Erich and Tom's Updates for Wednesday, October 12, 2005

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Market Update for Wednesday, October 12, 2005
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Hot off the commodity presses to you!
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1: CURRENCIES
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December Australian Dollar ADZ5
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Darn it! The gaps in these smaller markets is starting to tick me off. We had the AD cornered today, but the opening gap voided our trade. We're on hold now until we see support.
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December British Pound BPZ5
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This one makes me sick. The BP likes to gap us at the best of times, but to miss a trade by 10 ticks when we had the market pegged really bugs me.
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December Canadian Dollar CDZ5
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The CD is in chop-mode and I don't expect a fill here tomorrow. You can run the trade, but the risk level just went up.

*BUY December Canadian Dollar at 8563
*Stop 8537
*Approximate Risk Exposure: $260 per contract
*Profit Target: 8675
*Approximate Profit Potential: $1120 per contract
*RRR: 4:1
*Degree of Risk: HIGH
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December EuroFX ECZ5
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Same song for the EC today as the opening gap voided our trade. Too bad as this would have been a nice move too.
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December Japanese Yen JYZ5
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This one is a little closer to the line. As big a market as the currencies are, you might have decided to sell the market after the open - as it was only 5 ticks from our entry ($62.50).

If you did sell then you're currently short and can bring stops to breakeven. If you didn't you'll have to hold on until the next support.
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December Mexican Peso MPZ5
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Nothing new here at the moment.
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December Swiss Franc SFZ5
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The Swissy also fell off today, which wasn't a surprise, but we've got possible support at 7750 which we'll need to clear before selling.
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December US Dollar Index DXZ5
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The USD had a calmer session that most of the foreign currencies today. Look to buy tomorrow above last week's resistance.

*BUY December US Dollar Index at 9011
*Stop 8977
*Approximate Risk Exposure: $340 per contract
*Profit Target: 9193
*Approximate Profit Potential: $1820 per contract
*RRR: 5:1
*Degree of Risk: Moderate to HIGH
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2: ENERGIES
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December Unleaded Gas HUZ5
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Gas rebounded off 178 today. Notice that the market never broke the support area over the last couple of days, so it's still intact. Watching for another chance to sell.
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December Heating Oil HOZ5
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Strong day in Heating Oil as the market seems to have held the trendline and is rallying higher. I'm not quite ready to buy it yet.
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December Crude Oil CLZ5
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Good bounce in crude today as well. Like the other energies I'm a little more bearish than bullish right now.
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3: FINANCIALS/INDICES
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September (06) Eurodollar EDU6
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If you're still short from last week's fill, then you'll want to bring your stops above yesterday's high, if you haven't done so already.
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December mini-DOW YMZ5
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I'm still expecting the Dow to rally a bit this week, but I'll leave the sell order in place for now.

*SELL December mini-DOW at 10237
*Stop 10277
*Approximate Risk Exposure: $200 per contract
*Profit Target: 10077
*Approximate Profit Potential: $800 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH
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December mini-NAS NQZ5
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Got a bit of a surprise today as the NAS fell off earlier than expected. We're currently short this market, but with the late fill we don't have a lot of room to fidget with the stops.

If you can afford the risk you might leave them where they are for one more day, otherwise you could bring them above the 1550 line for tomorrow.
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December mini-S&P ESZ5
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The S&P didn't find our sell order today. We'll run it again tomorrow.

*SELL December e-mini S&P at 1184.5
*Stop 1191.5
*Approximate Risk Exposure: $350 per contract
*Profit Target: 1161.5
*Approximate Profit Potential: $1150 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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4: GRAINS
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December Corn CZ5
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Big report day in the grains tomorrow. Let's hope it lights a fire under them! I'm bracketing corn's recent support and resistance and will take a trade to the breakout side.

*SELL December Corn at 201 1/4
*Stop 204 3/4
*Approximate Risk Exposure: $175 per contract
*Profit Target: 190 3/4
*Approximate Profit Potential: $525 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH

OR

*BUY December Corn at 208 1/4
*Stop 205 1/4
*Approximate Risk Exposure: $150 per contract
*Profit Target: 217 3/4
*Approximate Profit Potential: $475 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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December Oats OZ5
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Oats are looking pretty bearish today as RSI broke the trendline, but since the market is still technically in an uptrend I will look to buy.

*BUY December Oats at 168 1/4
*Stop 1643/4
*Approximate Risk Exposure: $175 per contract
*Profit Target: 183 3/4
*Approximate Profit Potential: $775 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH
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November Rice RRX5
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I'm still expecting rice to drop over the next couple of days. Support at 710 is the number to watch in my opinion.
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December Soybean Meal SMZ5
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Bean Meal broke the RSI trendline and is also looking much more bullish today. I'll bracke the trade however, as technically we're still in a downtrend.

