Marsh Jones, the E-mini day trader (for a free download of his manual click here), put an interesting post at the Trader’s Helping Trader’s forum the other day. I liked the post so much I thought I would share it with you here.

"The battle that never ends is the battle of belief against unbelief." - Thomas Carlyle

"What battle are you engaged in with yourself? Are you having a hard time going for your trading because you don't believe that you will succeed? Is it because you cannot see yourself obtaining your goal?

It's hard to move forward when you keep pulling yourself backwards; namely when you keep falling into the same old self-defeating patterns that take you in the opposite direction of your goals.

How can you end this battle between what you want and what you think you deserve? By confronting those beliefs that are keeping you from your goal. Examine these limiting beliefs and commit to proving them false by taking active steps towards controlling your emotions".
-----------------------------------------------

Isn’t it strange that the menace at the root of most of our problems is ourselves? This seems to be a problem that is universal among all people regardless of age, gender, education, etc. It seems that no one is immune and we all fall victim to limiting self criticism at one time or another.

So what can be done?

I like Marsh’s suggestion of confronting the criticisms we tell ourselves to see if they have any merit. More often than not they are nothing more than doubts conjured up in our minds and given far more attention than they deserve.

However if you are having a hard time nailing down those nagging doubts, I would like to offer another piece of advice. People get stuck when they begin listening to that little voice in their heads that tells them stuff like “you can’t do it” when you are trying to do something new like learning how to trade.

To get rid of that little voice, simply tell it to take a hike…for now. Tell that little voice in your head to come back later when it’s time to count all the money you earned from learning to trade. ;-) Don’t know why, but it seems to work. So if you have a little voice in your head that is bugging you tell it to get lost. Now let’s get to work!

Hope you enjoy this issue.

Weak export demand combined with bearish weather forecasts for the weekend saw corn prices dip a little lower than expected last week. The market even seems to have renewed some of its bearishness that it lost over the last few weeks.

I would prefer a bullish posture as February draws to a close; however since the market has fallen lower than expected it might be hinting that lower prices might be just around the corner in the near term.

There is major support just below the market at 232 ½ which will likely be tested early next week. Below here there is the support at 231 ¼, just 2 cents shy of the contract low at 229 ¼. The market is going to need a real good reason to get below here; therefore I would expect the nearby support to hold the market up.

Assuming support halts the recent decline, we should see prices reverse and try to recapture the recent high at 245 ¾. A closing price above this level should have very bullish implications for corn likely sending prices higher to resistance at 248 and 252 ½.

The global lack of good grade cotton seems to be supporting the cotton market for the time being. While the market is technically overbought and trading higher on lower volume, fundamentals suggest that there are buyers waiting to support cotton prices on any dips in price.

Therefore a close above Friday’s high should see the market continue higher to the long term resistance found at 6004. However, given that the market is advancing on thin volume, unless more bullish buyers enter the market soon, prices might retreat before the market gets there.

While the technicals indicate that cotton may be setting up for lower prices in the near future, it does not appear as though we can expect a full reversal in prices next week. A declining market would not have too far to go to find support as initial support is just below the current lows at 5630. Below here there is also quite a bit of support to be found at 5550 which would likely send prices higher again in the short term.

Should support at 5550 there is more support again in the small range of 5440 – 5415 which should hold up the market. If the market managed below here the next significant support seems to be found at 5190; however this seems unlikely for next week.

Soybeans didn’t do a whole lot last week as the last of fundamental news failed to drive the market either way. Technicals didn’t help the decision making process much either as the market remains trapped in the large trading range that has contained beans for almost six months. The market continues to flirt with the upper boundaries of the trading range, but until we see a decisive break above this level the market will likely remain trapped.

Since the market was channel bound last week we could use the formation to set up a trade for this week. The top of the channel would be at 574 ½ and the bottom of the channel would be at 564. The favoured breakout from this formation would be to the long side with the market next challenging the resistance at the contract highs of 588.

Should we see a breakout to the short side, expect prices to test the lower boundaries of the trading range at 552 and 541; however we are quickly approaching what is traditionally a very bullish time of the year for soybeans, so short positions should be entered with caution.

Last week saw cattle prices pullback as anticipated; however prices are rallying a little stronger than expected. News reports attribute the extended rally to short positions exiting the market, thereby fuelling the bullishness of the market. The rally is not expected to continue for too much longer however as it lacks the increasing volume figures to sustain it. Overall the market still has a bearish feel to it.

The question now is how far will the market pullback before it reverses again? In fact given the resistance at 7775just above the current highs we might not see cattle prices continue higher than they are now. If they do manage to head a little higher still, there is fairly strong resistance found at 7855 which should be enough to resume the downtrend next week.

Once the bearish pullback is complete look for prices to continue lower to challenge the previous support at 7500. Once prices are below here the market should be in a position to complete a 50% retracement at 7338.

Cocoa prices took a huge tumble last week in one of the biggest one day moves in cocoa’s history. While there is still political unrest in the cocoa producing nation of the Ivory Coast, the market was unable to find new buyers to send it above the triple top that had formed last week and as a result collapsed. The lack of additional buyers probably fuelled the collapse as traders who were long got nervous and bailed out.

The market fell hard breaking a couple of notable support levels before settling on support at 2045 just slightly above the 50% retracement level of 2015. The rapid decline also left a huge gap in its wake, and while I believe the market has now committed to lower prices over the next few months, we can probably expect to see an attempt to fill the gap of last week.

