Have you ever bought or sold anything through eBay?

I know I’m a little behind the times here, but I’ve seriously been thinking about trying to flog a few household items that we happen to have kicking around, and quite frankly some of the success stories you hear about folks on eBay has made me a little curious to see if it really works that well.

Unlike all the different MLM programs that various “friends” are always trying to sell me, I actually met someone who was making money selling stuff on eBay. She was still a friend of a friend, but even so she was an actual person and not just somebody I read about in another internet article.

While she wasn’t making an outrageous living selling stuff at the auction site she was still making about an extra $1000 dollars a month selling “junk”. An extra grand a month is nothing to sneeze at, so being the entrepreneurial pack rat that I am, this got me thinking.

Every spring we have a large garage sale in combination with our neighbours. It’s amazing the stuff that you can collect in a year’s time that you no longer have a use for. I used to frown on garage sales until I actually tried one, and I was blown away at the response!

People were buying everything, even things I considered throwing away! In fact it seemed that the junkier the item was, the more inclined the garage sale crowd was prepared to pay money for it. I’m hoping to have similar success on eBay.

You see since my wife had me remodel a room downstairs we’ve lost valuable storage space. In fact it took me longer to find new hiding spots for all the stuff that was in that room than it took me to build the room! So now every nook an cranny in our house has something in it and if I don’t make some room soon I don’t know where I’m going to stash all the stuff that we’re going to collect this year. ;-)

I’ll keep you posted and let you know how I make out. In fact if this works out I could get a whole different attitude about having so much junk around.

Enjoy this week's issue!

-Erich 
ErichTHT@hotmail.com

PS. Wanna see what I’m selling? http://cgi.ebay.ca/ws/eBayISAPI.dll?ViewItem&category6297&item'14105525&rd=1

According to the Grain Trader’s Almanac (check it out at www.grainguide.com) March is the strongest month on record for corn futures finishing higher an amazing 13 of the last 19 years. This fact helps explain why the market found its footing last week on the support at 232. After testing the support several times the market rallied slightly on Friday, however it failed to post an impressive close.

This Week:
In spite of the weak closing price last week I think we’ll see higher prices continue for corn this week coming. The first real test of corn’s bullishness is the resistance of 245. Once above here the market will encounter an assortment of resistance in the 248 – 252. Although we could see a pause or slight pullback off this resistance, the market will probably not give us a retracement reversal until it finds resistance around 258.

Cotton surprised a lot of traders last week by pushing to a new contract high on very thin volume. In fact the recent rally has been on severely declining volume and stagnant open interest: not a good combination for a healthy bull trend!

This Week:
Everybody and their brother are waiting to short this market as all indicators are signaling that the bull rally is almost over and due for a correction. While I initially thought the market might make it to the resistance at 6004 before reversing, now I’m beginning to think it might not make it past the resistance at 5910 which is not too far off Friday’s highs.

There is plenty of possible support below the market once a reversal is underway; however it appears that the most significant levels of support could be found at 5630 followed by support at 5440 before reaching the 50% retracement level at 5368. If the market breaches the 50% retracement, look for support once again at 5240.

The lack of bullish fundamental news means that beans continue to trade in the large sideways channel that has trapped this market since last September. However like corn, March is traditionally the strongest month on record for beans (thanks again to the Grain Trader’s Almanac, www.grainguide.com). This explains why the market is toying with the upper boundaries of the trading range and we might see a breakout in the very near future.

This Week:
While a breakout maybe just around the corner, it looks as though bean prices might head a little lower before they head higher. Look for the market to test support around 568 early next week before again heading higher. The barrier to the upside continues to be the contract highs at 588. Once above here look for resistance at 598 and 610 as the market heads to the target resistance at 650.

After pulling back slightly more than anticipated, cattle once more reversed and resumed the recent downtrend. Spring is normally a very bearish time for cattle and as a result we can probably expect to see lower prices in the coming weeks. In this issue of the ezine we have a lesson courtesy of Scott Barrie that addresses the “Spring Break” in cattle prices (see the lesson section).