*SELL December Soybean Meal at 164.7
*Stop 167.3
*Approximate Risk Exposure: $260 per contract
*Profit Target: 153.3
*Approximate Profit Potential: $1140 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH

OR

*BUY December Soybean Meal at 170.1
*Stop 166.7
*Approximate Risk Exposure: $340 per contract
*Profit Target: 183.7
*Approximate Profit Potential: $1360 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH
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December Soybean Oil BOZ5
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Bean Oil made a textbook bounce off RSI today, so I'll look to buy the market long tomorrow. Yes, you could bracket this range as well, but I'm sticking to the long side for now.

*BUY December Soybean Oil at 2393
*Stop 2347
*Approximate Risk Exposure: $276 per contract
*Profit Target: 2547
*Approximate Profit Potential: $924 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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November Soybean SX5
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We got stopped out of our bean short today...but that wasn't a real surprise given the crummy fill we got. I normally don't trade a market the day after a loss, but I'll make an exception since tomorrow is report day.

*SELL November Soybeans at 553 3/4
*Stop 561 1/4
*Approximate Risk Exposure: $375 per contract
*Profit Target: 522 1/4
*Approximate Profit Potential: $1575 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH

OR

*BUY November Soybeans at 571 1/4
*Stop 564 3/4
*Approximate Risk Exposure: $325 per contract
*Profit Target: 597 3/4
*Approximate Profit Potential: $1325 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH
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December Wheat WZ5
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Oops! Another crappy fill as prices just barely broke resistance today. I hate getting filled like that! I guess I shouldn't have pushed my luck today and waited until tomorrow to trade. It might not be all bad however, at leat we don't need to worry about a bullish opening gap tomorrow. ;-)

You should leave stops where they are for now. Keep your fingers crossed for tomorrow!
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5: MEATS
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November Feeder Cattle FCX5
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Yep, there they go higher again. What's with this market? Who's holding it up? Will you retrace already so I can buy you?
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December Live Cattle LCZ5
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Today's stronger day in Feeders will hopefully spill over into Live Cattle tomorrow. I'm still running the buy order from yesterday, but I don't consider it to be as risky now.

*BUY December Live Cattle at 9192
*Stop 9137
*Approximate Risk Exposure: $220 per contract
*Profit Target: 9437
*Approximate Profit Potential: $980 per contract
*RRR: 4:1
*Degree of Risk: Moderate to HIGH
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December Lean Hogs LHZ5
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Well whaddaya know...we finally got a pullback in hogs! I'm going to tighten our entry a bit to buy above the strong resistance at 6450, which had been the support for the last week or so. A break above here, plus a bit of a cushion, will get me long again.

NOTE: It's still safer to stick with yesterday's trade and buy above the contract highs.

*BUY December Lean Hogs at 6475
*Stop 6395
*Approximate Risk Exposure: $320 per contract
*Profit Target: 6992
*Approximate Profit Potential: $2070 per contract
*RRR: 6:1
*Degree of Risk: HIGH
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6: METALS
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December Copper HGZ5
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Another strong day in copper. The market certainly has regained some strength in the trend. I'll get a lot more serious about buying on the next resistance.
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December Gold GCZ5
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We bought gold today on a break of the 480 resistance. Prices still closed below the resistance, so technically it's intact. We can't do too much with the stops right now, but rest assured that a break below 477 is a definite sign we're on the wrong side of the market.
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December Silver SIZ5
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Silver finally stalled today. Nothing new here tomorrow.
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7: SOFTS
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December Cocoa CCZ5
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Cocoa gave us an identical range to yesterday as prices made a run at our stops. We're still short this market, but I don't like today's session at all. You might want to bring stops to breakeven for tomorrow.
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December Coffee KCZ5
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Nothing new in coffee - yet.
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December Cotton CTZ5
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There's a cotton report due out tomorrow as well, which explains the rather confined market - at least for cotton. I still like the market long, but we could be in for a bit of a pullback.
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November OJ OJX5
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Big retreat off resistance today. I'll run the buy again tomorrow, but I don't expect a fill. We'll tighten the trade a bit when we get closer to a testpoint in RSI.

