window opened we were bouncing between 671 and 673. I couldn't see a clear buy above or sell below 672 so I sat on my hands for a spell. After 4 failures in the high 672's I sold 671.70 and exited at 670.00 for $170. I sold 669.70 and bailed at 670.70 losing $100. I sold 669.70 again and exited at 670.10 losing $40. Next up we bought 670.40. Game on. I exited this one at 671.80 for $140. I bought 672.40 and exited at 674.80 for $240. I called it a day there.
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DECEMBER Gold
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A good sized gap up started the day throwing us into the 460/470 channel. We got a nice pullback and a confirmation. I bought 461.50 and was stopped at B/E. We bought 461.50 a second time. When we failed at 463.50 I jumped out at 463.20 for $170.
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DECEMBER Cotton
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I bought 49.60 on the bounce off 49.50. We tried but ultimately got stopped at B/E
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NEW TRADES
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DECEMBER TBonds
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There is a growing sentiment that the FED will back off on further rate hikes to facilitate the rebuilding of infrastructure destroyed by Katrina. That will probably cap the amount of further downside in the short term. I doubt we'll go any lower than 113-16 in the near term. We closed on Friday at 114-24. We'll be focused initially on 115-00 and 114-16 to kick off Monday trading. -08 and -24 are really almost out of the trading picture completely. Only an extraordinary set up would get me to take a shot at either.
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March 06 Eurodollar
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95.725/.030 is the current big line for us. I'll sell a break below .725 and buy a break out above .730. .0735 is the stop on the sell and .725 on the buy. The sell target is 95.575. We'll roll to B/E at 95.715. Additional protective rolls at .695, .675, .625 and .590. The target on the buy is .850. Roll to B/E at .755 thereafter at .775, .805 and .825.
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DECEMBER Canadian $
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We'll roll out to the December contract beginning with Monday's trade even thought LTD isn't until Tuesday. OI and Volume have fallen off to a point where it's the right thing to do. Unfortunately, I do not like the look of the DEC chart at all. We should re-label it "Gap City". I can only get behind a couple of trades at this time. I will sell a break below 8420 with a stop at 8427. The target is 8340.

The risk of, hopefully, less than $100 gives us about a 10:1 RRR. Roll to B/E at 8411 and make additional rolls at 8405, 8370 and 8350. I will sell a retest of 8500 as it turns and heads south. The stop is 8503 on any fill above 8490. I think the night boys will take care of this one and we'll never see the opportunity … you never know though.
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DECEMBER Swiss Franc
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Likewise Swiss, we roll to December contract beginning tomorrow. NO SEPT TRADES! We have a limited choice here as well. I will sell a break below 7920 with a stop at 7927 for risk of $125 max. We'll roll to B/E at 7913. At 7903 or lower roll to 7911 and below 7998 bring the stop to 7903. From there we'll roll at 7880 and at 7860 we'll begin a serious squeeze into our target at 7850. The RRR is about 7:1.

I will also buy a retest of 7920 that fails to press lower as it turns back higher. Place the stop at 7917 for risk not more than $75 (meaning you must get a fill of 7923 or lower) and roll to B/E at 7927. The target is 8050. That gives us RRR of 20:1. That's very unlikely so we'll protect this trade all along the way by making rolls at 7950, 7975, 8000, 8025 and at 8040 we start the big squeeze.
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SEPTEMBER Mini Russell 2000
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We are making a few changes in our number array. We'll add 678 and 683. 682 comes off the play list and we add 666 in combo with 665 and call it a range. That means at that area we sell breaks below 665 but make buys ONLY on breaks above 666. Here they are … 687, 683, 680, 678, 676, 674, 672, 670, 668, 666/665 as a range, 662, 658, 656, 654, 647, 645, 632. It's obvious the array of playable numbers has shrunk significantly from September. This poses management problems for us as we do not have the quantity of management tools to work with as we did in the past month. Soon we will be there but not right now.

