This week, the nice folks at Gecko Software let me know about a special promotion that they are offering during the holiday. Until December 24th they will give you $20 off your next purchase of any Track 'n Trade Pro 3.0 Plug-in, Educational CD-ROM, or Annual Data Subscription Service. You need to quote a special code if you would like to take advantage of this offer, so if you are interested just send me an email at ErichTHT@hotmail.com and I will send you the information you need to get the discount.

For those of you who don’t know, Track ‘n Trade Pro is the software I use in the ezine every week. If you don’t currently use charting software, and are considering getting some, I don’t think you could do any better than Track ‘n Trade. If you would like to try the software to see what it is like, you can request a free demo version at no cost or obligation by following this link. Try it; I know you’ll like it.

Also a reminder that Shaggy and I have prepared a little Christmas gift for you in the form of a special trading report. It’s just our little way of saying “thank you for reading”. This gift will only be sent to current subscribers, so if you would like to receive it this Christmas make sure we have you on our mailing list. Subscription is easy, just send an email to Shaggy@xtn.net with the word SUBSCRIBE in the subject heading. I think this is one gift that you will really enjoy, so don’t miss out.

The markets were really good to us last week. I just love it when the markets are behaving like they’re supposed to. It sure makes my job a lot easier! :-)

Enjoy this week’s issue.

Erich

After testing the weekly 50% level, corn continued its downward slide last week settling on the next support level we pointed out at 235. While the market is in a definite downtrend, we are quickly approaching more significant short and long term support which could see prices reverse this week.

Just below the current lows of 235 is more support at 230. Not only does the daily chart show support at this level it also coincides with the 38% retracement on the weekly chart and the 50% retracement on the monthly. This is going to be quite a bit of support for the bears to have to break through if they are going to send prices lower. Should they succeed there is some pretty firm support at 228 ¼ and 225 ¾ before encountering the contract low at 224.

If we see a reversal off the current lows or the support at 230, look for prices to test upward resistance at 241 and 245. If we see a close above 245 then this could be interpreted as a bullish reversal in which case we might see the market continue higher to test resistance at 249 and 255 ½.

Last week saw a nice bearish break out of the pennant formation in cotton. The bears quickly took the market to the 50% level at 4830 driving the market as low as 4800 before relinquishing the market to the bulls. Prices rallied toward the latter part of the week, but not enough to see the market post a close above the 62% level at 4914. While prices are struggling to get higher, the lack of increasing volume and open interest hints that this is nothing more than a bullish pullback before prices continue to head lower.

Friday’s high of 4940 puts the market up against some firm daily and weekly resistance. If the market can post a decent close above this level we could expect prices to continue higher to the next resistance found at 4970. If the prices push through this level the next resistance is found at 5070 and 5180.

If the current downtrend continues, look for cotton to test support at the 50% level (4830) and the recent lows of 4800. If the market can get below this level there is some pretty firm support found at 4760, just above the 38% level of 4746. This area would also be the first profit target based on the breakout from the pennant formation. Should prices continue lower still the next support seems to be at 4655.

Try as they might to continue higher, bean prices could not close outside of the resistance range we highlighted at 577 ½ - 580 last week. As a result the bullish rally reversed on itself and declined sharply retracing to the 50% level before finding support.

Trading around the 50% level can be unpredictable as the market can literally go either way from here. While the market is in a short term downtrend, we could use the range of the last three sessions to bracket the market and allow beans to tell us which way they want to go next. The top of the channel is located at 568 ½ and the bottom is at 556 ½.

A breakout through the top of the channel could see beans test the resistance at 574 followed by the resistance zone at 577 ½ - 580. However, if the market falls through the floor of the channel, look for support at the 38% retracement level of the uptrend at 550 ½. Below here we find more support at 546 and again at 540.

Cattle prices pushed higher last week before stalling at 7965, just 15 points shy of the resistance we pointed out on the weekly charts. From here the bears took over on Friday and pushed prices down to the first support at 7803. If you are consulting a longer term chart you can see that the market has now completed a very large rounded bottom formation and is currently trading at the neckline.

It appears that cattle want to continue lower for the short term and if prices continue to decline look for the market to find support in the middle of the gap formed mid-November at 7700. This support level also coincides with some support from the weekly chart around 7720. If the market breaks through this level look for it to next test support at the weekly level of 7630. If prices fall far enough they might even test the support at 7555, 7440 and the 38% level at 7422.

Technically the market is still in an uptrend and if cattle prices try to rally they will once more have to contend with the long term resistance at 7980 - 8000. If the market can close above this level the next resistance seems around 8190 – 8200 range.

I can hardly believe how nicely cocoa has been trending these last few months. At times cocoa can be an extremely wild market, but right now it is behaving just like a textbook market. Last week saw cocoa leave the tight range of 1690 to 1711 that had trapped the closing prices and caused the downtrend to stall. The market subsequently broke long above the resistance in a big way, pausing just briefly at the resistance levels we pointed out before continuing higher to close the gap above the 62% retracement.

Bolstering the extreme bullishness of the market last week, volume and open interest figures remain strong suggesting that the current trend might have some strength to it. However, on Friday the market filled a gap and it is quickly approaching resistance at 2010 and the 50% level at 2024, either of which might cause it to pull back next week.

If the market can close above the 50% level we should see it continue higher and possibly fill the gap located just below the 38% level at 2075 -2110. While we could likely consider a bounce off this level, if the market did manage to push still higher the next stop would seem to be the resistance/gap at 2190.

If prices turn down early next week, look for cocoa to test support at 1858 and 1790. If prices continue to slide we could expect it to again test the support at 1711 and maybe even the larger daily 50% level at 1690.

