Erich and Tom's Updates for Friday, October 21, 2005

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Market Update for Friday, October 21, 2005
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SCROLL DOWN ABOUT HALFWAY FOR TOM'S TRADES!!

"I may not be there yet, but I'm closer than I was yesterday." - Anonymous
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1: CURRENCIES
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December Australian Dollar ADZ5
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Here we are again with the Aussie, right back at an important test for the bulls. If we see a reaction here I might look at selling next week, providing it's not another crazy gap day.
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December British Pound BPZ5
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The BP officially moved into bull territory today. Tomorrow's Friday so it's a little iffy putting on a new position so I'll wait until Monday.
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December Canadian Dollar CDZ5
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The CD remains as choppy as ever. I should be looking to sell the support tomorrow, but what the heck...it's Friday.
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December EuroFX ECZ5
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The Euro floundered a bit today which could see the market fall off tomorrow. The plan remains the same; however the risk level is very high. We certainly don't want to get caught in a wandering market.

*SELL December EuroFX at 119.37
*Stop 119.73
*Approximate Risk Exposure: $450 per contract
*Profit Target: 117.61
*Approximate Profit Potential: $2200 per contract
*RRR: 4 1/2:1
*Degree of Risk: Moderate to HIGH
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December Japanese Yen JYZ5
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Why do we have to get signals to trade on a Friday? Today the Yen is looking like it might be ready to continue with the trend again, so I'll look to sell below this week's low.

*SELL December Japanese Yen at 8679
*Stop 8707
*Approximate Risk Exposure: $350 per contract
*Profit Target: 8553
*Approximate Profit Potential: $1575 per contract
*RRR: 4 1/2:1
*Degree of Risk: HIGH
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December Mexican Peso MPZ5
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The Peso finds itself at an RSI testpoint today. I think we could see a break since the test came so quickly after the other one. I studied the chart trying to find tradable numbers but can't come up with anything I like.
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December Swiss Franc SFZ5
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The Swiss Franc is also approaching a testpoint and as such we could see rates fall off again. I'll run the original order for tomorrow and sell only if we make a new low.

*SELL December Swiss Franc at 7693
*Stop 7733
*Approximate Risk Exposure: $500 per contract
*Profit Target: 7553
*Approximate Profit Potential: $1750 per contract
*RRR: 3 1/2:1
*Degree of Risk: HIGH
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December US Dollar Index DXZ5
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A small day in the USD. Not too much to get excited about at the moment, although I am still favouring the long side.
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2: ENERGIES
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December Unleaded Gas HUZ5
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Hallelujah! Boy I needed that trade to work out and it worked perfectly. I think that was the fastest $1700 I ever made in a trade - about 30 minutes from entry to profit target.

If you're still short this trade and trying to ride it out, you'll want your stops above the intraday resistance at 166.20. The trend looks good, so lower prices are likely.
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December Heating Oil HOZ5
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Would you look at that range? We missed the Heating Oil trade by one stinkin' day! We've got some rather strong support at 187.50, and I would certainly welcome a reaction here so we could sell again next week.
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December Crude Oil CLZ5
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Crude broke my heart today as we just missed riding out this trade yesterday by a couple of ticks. The first profit target was reached today, and like heating oil, I wouldn't mind seeing a reaction so we can sell again.
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3: FINANCIALS/INDICES
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September (06) Eurodollar EDU6
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I don't think I've ever seen any market follow one fade day with another, but that's what happened in the ED today. I'll run the sell order again, but if the fade holds we should see higher rates tomorrow.

*SELL September (06) Eurodollar at 95.245
*Stop 95.290
*Approximate Risk Exposure: $112 per contract
*Profit Target: 95.035
*Approximate Profit Potential: $525 per contract
*RRR: 4:1
*Degree of Risk: Moderate
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December mini-DOW YMZ5
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Brutal ranges in the minidices today. The Dow reset yesterday's gains and the RSI hook looks like more is to follow tomorrow. I don't know about you, but the market is acting a little hinky so I think I'll hold off.
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December mini-NAS NQZ5
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I was going to hold off trading the NAS; however the RSI hook, although premature, is almost too good to pass up. We have support below the low at 1547 - 1548 that is making me a little apprehensive about the success of this position, but on the bright side the resistance at 1565 should definitely tell us if we're wrong.