*BUY November OJ at 105.25
*Stop 104.05
*Approximate Risk Exposure: $180 per contract
*Profit Target: 109.45
*Approximate Profit Potential: $630 per contract
*RRR: 3:1
*Degree of Risk: Moderate to HIGH
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October Sugar SBV5
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Yep, there goes sugar again. The market's trading near the contract highs, and is probably due for a hiccup again, so I'll avoid buying it tomorrow...maybe the day after.
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"Tom's Trades" for Wednesday, October 12, 2005
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1: DECEMBER 30 YEAR T BOND
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USDZ5 O=4-09 HI=4-11 LO=3-24 CL=4-00

The Bonds had a nice 19 tick range today. The problem was it started in territory just shy of -16 and never gave us a decent shot at an entry. I did sell -29 late in the day but not with a lot of passion. It came at the end of a reasonanly big run and was suspect from the beginning. I exited at -26 for a whopping 3 ticks.

The close at 114-00 has us watching for a bit of movement before jumping in tomorrow. The play could be off of 114-00 or 114-16 or 113-16. Be aware.
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2: MARCH 06 EURODOLLAR
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EDH6 O=.445 HI=.460 LO=.410 CL=.435

The bad news is we didn't even sniff at our numbers from TT; the good news is we are building some at current price levels and should have something cooking in the pot before long.
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3: DECEMBER CANADIAN DOLLAR
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CDZ5 O=79 HI=32 LO=79 CL=10

CD opened right on our number and then climbed away from us. I'll stay with the TT numbers again tomorrow.

Let me share with you a bit about my current thoughts on the currencies applicable to both the CD and SF. The volume is being down electronically. About this there is no doubt. While I have ben resistant to move my trading into the electronic market there is too much potential for danger to avaoid doing so. I have a bit of the "old dog, new trick" syndrome that's been plaguing me for a while now. It is time to make some changes and move forward. Beginning with this weekend's TT I will switch my currency trading to electronic.

I will only initiate trades during the RTH session much as we do in the Russell. I will occassionally leave trades on thru the entire electronic session with a stop and/or limit order working. I have not yet decided whether I will formulate my trades only of of candles occurring during RTH hours or consider the entire electronic chart. I'm still doing some comparative analysis on this subject. My suspicion is that I will indeed use only that portion of the chart unfolding in RTH hours. I will confirm that fact to you in this weekend's TT.
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4: DECEMBER SWISS FRANC
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SFZ5 O=16 HI=67 LO=87 CL=95

Nothing near our numbers today. I will shift focus for tomorrow to 7800. I will sell a break below after a retest or I will buy a break above. The stops are 7793 on the buy and 7803 on the sell. The target for the buy is 7940 and for the sell 7720.

The comments above in the CD section apply exactly to the SF as well.
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5: DECEMBER MINI RUSSELL 2000
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ERTZ5 O=0.50 HI=5.30 LO=1.30 CL=1.50

We suspected the stock market would have a difficult time holding anything in the 670's and thus far it looks as though that forecast is coming true. This puts us in a bad place because we have no structure to speak of below 642 and it disappears totally below 634/632. We'll be on the sidelines for a bit I fear. Atleast until we get some significant construction projects going on at levels below current pricing. This may have been our last day for a bit.

We opened the window buying 642.60 which we exited at 643.90 for $130. I then sold 644.40 and exited at 642.20 for $220. I then sold 641.60 and exited at 642.00 losing $40. Next up I bought 642.60 and exited at 643.50 for $90. I then sold 641.60 and exited at 640.20 for $140. That ended the day $540, unfortunately, as there was almost another $900 available during the balance of the day but I had no numbers to play. It was really very hard to sit and watch the geese parading by and me without a shell to my name.

The full array from TT for tomorrow.
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6: DECEMBER GOLD
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GCZ5 O=7.80 HI=1.50 LO=7.40 CL=9.80

Nothing for us today. $10 channel tomorrow if it shows us a sell.
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7: DECEMBER COTTON
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CTZ5 O=.60 HI=.85 LO=.10 CL=.17

If we get a shot at selling a break of 54.50 we'll take it. Stop is 54.57
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8: DECEMBER COCOA
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COZ5 O=70 HI=72 LO=51 CL=56

That's about as close to carbon copy days as you're likely to see in Cocoa. I found the action today very surprising since Gina Davis sent F-15's to bomb the coca fields. Oh wait ... that's a different plant, huh?

I sold 1368 and exited at 1353 for $150. We'll stay with the TT numbers for tomorrow.
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9: DECEMBER CORN
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CZ5 O=2.03 1/2 HI=2.04 1/4 LO=2.02 1/4 CL=2.02 1/2

Watching, hands firmly sat upon.
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10: DECEMBER WHEAT
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WZ5 O=3.40 HI=3.41 1/4 LO=3.38 1/4 CL=3.39 3/4

No luck on our hunt for 3.38. I'll ride the same horse tomorrow.