Look for resistance at 2180 as the market attempts to fill the gap left behind last week. If cocoa can fill the gap, then the resistance at 2270 should be enough to send the market lower again. For a continued move to the downside look for support to be found below the 50% level at 1920, 1775 and 1710.

Sugar prices continued to inch higher last week. The market is now quickly approaching significant long term resistance and may have even topped out early last Thursday in anticipation of a reversal. Secondary indicators are showing a serious divergence in prices which helps to reinforce the belief that the market may reverse soon.

A break below Friday’s range could be interpreted as a bearish signal with lower prices to follow. Look for initial support at 755 or 737 before we might see the market bounce. The downside target for a bearish move would be the 50% level at 698. With stops above the current high, there is a slightly better than 3:1 risk/reward ratio for this trade.

Even though a reversal seems imminent the market continues in a strong uptrend. If prices exceed the current high look for initial resistance at 835 followed by additional long term resistance found at 860.

In spite of obvious pressure to retrace, the Swiss Franc continues to defy convention and rather has chosen to channel for the time being. As in weeks’ past, the threat of war in the Middle East has supported foreign currencies like the Franc, while beating the US Dollar.

The market has formed a rather large channel over the last week and has been content to offset one day’s gains with another day’s loss. As a result there is obvious resistance found at 7401 and strong support at 7252.

All indicators continue to point to a bearish breakout as being the most favourable, but I would not commit to a short position until the market could get below the support at 7252. Once the market is below here look for it to test support at 7121 as the market attempts to reach the 50% level at 7077.

A breakout to the long side would see prices test the contract high at 7465 before testing long term resistance at 7555 and 7600. These are some pretty serious resistance levels, so make certain that any bullish breakout is accompanied by increasing volume as well.

As expected, silver prices rallied last week, helped in part by stronger gold prices. Technically speaking the market is at an important junction as the highs are firmly planted against the 62% retracement level, and some substantial long term resistance, on the weekly charts.

While the market is attempting to rally to the 50% retracement of the recent downtrend at 475, being able to surpass the resistance at 470 will be an important obstacle for the returning bull market to overcome.

As such we might want to simply bracket the near identical trading range of the last two days and let the market tell us which way it wants to go next. Ideally the market would trade for one more day within this range before breaking out, but it is not essential that it do so.

A breakout to the long side would see the market complete the 50% retracement at 475. There is more short term and long term resistance found above the 50% at 481 which might cause the market to pause or bounce before continuing higher.

A breakout below the small channel would see prices test support found at 452 and 450. If the downtrend continued below here, look for prices to test support found at 438 as well.

Cattle gave us the pullback we were looking for last week, but the market has gotten a little carried away since then and now our stops are in danger of being hit. The only good news so far is that the market has not closed above the 50% level of the recent downward move, indicating that all may not be lost for the bears…yet.

Our stops are just above the 50% level at 7785 and there is some notable resistance associated with Friday’s high, so we might get lucky and hang in there. However we definitely need to see more bears step up to the plate Monday and begin shorting this market.

Were we on the wrong side of the trade? Not really, as I am confident we will see lower cattle prices soon, the only real question is when? In hindsight it would have been better to take profits again after encountering support at 7500 vs. trying to ride out the pending pullback, but we were looking to maximize the potential of the trade which is why we decided to continue to hold the open positions.

The quick decline and gap of the week before told us that the market was going to pull back last week and since everything from fundamentals to technicals were calling for lower cattle prices in the near future we chose to ride out the pullback.

If we do get stopped out next week however, we will be no worse for wear as we’ve been playing with the profits earned on the first half of our trade; but it would be a shame all the same as prices will head back down very soon. The question for us right now is if we’ve placed our stops at far enough away to allow us to ride out the bullish pullback?

We should know Monday.

-Erich

PLUG: Calculations are performed on the Range Projector panels of SMTP/DTP. SMTP/DTP also provide: (Fib and Gann, dynamic and static) Time and Price calculators, Cluster Discovery and Analysis screens, and an "on-the-fly" Elliott wave extension calculator. 13 tools in all.

Answer - Part 1:

Question - Part 2:

Thanks for the answer. You’re right that if you don't ask you'll never know. So here it goes: what is the significance of a commodity that is widely held? Thanks again.

Answer - Part 2:

For more information on how to trade a small account, be sure to follow along with the Pick of the Letter each week as I break down a market into specifics for you to learn from.

Erich

This week we continue to look at the Lean Hog/Live Cattle spread that we examined last week. The timing for this spread couldn’t be any better as the markets are setting up very nicely for this “traditional” spring time inter-market meat spread.

To refresh your memory, February is normally a strong month for Live Cattle contracts and we usually see prices peak at this time of the year.

The end of February and the beginning of March is also a time for calving and as such we see ranchers placing more livestock as they need to make room for the new additions to their herds. This normally means an abundance of supply on the market adding pressure to keep prices down.

Conversely while Lean Hogs are also breeding at this time of the year, more animals are kept for breeding purposes thereby limiting the amount available for slaughter. To add more fuel to the fire, March Hog and Pig reports tend to show that spring has the lowest animal populations for the year. The tighter supply combined with the increasing demand for pork as we approach Easter (ie. Easter hams) normally sees a rally in the hog market.

Therefore hog slaughter declines into May and June, just when cattle slaughter is peaking. Strong demand in March for pork in cold storage has made this a particularly reliable spread.

Look to buy June CME Lean Hogs (LEM3) and sell June CME Live Cattle (LCM3) on or about February 26th or when the spread is trading about 9.50 to 11.00. Stops should be placed at around 13.00 – 13.50. You should plan on liquidating the spread around March 25th. Profit target for the spread is $600.