We combat this by utilizing the "Once Broken" theories. This means, as we saw last month, it is a process of building momentum and exercising patience. Our results will not, in all probability, be as solid as they were in the later stages of the last contract trading. It is very important that we realize, accept and act accordingly. I would suggest printing out the previous numbers from our September array and anticipating they will materialize again as players. Using this technique is acceptable ONLY for management purposes, NOT for trade entry. You dig?
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DECEMBER Gold
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I'm very close to declaring Gold a "no buy zone". We'll continue to play the $10 channels for now but will be extra tight in managing any buys at this level. I'll watch for a few days and then make a decision about no buys. Keep an eye on the daily updates.
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DECEMBER Cotton
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We again have a number of trades to consider. We'll start with 53.00. Either a buy or a sell will fly here. We'll buy the break above with a stop at 52.83 for risk of $100. The target is 54.50 giving us an RRR of 7.5:1. We adjust stops at 53.30, 53.50 and 54.00. We'll also sell a retest that fails to drive higher as it begins to fall hoping to get filled no worse than 53.85. The stop is 54.07 for risk not to exceed $100. The target is 50.50. We'll adjust stops at 52.50, 52.25, 52.00, 51.80, 51.60, 51.23, 51.00 and at 50.80 we go into squeeze mode. The RRR here is about 12:1.

I don't think we'll get past all of the intervening support levels on the first pass so we should view it as a much skinnier trade than 12:1. 52.50, 52.00 51.50, 51.00 and 50.50 and 49.50 are all playable numbers in either direction. Pick up the management from above. In the case of 49.50 add rolls on a sell trade at 49.35, 49.10, 49.00, 48.85, 48.65, 48.50 and 48.25 on the way to the target at 48.00. We will buy a retest of 48.00 if it fails and turns back higher. The stop is 47.97.
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DECEMBER Cocoa
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The only trade I will do is to buy a retest at 1370 that fails to drive lower as it heads back north. The stop is 1367. The goal is 1430. Rolls at 1380 and then every $10 higher. DECEMBER Corn I'm going to stand aside tomorrow and watch. I think we're going lower but with no structure I'm unwilling to bet money on it. I'm sorta' tempted to buy a break above the double bottom from last week. I won't though. I'll take another look at Corn for the update tomorrow but for now let's be spectators.
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DECEMBER Wheat
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I'll buy a break above 3.26 ½ or sell a failure there. Stops and rolls to B/E at a penny and a half. Should we see a retest at 3.18 I'll buy one there. That's it for this edition. Check out the Wednesday Webinar if possible. It is one of the true perks of following along with us.

-Tom

"Tom's Trades" for Friday, September 16, 2005

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"Tom's Trades" for Friday, September 16, 2005
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Hi Gang ... My apologies for flaking out on you all last night. After 2 hours of non-stop Webinar I was hurtin' and exhausted. I will give you the trades I did today. This is a good opportunity to a little check the system game. Since I didn't tell you all last night what I'd be looking at for today you can compare what you did and see how it compared to my trades.

Thanks for understanding. I will try to keep absences down to a minimum as I work thru the good and bad days ahead.
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1: DECEMBER 30 YEAR T BOND
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USDZ5 O=6-01 HI=6-10 LO=4-30 CL=5-09

There's another point disappearing from the bonds. I tried to buy -03 right after the open and they wouldn't let me in ... thank you for that. Doesn't look like any real damage would have been done had we gotten filled but I'm happier to be flat. Looks like we'd have been out at B/E or maybe -02.

I then did sell -29. I decided to make them break -24 to get me out after we hit -18. They got there but didn't break it. I finally exited of my own will at -18 for 11 ticks. I tried twice to sell the break of -16 and couldn't. On the third try I got on off at -13. We went to 114-31 and I bailed at -01 for 12 ticks. Total on the day 23 ticks, $718 without ever having more than about $157 at risk.

The close at 115-09 sets up 115-16 and 115-00. -08 and -24 are playable after the first trade at -00 or -16.
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2: MARCH 06 EURODOLLAR
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EDH6 O=.835 HI=.860 LO=.790 CL=.810

I sold 95.825 on Wed. and was stopped out at .840 at the open losing $37. Sold .825 a second time today and was again stopped at out, this time at .835 losing another $25. I'm beginning to remeber why I traded the front month ... lol. I sold the number once more and am now short from .825 with the stop at .835 headed to tomorrow.

If we bounce back to .825 we can sell if you're not in with me already. The other alternative would be to sell a break of 95.780. I like the looks of that level as well.
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3: SEPTEMBER CANADIAN DOLLAR
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CDU5 O=44 HI=49 LO=05 CL=34

No volume so I passed. I leave it alone tomorrow as well and on Monday we'll roll out to the December Contract.
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4: SEPTEMBER SWISS FRANC
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SFU5 O=97 HI=98 LO=84 CL=91

Same story here in the Swiss. On the sidelines until the weekend TT where we'll roll to Dec contract
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5: DECEMBER MINI RUSSELL 2000
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ERTZ5 O=9.90 HI=2.30 LO=6.50 CL=7.80

The scene opens with a panoramic shot of the Ponderosa ranch. The camera narrows in on the kitchen window where we see Hop Sing with a clever in his hand ... chop, chop, chop. Geez. I bought 670.40 and exited at .50 for $10. I bought 670.40 again and exited at 671.90 for plus $150. I sold 671.60 and exited at 668.10 for $350. I bought 668.30 and exited at 669.60 for $130. I missed one setup and picked back up the concentration at 669.50 with a sell. I bailed at 667.20 for another $230. I bought 668.30 and exited at 667.70 losing $60.