This Week:
Now that the market has resumed the downtrend, look for cattle prices to attempt to complete the 50% retracement of the uptrend at 7338. There is some support just before the 50% level at 7390 which might cause a hiccup; however I don’t think it will result in a full reversal. It would be wise to keep an eye on it all the same.

For more on this market check out the Pick of the Letter section.

While there are still tensions in the Ivory Coast, one of the world’s leading cocoa producing nations, cocoa prices fell hard last week on speculative selling. Technically speaking the market didn’t have a good enough reason to push prices past the already abnormally highs prices.

The market fell off quickly, reaching the 50% retracement level at 2015 in the process. The decline stopped just short of the support at 1920 before reversing and ending the week above the 50% level.

This Week:
While the market has a definite bearish posture, we could see a pullback next week as market tests the resistance above Friday’s highs. An aggressive pullback could see prices test the resistance at 2145 or 2180 before likely resuming the downtrend. Keep in mind that there is a gap just above the 2180 resistance as well

The longer term target for the downtrend is support at the beginning of the trend at 1730. There is also support found at 1775 which might cause the market to pause on the way down.

After a brief decline last week, sugar found support at the 750–ish level we pointed out before rallying higher on Friday. Technically speaking the market is running into substantial long term resistance which makes me wonder how long the bull trend can continue.

This Week:
While I usually don’t like to trade against the trend, I don’t believe that the current trend has too much life left in it. Expect prices to continue to rally next week and test resistance at 809 just below the contract highs. If the market rallies enough it might even re-test the contract highs at 823 and fill the gap just below them; however I would expect the highs to hold for the time being.

If the contract highs hold, look for the market to decline and retest the support at 749. Once below here there is not too much support available to keep the market from retracing to the 50% level at 698. However there might be some support found on the 62% retracement line at 728 on the way down.

The Franc continued to trade sideways last week as tensions over a possible war with Iraq continue. While the market was giving indications last week that suggested lower prices, it has now acquired a more neutral bias and is poised to head either direction depending on world events.

This Week:
I’m tempted to call for lower prices for the Swiss Franc but not until the market can break the support at 7252. If the market can close below this level, then there is a pretty good chance that we could see prices pullback to at least the 62% retracement line of 7170. If political pressures persist then this might be the extent of the pullback; however if war does not seem likely then we could anticipate a pullback to the 50% level at 7077 after the market deals with the support at 7121.

Of course if the market breaks up through the recent trading range then it will in all likelihood continue higher. Next resistance to the upside can be found at 7555 followed by more resistance at 7600.

Ongoing war concerns helped shore up the precious metals last week, in particular gold and silver. With the international tensions continuing no one is interested in seriously shorting the gold and silver markets at this time. While silver seems non committal at the moment, we can probably expect higher prices in the near future.

This Week:
While silver might try to re-test the recent lows at 450, right now it seems that the market has found its footing and we can probably expect higher prices beginning early next week. The first test of the up trend will be the high from the week before at the 50% of 475. Just above here there is more resistance at 483 and 491 as the market attempts to make its way back to the highs near 500.

The good news is our cattle trade is going along according to plan…well almost. That brings me to the bad news; while we were expecting the market to pull back, it retreated a little further than we expected and we got stopped out for a small loss.

Darn it! I hate it when that happens! Fortunately however, we re-entered the market short after the market revealed it had finished pulling back (finally) and now we are once again short two contracts, but this time from 7649 with stops above the pullback at 7819.

While I fully expect the market to retrace to the 50% level at 7338 in the next week or two, the support around 7390 has me a little concerned. While I do not expect a full reversal off this support, it could nonetheless cause another bounce which could once more test the limit of stop loss orders.

Therefore to be on the safe side I’ve moved the exit order for both contracts just above the support at 7413. Exiting here would guarantee us profit of just over $900 per contract ($1800 total). If we held out for the market to reach the 50% level, we could stand to make another $200 per contract ($400 total); however given that we are trading a small account I think the first priority should be given to building the account rather than trying to milk the maximum profit from the trade.

