Thursday, July 06, 2006

Tom Loge's Trades for the week 7-6-06

Having a wonderful time, wish you were here. Jacki, I and the 3 kids are roughing it in a friend's beach house about 100 miles up the coast in Cambria. Every one is enjoying our unseasonably hot weather. After being relatively pain free since the surgery last August I am hurting at pretty close to pre op levels. I'll be back for a new MRI and an evaluation when I return … very disappointing to say the least. We are returning tomorrow late afternoon in time to check out the fireworks and a Kenny Loggins/L.A. Philharmonic concert at the Hollywood Bowl.

Not being able to fully partake in all the physical activities this weekend has given me some time to ponder some deep issues. I will turn 61 in a month and a half. Writing TT on the weekends and the Daily updates each night is a little like being confined to a cell and scratching off the days on a wall. I life of deadlines … not that I'm the best in making them all the time … makes for a heightened awareness of the time passing. It does not look as though the kids will be returning to their Mom any time soon and I am becoming increasingly sensitive to my obligations to them.

I awoke at 5 am this morning, went out to the deck and camped on a chaise lounge to welcome the sunrise. It was spectacular looking out over the calm ocean watching the dolphins at play and the giant wing span pelicans in search of breakfast, skimming no more than mere inches above the frothy tops of the waves breaking rhythmically on e after the other. It was at that moment that I understood, with almost painful clarity, that my days of doing TT and the Daily Updates are numbered. Oh, that's not to say you should expect an immanent announcement I certainly don't see that happening for at least a year and maybe 2. One of the by products of this early morning epiphany is a realization that I have much work undone. Before I can hang 'em up I need to write at least a manual of what I do in the context of my primary trading philosophy and certainly a guide to the bonds and the indices. Gold too. Erich has been writing a bond program. I now realize I must do it and so I will.

I hope you all are enjoying time off and gathering tomorrow to celebrate Independence Day. Hopefully you can spare a minute or two to think about all our young men and women in lands far away who are serving this country in hopes of giving those people a taste of what we all hold so dear. Fat chance of success or the effort being appreciated, I think.

This will be a very short week of trading. There is always a tendency to come back from a hiatus like this and be a little revved up to start trading again. Do a little check on your systems. Are you focused and read? Got a good handle on your management strategies? I like to tighten things up a bit and move gently back into the fray. I like to be a little more demanding of my entry triggers … if I normally will play the top 6 or so S&R levels maybe for the first couple of days I'll relegate my view to only the top 4, say.

With this very short week … just 3 trading days … in front of us let's not feel we have to make up lost ground. Let the markets seek us out at preordained levels rather than acting like a pit bull too long tethered to the leash.

NEW TRADES

SEPTEMBER TBonds

Thursday and Friday action was driven by two events. First the FOMC meeting notes were decidedly mild as to future hikes. This was received well by the stock market. Well enough that the market shrugged off some very weak economic news to advance in spite of it. This also buoyed Bond prices on Thursday, Friday and Monday.

There isn't much happening the balance of the week. We expect Factory Orders on Wednesday to show some follow through weakness from last month. The big deal will be the monthly Employment Report for June. I doubt we'll see the Bonds do much in front of that report.

The close on Monday at 106-17 has us looking to 106-00 and 107-00 along with 106-16. The quarters will be important in the 3 day week remaining. I'll continue to demand one -00 or -16 trade first.

DECEMBER Eurodollar

Friday provided the bounce sufficient to carry us back to 94.400. We broke from there a tad on Monday. I'll be looking for a return to .400 to sell or buy a break higher. The sell is a much more comfortable trade than is the buy. But we can play either … just keep a short rein on things with tight stops both sides.

SEPTEMBER Canadian $

Any movement back into the 9060-9080 should be watched for the first sign of a failure at which point we'll sell. From the fill price go back to the next XXX3 and place the stop there. The target is 8920. This yields a pretty fat RRR yet we understand the need to roll the stop at 9040 and then every 20 points lower.

If we miss the opportunity to sell at the higher levels we can sell a break of 9040 or 9000. Use the same stop placement formula and roll points as applicable.

A failure to continue moving lower at 8940 or 20 can be bought with the stop at the next lower XXX7. A break lower from 8940 or 8920 is fair game for a sell as well. If we get a shot at selling 8940 make an aggressive roll of the stop as we approach 20. Don't be at all surprised if the trade ends or reverses there. If we get thru that level, we'll be looking for a target of 8840. Roll at 8900, 8880 and 8840.