No new numbers.
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6: DECEMBER GOLD
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GCZ5 O=7.00 HI=9.70 LO=6.30 CL=9.30

A big gap up at the open was a bit of a surprise to all. The good news it leaves us at 459.30 with a good look at upper 80th percentile numbers for tomorrow. Follow thru or failure? We shall see.

$10 gold channel for tomorrow.
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7: DECEMBER COTTON
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CTZ5 O=.50 HI=.94 LO=.38 CL=.50

I bought 49.55 and bailed at 49.85 for $150. Same numbers from TT again tomorrow. I will also buy a failed retest at 49.50 as it turns and heads north. The stop is 49.37.
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8: DECEMBER COCOA
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COZ5 O=12 HI=17 LO=99 CL=05

Nothing for us today. I'll leave it alone tomorrow and attack on Monday ... with one exception. I'll buy a failed retest of 1400 tomorrow with a stop at 1397.
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9: DECEMBER CORN
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CZ5 O=2.06 1/4 HI=2.08 LO=2.05 3/4 CL=2.06 1/2

Sidelines for me. We'll see what's what in TT over the weekend.
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10: DECEMBER WHEAT
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WZ5 O=3.25 HI=3.26 1/2 LO=3.20 1/2 CL=3.22 3/4

3.26 showed itself. Couldn't do anything with it. I tried to sell but couldn't get a fill. We'll sit tomorrow out and get back after them on Monday.
.

Erich's Update for Friday, September 16, 2005

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Market Update for Friday, September 16, 2005
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Hot off the commodity presses to you!
"Anyone who stops learning is old, whether at twenty or eighty." - Henry Ford
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1: CURRENCIES
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December Australian Dollar ADZ5
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The Aussie continues to be quite choppy trading considerably lower again today. It does appear that the market has confirmed resistance and might fall off some more, but there's nothing tradeable here right now.
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December British Pound BPZ5
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Wow, the Pound made a wicked drop right to trendline support at 180 today. Rates didn't even flinch at the 181 resistance, although that is argueably the high for today. Important day for the bulls tomorrow, if they can rally the market then we might see the Pound head higher.
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December Canadian Dollar CDZ5
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The CD dipped lower today to give us an RSI test. If it wasn't Friday I'd look to buy a break of the high, but it is, so I'll wait for confirmation.
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December EuroFX ECZ5
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The Euro officially became a bear market today as rates fell through the trendline support. We should see a slight hiccup soon, but our focus is now on selling.
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December Japanese Yen JYZ5
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The Yen continued lower today as well, but this market is way too choppy to even consider trading right now.
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December Mexican Peso MPZ5
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Got stopped out at breakeven on a slight hiccup in the Peso today. Too bad, as it looks like the Peso might be heading lower for the short term.
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December Swiss Franc SFZ5
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If you never thought you'd be happy to be whipsawed just look at today's open in the Swissy. See what I mean? If we didn't get taken out of the market yesterday we would have experienced a huge gap this morning on the open (almost a $1000 loss!)

In spite of it all support and resistance did keep us out of a bad trade. We took our lumps when the market said we were wrong, and while no one likes to be wrong, I'll take a $300 hit to a $1000 one any day!
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December US Dollar Index DXZ5
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As you might have suspected, the USD rallied today, and quite substantially I might add. We could see a pause tomorrow however as we're trading off resistance at 8800.
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2: ENERGIES
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October Unleaded Gas HUV5
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Gas continues to channel, and while I would like to trade a breakout of the channel I won't press my luck on Friday. After the weekend we roll into the next contract month.
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October Heating Oil HOV5
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Slight hiccup in the HO rally, but that's to be expected after yesterday's strong rally. Nothing I want to try here tomorrow either.
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October Crude Oil CLV5
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Crude reversed from yesterday's rally as well. I hate it when the market's are so choppy, but it's usually a sign of changing trend, which I think is what we're getting here.
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3: FINANCIALS/INDICES
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June (06) Eurodollar EDM6
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The ED is also channelling and while the market is technically in an uptrend, the bulls aren't doing too much about it. If rates break support we'll also change our bias here, but I'll just cover the long side tomorrow.