*SELL December mini-NAS at 1551.5
*Stop 1565.5
*Approximate Risk Exposure: $280 per contract
*Profit Target: 1506.5
*Approximate Profit Potential: $900 per contract
*RRR: 3:1
*Degree of Risk: HIGH
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December mini-S&P ESZ5
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The S&P continues to struggle with the weekly support line and the sell signal is not as strong as it is in the NAS so I'll hold off for the time being.
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4: GRAINS
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December Corn CZ5
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We're still holding on to our corn position, although I have to admit that it isn't too promising. RSI is pointing higher which might suggest higher prices tomorrow. Besides, any trade that takes this long to breakout is taking too long.
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December Oats OZ5
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A suspected, oats rallied today. It was a good rally too, with prices honouring the trendline. I will look to buy the market long on a break above the 167 resistance.

*BUY December Oats at 167 3/4
*Stop 164 3/4
*Approximate Risk Exposure: $150 per contract
*Profit Target: 176 3/4
*Approximate Profit Potential: $450 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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November Rice RRX5
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Rice is still sticking pretty close to the 724 support area. I'll run the buy trade again tomorrow, but would like to see continued testing of support.

*BUY November Rice at 750.5
*Stop 739.5
*Approximate Risk Exposure: $220 per contract
*Profit Target: 787.5
*Approximate Profit Potential: $740 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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December Soybean Meal SMZ5
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Soy meal is starting to paint a slightly more bearish picture after last week's impressive rally. I'm not going to get ahead of myself and pick a direction on Friday, but a break higher or lower should see prices continue that way.
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December Soybean Oil BOZ5
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Bean Oil is giving us an RSI test today, and while I think we could see a breakout to the short side, I'll place my buy order with the trend. Don't feel rushed to get into this market however. Tomorrow is Friday and this is Bean Oil.

*BUY December Bean Oil at 2433
*Stop 2397
*Approximate Risk Exposure: $216 per contract
*Profit Target: 2547
*Approximate Profit Potential: $684 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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January Soybean SF6
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It's a little strange having all these orders for a Friday, but Beans are finding themselves at a definite decision point. This market could literally go either way from here, so I'll bracket the trade and let the market decide. All I'm hoping for is a clean breakout.

*BUY January Soybeans at 603 3/4
*Stop 597 3/4
*Approximate Risk Exposure: $300 per contract
*Profit Target: 642 1/4
*Approximate Profit Potential: $1925 per contract
*RRR: 6:1
*Degree of Risk: HIGH

OR

*SELL January Soybeans at 592 3/4
*Stop 597 3/4
*Approximate Risk Exposure: $250 per contract
*Profit Target: 577 3/4
*Approximate Profit Potential: $750 per contract
*RRR: 3:1
*Degree of Risk: HIGH
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December Wheat WZ5
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Wheat recovered nicely today, and looks poised to rally tomorrow, but I'm only watching.
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5: MEATS
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November Feeder Cattle FCX5
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After watching for several weeks, Feeders are finally giving us a signal we can trade. I'll look to sell this week's low at 144.55 which should be a clear sell order. NOTE: Friday is the release of the Cattle on Feed report, so this could be a very volatile day.

*SELL November Feeder Cattle at 114.37
*Stop 115.12
*Approximate Risk Exposure: $375 per contract
*Profit Target: 110.17
*Approximate Profit Potential: $2100 per contract
*RRR: 5 1/2:1
*Degree of Risk: HIGH
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December Live Cattle LCZ5
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I'm tempted to tighten up our sell order as having it this far away could end up getting us filled at the low of the day - which is never much fun. I will run it as is however, as I can't find suitable numbers to tighten it up.