In all likelihood this is not the extent of the decline in cattle prices anyway. Even if hindsight proves we exited a little too soon, we can still wait for the next pullback to re-enter the market once more; assuming of course that the trade still seems to have enough potential.

-Erich

 

 

Item	Corn	S Franc	Silver	Soybeans
Ranges
Maximum	4.0	.0080	.115	.96
Minimum	1.2	.0037	.045	.52
Average	2.2	.0055	.081	.70
Median	2.0	.0053	.075	.67
Mode	2.6	N/A	.075	N/A
Highest	240.6	.7415	4.725	58.36
Lowest	229.6	.7261	4.500	56.52
Breakouts
Maximum	3.8	.0064	.055	.54
Minimum	0.2	.0003	.005	.04
Average	1.3	.0026	.033	.20
Median	1.3	.0027	.045	.15
Mode	N/A	.0020	.055	.06
Pivot Points
R2	235.7	.7431	4.695	58.63
R1	233.7	.7414	4.640	58.07
Mid	232.7	.7385	4.593	57.88
Pivot	232.3	.7389	4.590	57.75
S1	230.3	.7372	4.535	57.19
S2	228.9	.7347	4.485	56.87
High	234.4	.7406	4.645	58.32
Low	231.0	.7364	4.540	57.44

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.

No matter the appearance of this phenomenon we are best served by taking the approach that trades will be there tomorrow. Although very hard to rein in our emotions let's not press the issue, feeling as if we MUST trade every day or every setup that is marginally within the parameters of our trade plan. Relax, there will be a better one tomorrow or next week.

SOYBEANS
The break Friday was almost a sure bet … month end, the top heavy Daily and Weekly charts. Short term, I think we will see more downside but certainly we have to wait and see what happens the first part of next week. Do the funds come back with long positions? The significant support at 5.74 and 5.70 leaves me a little cold as to a short position. A retest of the 5.84 and above area and an accompanying failure might change my view on a short … the risk/reward would be almost impossible to resist. A stop at 5.89 or so and an opportunity short at something above 5.83 with a target somewhere in the mid 5.60's. But the short I think has to be done in contracts.

Long term, I think there is an opportunity to the upside for several reasons. This opportunity is not real visible at the moment so makes most sense to be done with options because of the defined risk and ease of management.

I would go out to September so I can hang through planting and the dog days of summer. Buy a Sept Soybean 5.80 call at 20-21 cents and sell a Sept Soybean 6.40 call at 10-11 cents. This gives you a debit … total risk … of 10 cents or $500. The max profit potential is 60 cents or $3000 less the $500 risk/debit/cost or $2500. We would manage this position as if we held a futures contract . ACTION NUMBERS for a futures would be an entry now, a stop at 5.52 or so and a target well into the 6.00 area which Erich cited. At worst we would hold the risk to $250 …half of what we risked. This gives us a R/R ratio of 1:10.

SUGAR
The strong support just below 800 held like a champ last week. I would suspect a bit of follow through to the upside will occur early in the week. I do not see it returning to previous highs I look for it to stall just shy of 860 which would be a wonderful confirmation to my mind.

My ACTION NUMBERS are Enter any where above 8.50. The stop goes in at 8.90 or if you wanted to play it very tight a stop at 8.73 and my initial target is a return to the top of the old channel 6.80-6.60. I don't see an option spread play here. Sugar options are quite dicey to trade. I would confine my view to futures. The only option play I might consider would be to buy a May 850 Put if my account was above 5K, if below 5K I would buy a May 800 put. The 850 will cost about $560, the 800 about $340. Don't let more than half the value leak out, so the risk would be $280 or $170. If Sugar were to return to something around 700 or a bit lower we'd likely see those options worth $1000 -1200. If we got such a move another management technique to be considered would be selling a 750 or 700 put if you got the chance for about the same premium as you paid for the 850 or 800 thereby leveraging your invested capital off the table and still maintaining a profit potential of $700-$1000.