SEPTEMBER Swiss Franc

The Swiss failed at 8250 on Friday and Monday. We'll sell any failed retest of 8250 and pretty much look to sell any failure at any number above there … especially 8275 and 8300. Take the fill price and go back to the next highest XXX# and use that for the stop. The target is 8075. Along the way we have to roll stops at 8230 (to break even), 8215, 8200, 8180, 8150, 8125, 8100 (big round one void of structure) and 8090.

We'll also sell the break below 8075 with a stop at 8077, although I think that one is highly unlikely. The target would be 8000 and rolls called for at 8050 and 8025.

We can buy any failure at 8000, 8050, 8075, 8125 or 8150. The stop for all these is the next lowest XXX7 below the fill price with a target of 8250.

The currencies will react Friday to the Monthly employment numbers so be cautious and demanding of the entries.

SEPTEMBER Mini Russell

The Russell managed to log 4 consecutive up days from Wednesday forward. I think we'll see a period of "back and fill" into Friday. I don't think traders will be willing to continue seriously pressing the advance issue ahead of Friday.

Here are the numbers currently in play for September:

790, 785, 783, 780, 778, 775, 772, 770, 767, 765, 760, 755, 750, 747, 745, 742, 740, 737, 735, 732, 730, 728, 722, 720, 717, 715, 712, 710, 707, 704, 700, 695, 692, 690, 685, 683 and 675.

No additions.

SEPTEMBER Mini Dow

The DOW was not quite as consistently strong as the Russell thru the same 4 day period … close though. I think we'll see very similar but softer action in the DOW as well. We may see a press to 11350 but I doubt much more than that prior to Friday. Friday's report will set us up for the next week.

Here are the current numbers in play:

11780, 11750, 11700, 11600, 11580, 11550, 11500, 11450, 11400, 11380, 11350, 11330, 11300, 11265, 11200, 11180, 11150, 11100, 11050, 11000, 10980 and 10950.

AUGUST Gold

Gold made a huge $10 gap up opening and then powered up another $16 on Friday closing at 616.

We'll continue to use our $10 Channel approach. I will not take any buy trades the reminder of the week. There is simply unjustifiable risk in any buy at the moment. We must rebuild a solid floor before a buy becomes viable let alone attractive.

OCTOBER Cotton

I think the big collapse on Monday is more a function of no players than saying anything about supply and demand in the market.

Any failure to press lower than 51.00 is a buy … likewise, a break above 51.50. Keep the stops short … no more than 11 points MAX. 52.50 is the target.

A failure to advance from 52.00 or 52.50 can be sold with some confidence. While I always try to manage Cotton trades closely, I think any sells must be approached with a great deal of circumspection.

Be very sensitive to long runs … look at Friday's early run up and subsequent failure to understand the concept.

SEPTEMBER Cocoa

A total rocket ship for a week. We just blasted to new contract highs … numbers not seen for well over a year. We are "on the trailer" due to lack of structure. No buys, for sure. I will, however, sell a break back below 1640 with a 1643 stop. No target is identifiable. We'll run the trade based on periodic RRR and definitely observe the long run concept.

This is risky business with a chart with such a configuration. I do not recommend this trade to any but a seasoned practitioner of the "Ambush" philosophy with the time to watch it tick to tick and an account above 5K, at least. Did I mention R-I-S-K-Y?

SEPTEMBER Corn

You will notice that most traders will roll out to December at this point. I prefer remain playing old crop as opposed to the Dec, new crop, contract.

Friday today we exploded 15 cents higher. I again think this is more about lack of volume as opposed to some supply/demand dynamic.

I don't think it was just coincidence we pulled up at 2.54 ½. So the play for tomorrow becomes an easy deduction … we'll sell a failure there or buy the break above. These are all scalps so penny and a quarter rules every aspect of our management.

The spread is off the table for the moment. Duh!

SEPTEMBER Wheat

I'm a bit suspect of the Wheat. The advances Friday and today weren't real convincing, both meeting dramatic failure … especially today.

I will sell any retest into the 4.09/4.10 area. I will also be watching 4.06 area for a failure there to sell. I would love to see that one happen. That one could easily lead to a 10 cent plus run back to 3.95/3.90 or even 3.87.

A failure to rock lower than 3.87 is a buy.

All these are scalps as well … penny and a quarter.

That's it for this edition. Keep in touch at the Forum. Wednesday's Daily Update should make interesting reading.

Tom