*SELL December Live Cattle at 8967
*Stop 9032
*Approximate Risk Exposure: $260 per contract
*Profit Target: 8732
*Approximate Profit Potential: $940 per contract
*RRR: 3 1/2:1
*Degree of Risk: HIGH
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December Lean Hogs LHZ5
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Hogs are still holding the line, so it's time to place our sell order below this week's support. I'll try to give the market as much room as possible before selling and try to keep stops relatively tight. The first profit target is likely not the last one, just so you know.

*SELL December Lean Hogs at 5967
*Stop 6015
*Approximate Risk Exposure: $190 per contract
*Profit Target: 5782
*Approximate Profit Potential: $740 per contract
*RRR: 3 1/2:1
*Degree of Risk: Moderate to HIGH
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6: METALS
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December Copper HGZ5
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Whew! What a wild day in Copper. What do you think, are prices coming down tomorrow? I would say so.
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December Gold GCZ5
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Looks like gold is going to give us another chance to sell this market next week as a bounce tomorrow appears likely. Wait for prices to pullback to resistance at 470 before getting serious about selling.
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December Silver SIZ5
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Silver's high closing price relative to the daily session would suggest that higher prices are coming tomorrow. I think these could be temporary however, especially if gold continues lower as well.
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7: SOFTS
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December Cocoa CCZ5
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Cocoa is extremely choppy right now, trading higher one day and lower the next. Today we saw prices testing support. I'll hold off selling until we get closer to last week's support, but in the meantime I'll run the buy order.

*BUY December Cocoa at 1421
*Stop 1397
*Approximate Risk Exposure: $240 per contract
*Profit Target: 1497
*Approximate Profit Potential: $760 per contract
*RRR: 3:1
*Degree of Risk: HIGH
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December Coffee KCZ5
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That wasn't much of a pullback, was it? I think I'll wait one more day before considering a trade.
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December Cotton CTZ5
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Who was that smart fella who said that cotton was going to find support at 5300 today? Oh yeah, that was me wasn't it? ;-) Okay, so we only got to 5305, so sue me (just kidding). Tomorrow's a big day, if we get a rally it means the bulls still control the market, otherwise it's gone to the bears.
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November OJ OJX5
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OJ's setting up for another buy, but not tomorrow. Right now it looks like it'll be ready early next week.
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October Sugar SBV5
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I'm trying to be patient with sugar and wait for the right setup, which should take a few more days to get.
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"Tom's Trades" for Friday, October 21, 2005
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We had a thunder and lightning storm last night. Beautiful to watch but not very conducive to computer work sans power. I got this all written last night but couldn't send it until tonight when I got home. I thought since it was already done I'd send it along if for no other reason than continuity sake.
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1: DECEMBER 30 YEAR T BOND
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USDZ5 O=2-15 HI=3-00 LO=2-12 CL=2-29

Bought 112-20 on the run up right after the open and was stopped at 112-17 losing 3 ticks. I tried to buy -20/-21 about 9:05/9:10 and couldn't get it. I finally bought -20. Bonds made it to 112-30 and then backed up a bit. I exited at -27 for 7 ticks, $218. The close at 112-29 sets up 112-16 and 113-00 for tomorrow. Refresh your view by re- reading TT from the weekend.
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2: MARCH 06 EURODOLLAR
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EDH6 O=.380 HI=.395 LO=.370 CL=.390

I'll stay with the below comments for tomorrow.

If we challenge 95.450 tomorrow and fail I'll take a flyer at selling one. I think I'll also buy a break above. Keep both stops tight but the buy is a pure scalp ... short leash time.
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3: DECEMBER CANADIAN DOLLAR
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CDZ5 O=20 HI=55 LO=92 CL=13

The break of 8500 came at the end of a fairly long run down. I thought sufficiently so to let it age a bit. It bounced back north. Nothing here today. Same numbers for tomorrow ... TT numbers, 8475 and 85. Sell only at 8500.
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4: DECEMBER SWISS FRANC
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SFZ5 Ow=53 HI=11 LO=42 CL=90