COTTON
We are now into may Cotton as FND for the March contract was last Monday, the 24th. Cotton options are problematic … NY market and all. If you are thinking as Erich is the only spread I see worth taking a run at would be to buy the JUNE Cotton 57 put and sell the June Cotton 54 put. You should be able to get this spread on for a debit of about 100 points or $500. The reward is $1500 less the debit or $1000. We manage again by not letting more than 50% of the debit erode risking only $250 or by exiting if Cotton trades above 6015. You might choose to wait for Erich's trade at or near 6000 before entering. In that case you might want to roll the Strikes up to whatever you can get that costs 100 points.

CORN
I like the corn to the upside. We are sitting just above contract lows and have tried quite hard to break through them without success. Again, we don't have a clue when the move will take place so as in beans I want a trade that has me on the playing field well into summer. I am buying the SEPT Corn 240 calls and selling Sept Corn 270 calls for a debit of around 7-8 cents …$350-$400. The reward potential is $1500 less the debit or about $1100. I will hold the position until Corn breaks the contract lows by 5 cents or until the spread has lost half what I paid for it.

QUESTIONS
"How do you know when to trade using options and when you should use a futures contract"

The decision to trade contracts or options can be determined by any number of issues. Generally speaking my first choice is always in favor of a contract. There are times, however when the margin for that market is too large for the account size. There are times when the gap back to the stop is just too large, there are times when the RISK/REWARD scenario is shy of my goals and, of course, there are simply times when a little voice says use extra caution. All these are good, solid reasons to consider an option play as an alternative to a contract. BUT, by all means, manage the option position just as you would a contract. Use the numbers culled from your analysis …observe stops and targets.

Until next week …

Tom
R.Thomas Loge', CTA
rtom816@att.net 1.800.656.0443

The Spring Break in Cattle…

The period from the end of October through February is the strongest period on record for Live Cattle futures as often we see a hole in supply. In the last 19 years, June Live Cattle have posted gains during this period in 15 of the last 19 years. During the same period, June Live Cattle prices have displayed weakness in 14 of the last 19 years from February through May, as the placed cattle begin to make it into the pipeline.

The worst spring breaks have occurred following weakness in February. From 1984 through 2002, June Live Cattle futures have declined in February a total of 8 times. Following these 8 weak Februarys, June Live Cattle have continued lower through May 7 times losing an average of –4.37 cwt in the ensuing three months, while the average break in the spring was a paltry –0.80 cwt following strong Februarys.

Hypothetical Performance Summary

Though the largest spring rally – in 1990 – occurred following a weak February so did the largest spring rally – 1987. Traders should also note that in only 2 of the 8 down February years was the February high violated to the upside in March through May – 1990 and 1998.

Though history does not have to repeat itself, traders should heavily at getting short on February rallies for the coming “Spring Break” and be especially aggressive following a weak February – after all “The Trend Is Your Friend… until it bends or ends!”

Erich

Like other “crop” commodities, sugar prices normally decline towards harvest. Sugar harvest in the Northern Hemisphere is mostly completed by March and the influx of supply tends to soften sugar prices. However this year demand for sugar is outstripping supply; thereby driving near term prices higher.

Brazil, one of the world’s largest sugar exporters, announced recently that it is committing more of its harvest to the production of ethanol, thus impeding the amount of sugar available for export. The news coupled with conflicts among sugar producing nations has served to support near term sugar prices.

As the March futures contracts expire and producer selling eases, buyers move into the nearby May contract. As supplies are consumed and new demand is still fresh, the old crop sugar tends to outperform the new crop sugar.

Therefore we are recommending the buying of May 2003 NYBOT Sugar #11 (SBK3) and the selling of May 2004 NYBOT Sugar #11 (SBK4) on or about February 27th. Plan to hold the spread until on or about March 20th. Profit target for the low margin spread is $300.