Ta-da! After several weeks trying, and a couple of failed rallies later, this week sugar finally succeeded in completing a 50% retracement of the large weekly downtrend. The market came to within one point of the weekly 50% level getting as high as 789 before retreating to support at 740. The weekly chart also shows a large rounded bottom formation with the market currently trading near the neckline.

While the market seems to have taken on a bearish posture, there is an abundance of support below the current levels which could make for a bumpy ride down, but then again knowing sugar, maybe not. The first support below Friday’s low is found at 730 followed by more support at 717 and 707. Below here we need to consider the support found at 692 before we finally encounter the 62% retracement level at 687.

While there is not too much holding the sugar market up at this time if we see prices rally and get above the weekly 50% level at 790 we might see the bulls push the market a little further. The next significant resistance appears to be located around 830 followed closely by more resistance at 850. The bulls will have to rally soon however, as it seems that the bears currently have control of the marketplace.

Last week the Swiss Franc exploded out of the channel that contained it the week before. The market made some huge gains in a few days and with the support of the 62% level below it, it looks as though the Franc is setting up to test the top of the trading range that has confined this market since last August. The first barrier to the top of the range will be some mild resistance at 6917 followed by stronger resistance at 6955. Above here is the current contract high and the top of the trading range at 6980.

If the market is turned back yet again by the upper resistance look for prices to decline and test the various retracement levels. The 62% retracement level is at 6809, the 50% level at 6763 and the 38% level at 6717. There is additional support found a little lower still at 6635 and the recent low of 6517.

Silver made some large gains last week before topping out on the resistance at 469. There is more resistance just slightly above here at 471 and 475 before the market gets a little breathing room. There is scattered resistance above 475; however the most significant seems to be located at 485 and 490.

Given the quick ascent of last week, and the current resistance above the market, we might see silver make a pullback next week. If the market should give up some of its recent gains look for it to first find support at 456 and the 62% level at 454. If the market continues lower next is the support around the 50% level in the 449 – 450 range followed by support at the 38% level around 445 and the recent lows of 441.

 

 

Item	Corn	S Franc	Silver	Soybeans
Ranges
Maximum	4.6	.0112	.120	1.20
Minimum	2.4	.0023	.035	.42
Average	3.1	.0047	.068	.78
Median	2.8	.0034	.065	.72
Mode	2.6	N/A	.045	1 .20
Highest	248.4	.6885	4.680	58.74
Lowest	231.4	.6676	4.400	55.64
Breakouts
Maximum	3.4	.0087	.110	1 .14
Minimum	0.6	.0003	.005	.08
Average	1.8	.0032	.038	.46
Median	2.0	.0025	.035	.42
Mode	N/A	N/A	.015	N/A
Pivot Points
R2	235.5	.6934	4.721	57.05
R1	234.3	.6897	4.676	56.69
Mid	232.7	.6842	4.638	56.40
Pivot	232.9	.6848	4.636	56.37
S1	231.7	.6811	4.591	56.01
S2	230.3	.6762	4.551	55.69
High	234.0	.6885	4.680	56.74
Low	231.4	.6799	4.595	56.06

Novice 10%
Know the Basics 59%
Pretty Experienced 18%
Very Experienced 14%

The results of last week’s survey were not too surprising given that the commodity business is known for being a very difficult endeavor; one in which, if you are not careful, it is all too easy to empty your trading account in fairly short order. This makes longevity in the commodity business a bit of a novelty.

That is not to say that success in trading can not be achieved, it can. What it does mean for most traders however, is that you need to be very careful about how you go about the business of trading. And the less money you have to trade with, the more careful you need to be.

One trait that seems to be common among all new traders is that they can’t wait to get into the markets and start making money. In spite of their lack of experience, or most likely because of their lack of experience, the new trader begins trading the markets before they are ready. Unfortunately, in most cases, this anxiousness translates into a busted account for the inexperienced trader. The new trader never gets the chance to gain the experience necessary to conquer the markets.

If I were only able to give one piece of advice to a new trader it would be this: take your time. There is a lot to learn about the trading business, much of which can only be learned by doing. Like the expression says “Good judgment comes from bad experience and a lot of that comes from bad judgment.”

Take the time to learn about the markets before you get involved with real money. Take the time to paper trade and develop some consistency. I know you’re anxious to make your millions, but take your time. The markets really aren’t going anywhere. Honest. I would tell you if they were, wouldn’t I? ;-)

How many markets do you trade simultaneously?

What specifically do you look for on weekly and monthly charts for application to the daily charts for the contract months you are trading?

I like to consult a longer term chart to give me a better perspective of current prices, especially if the daily price chart is making new highs/lows. Without consulting a longer term chart, you would have no way of knowing if the "new" prices are average for the market or extreme. You would obviously trade an extreme market differently than you would an average priced one. Current examples of extreme markets are cocoa, most of the grains and energies. The more extreme the price in the long term, the more significant the resistance might be in the short term.

Many times the weekly and monthly charts will show resistance at a particular price just like on the daily charts. These resistance points would require consideration when planning your trade on the daily level; as the price has proven to be significant resistance in the past. You can analyze the longer term charts just like daily charts: the more resistance at a specific price level there is, the more exact the resistance is, and the more extreme the resistance is, the "harder" it will be.

The only significant difference between the charts is the time frame, and this is most significant when considering retracements. Retracements on the daily level might occur over a matter of weeks or months, whereas on the weekly chart the retracements of trends could take several months to a year or more, and on the monthly level the retracements will take several years. This is important to remember when you are trying to determine where prices are going.

Many times the longer term charts will also hint to a market's cycle or trends. This is more difficult to analyze and can sometimes be misleading, but some markets, like lumber, make regular market swings that can be seen on a weekly chart.

Erich