We bought 7764 which I exited at 7775 for $137. I tried to buy the dip at 66 and couldn't get it below 70. Same 7760 tomorrow.
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5: DECEMBER MINI RUSSELL 2000
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ERTZ5 O=9.70 HI=1.30 LO=3.90 CL=9.10

The window opened with the Russell bouncing around 630/640. We're a little number challenged in this area so we sat for the first half hour. We bought 637.60 and exited at B/E. We sold 636.60 with the same result ... B/E. We next bought 637.50 and exited on a "once broken, OB hereafter" play at 638.80 for $130. We bought 637.50 again and exited at 637.70 for $20. Next we sold 636.60. We got down to 634.90 and I tried to get out on an OB but the market was faster than my fingers. Out at 635.70 for $70. I took a break here and came back with the market trading 638 about 10 CDT.

We sold 636.50 on a break of 637 and exited on an OB at 635.10 for $140. Sold 634.60 on a break of 635 and exited at 632.20 for $240. I bought 632.40 with an exit at 631.70 losing $70. I bought 632.50 and exited at 631.80 losing $70. I took another break. When I returned it was trading 635/636 around 12 CDT. I sold 634.50 and exited at B/E. I sold 634.50 again with the same result. I sold it a third time about 12:40 CDT. We made it down to 631.80 and I tried to exit at 632.10 on an OB. Out at 632.80 for $170. Sold 632.50 and exited at 633.00 losing $50. I sold 632.60 and exited at 629.00 for $360. I quit at this point.

This was, by far, the hardest trading day since we began trading the Russell. Many of our "Once Broken" plays didn't work as the market would run for a bit and then reverse hard right back. A very frustrating day to say the least. I just didn't have anything left in the tank. I felt like I'd gone 6 with George Foreman. We missed a couple of good potential trades near end of day as the chop abated and we went on a couple of decent runs off our numbers at 630 and 627. We ended the day up $940. Although the gross on the day wasn't too bad, only slightly off out $1000 goal, it took me about twice as many trades to do it.

This is NOT an example I would encourage anyone to follow. On day's like this where the market "personality" was clearly evident it would have been smarter to have cut the trades in half. I'm frankly not sure it was worth it ... I will however take it. This was a lot of trading and so a lot of time in harm's way. I was only able to do this because the my Bond trading was almost non existent today. I could not and would not do this every day.

I actually got into a zone today. A bad one, in retrospect. The more it chopped and played its game the more I got wrapped up, pulled into, it. This was not a smart day of trading on my part.

All the numbers tomorrow.
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6: DECEMBER GOLD
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GCZ5 O=6.30 HI=7.30 LO=2.00 CL=3.20

Nothing for us today as it played all day within the 20th and 73rd percentile. $10 channel tomorrow.
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7: DECEMBER COTTON
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CTZ5 O=.70 HI=.90 LO=.05 CL=.21

We sold 54.50 having missed any chance to sell 55.00. We made a very quick descent to 53.35. Remember my feelings about long runs? I rolled the stop to 53.43 and got out at 53.45 for 105, $525. We might have made a bit more if we'd done everything ogff our numbers but I was in a dogfight in the Russell and it pretty much turned me blind to other plays. We'll go again tomorrow with the same array of numbers from TT plus 56.00.
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8: DECEMBER COCOA
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COZ5 O=85 HI=99 LO=64 CL=67

Nothin' today. Same numbers for tomorrow.
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9: DECEMBER CORN
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CZ5 O=2.01 3/4 HI=2.03 LO=2.01 1/4 CL=2.02 3/4

Pitiful! Couldn't even manage the bounce off 2.02. Watching only.
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10: DECEMBER WHEAT
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WZ5 O=3.26 1/2 HI=3.33 1/4 LO=3.26 1/4 CL=3.32 1/4

I bought 3.26 1/2 and out at 3.30 3/4. I thought 3.32 area was about as good as we could hope for and when it failed nearby there was no sense trying to wring another penny or less from it. $212 for about 30 minutes of risk is fine by me.

Play 3.26 if we see it again tomorrow. We'll also sell a failed retest of 3.32 or buy a break above there. Still scalpers, still penny and a quarter stops.