*BUY June Eurodollar at 95.835
*Stop 95.775
*Approximate Risk Exposure: $150 per contract
*Profit Target: 96.055
*Approximate Profit Potential: $550 per contract
*RRR: 3 1/2:1
*Degree of Risk: HIGH
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December mini-DOW YMZ5
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A sign of support from the Dow today? Maybe, but it isn't confirmed just yet. If we get a bounce off of 10560 then we can get serious about buying, but if we see a break we will look to sell.
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December mini-NAS NQZ5
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The NAS closed too close to the 1600 support line to really determine whether or not it is broken. Personally I think we will see the market continue lower, but I dont' want to play Futures roulette tomorrow.
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December mini-S&P ESZ5
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As usual the S&P mirrored what the other indices are doing, and like the other indices we are trading off substantial support. If we get a bounce we're buyers, otherwise we flip to the bear side.
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4: GRAINS
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December Corn CZ5
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Here we are, flirting with long term support at 205. The trend is down, and strong, but dare we sell? I think I'll wait, just a little longer.
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December Oats OZ5
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Oats stalled today, not able to exceed yesterday's high, but the market is looking stronger as we have a reasonably high close. Nothing new here tomorrow.
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November Rice RRX5
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679 is close enough to the 680 level we were looking for as our first resistance test. RSI is still sloping higher, so I might expect the rally to continue to 690, but we'll see what the market gives us.
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December Soybean Meal SMZ5
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Well whaddaya know, we finally caught a break! I was beginning to think the market's were conspiring against me or something. Soy Meal made a strong move to the downside today and as of the close we're about halfway to our first profit target.

If you're looking to let the trade run as much as possible, breakeven is the best place for your stops. If you want to tighten them up a bit, consider using the intraday resistance at 1775 to place your stops above.
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December Soybean Oil BOZ5
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Bean Oil wasn't nearly as cooperative as Soy Meal today, but the market hasn't found our exit stops yet. Holding everything as is, and hoping for a lower session tomorrow.
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November Soybean SX5
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It doesn't look like much, but today's range picked us up $1000 as of today's close. Now comes the tough part. If you want to let the trade run put stops above today's high (or 580), if you want to protect as much profit as possible use the intraday resistance at 575.
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December Wheat WZ5
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Wheat moved firmly into bear territory again today. In hindsight I got too bullish too quickly as it looks like prices are heading lower for the near future. I'm just watching tomorrow.
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5: MEATS
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October Feeder Cattle FCV5
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Feeder's continue to hold support today. We've got a bit of a channel happening again, but I'm going to pass on doing anything tomorrow.
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October Live Cattle LCV5
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Cattle continue to look strong and I need to get serious about finding a good spot to buy into this market again. I'm still kicking myself for passing on the 8360 breakout.
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October Lean Hogs LHV5
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Hogs recovered quite quickly after yesterday's big bear session. RSI is at a testpoint, so I would think higher prices are likely tomorrow and for the short term.
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6: METALS
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December Copper HGZ5
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Copper is still in no-man's land. I sense a big move coming in this market, but I don't know where, or when.
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December Gold GCZ5
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Turns out we were a few days early with our gold buy as today was the day the market made some serious gains. Not to worry, we'll have another chance very soon. I was surprised to see a rally however, especially with the strength of the USD>
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December Silver SIZ5
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And higher prices were the result today of the RSI trendline break from yesterday. A big day with a weak close, but we'll probably see silver try to get higher still.
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7: SOFTS
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December Cocoa CCZ5
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Cocoa's due for a bounce after a week of straight declines. I hope we see a bounce/pause tomorrow so we can try and sell the market again.
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December Coffee KCZ5
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Quick about face from coffee today, and slightly premature as we're not to our RSI test yet. I know that should be selling a break below today's support, but it's Friday and this is coffee and I'm a chicken. ;-)
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December Cotton CTZ5
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Cotton continues to hang around the 4940 - 4950 line today. The low close looks bearish for tomorrow, but the support is still holding right now.
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November OJ OJX5
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Depending on how tight you made your stops you might have gotten tagged today. You might consider bringing stops in below today's low however, as the smallish session might hint of a reversal tomorrow.
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October Sugar SBV5
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There goes sugar, through the top of the channel. I want to buy this market but I'm more than a little apprehensive about the extremely overbought situation. I would dearly like to see the market *normalize* ...at least a little bit.
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