Well two hips and hooray! After several weeks of fighting the market has finally retraced 50% of the last trend at 4330. In fact cotton managed to dip just below the 50% getting as low as 4305 on Friday before finding support. While the market did close below the 50% the downtrend seems a little unstable lately, as the market had a huge volume spike toward the end of the week combined with falling open interest suggesting that the trend could be loosing steam.

While we might see the downtrend continue for the long term we could be in for a short term pullback early next week. If prices retreat they are in for early resistance in the 4445 - 4460 neighbourhood. Beyond here the next resistance can be found at 4480, 4540 and again at 4590. If the market manages to get all the way above here we might have to reassess the downtrend.

If the downtrend continues on Monday, especially if the market closes solidly below the 50% (4330) and volume and open interest are increasing, then it would be reasonable to assume that the downtrend has been refreshed and should continue further. Below 4300 the next support is found at 4250 and then at 4160. If the momentum is strong enough the market might even retrace the weekly 50% at 4030 but that is still a ways off.

Monday’s trading and close will likely set the tone for the remainder of the week.

Like many of the other grain markets, beans topped out the middle of the week and then retreated before finding support by filling the gap of September 6 at 563. In the short term beans will likely continue to pull back for a little longer before possibly continuing the uptrend.

Below Friday’s low the next support can be found on the yearly chart at 560, however the support on the daily chart at 547 might be more effective. If the market continues down from here the next barrier is around the 61.8% retracement at 536-538. This also matches resistance on the weekly charts.

There is a gap just above Friday’s range which might beckon the market higher. If the market reverses from last week’s descent it will fill Friday’s gap and have to get through the resistance at 580 before it can test the recent high.

Cattle charged hard all last week clearing all nearby resistance without even a pause; however volume and open interest are down slightly indicating that the quick ascent might have lost some of it power to continue. While Friday’s market had a large range, the market opened and closed at almost the same price. This normally indicates a balance between the supply and demand forces with neither side having the upper hand at the moment. Monday’s trading should determine if the market has the strength to continue or not.

A close above Friday’s high at 7040 should see the market continue higher and test the next resistance at 7150. From here the market might continue higher to more resistance at 7220 before testing the high of the previous downtrend at 7282. If the market pushes higher it should accompanied by increasing volume and OI to ensure that the trend has strength behind it; otherwise it might be short lived.

If the market closes below Friday’s trading then we could expect the market to pullback, at least for the immediate short term. There is plenty of support to the downside to help hold up a declining market. The first support is found at 6900 with the next level nearby at 6850. There is even more support clustered around 6825-6835. Finally there is the 50% retracement of the previous downtrend at 6770.

Next week we will shift our attention to the December contract.

Cocoa continued to advance this last week setting yet another new high at 2053 on Monday. The small ranges that occurred this week would indicate that the tug ‘o war between the bears and bulls continues with neither side having the upper hand at the moment. There is pretty solid support at 1996 which seems to be holding the market up at this time; however volume, open interest and MACD have all fallen off indicating that the market could be stalling. The end result is that the market has formed a channel which we can use to trade from.

The top of the channel is the new high at 2053 and the bottom of the channel is the support at 1996. Whichever way the market breaks out of the channel be sure that it has some momentum behind it otherwise it could result in a whipsaw or short term pullback.

A move to the up side should see cocoa attempt to challenge the long term resistance at 2100. A breakout below support would see cocoa test the support at 1967-69. If this support failed the next stop would be the 61.8% retracement at 1924 and finally the 50% at 1883. Although cocoa looks like it is losing momentum, the predominant trend is still long therefore you might not want to get too heavy into short positions as the market has not yet reversed trend.

Sugar took off last week like a rocket blowing through all the previous resistance and retracing beyond the 50% of the last downtrend on the daily chart. The market closed well above the 50% level and all indicators, with the exception of declining Open Interest, seem to suggest that the uptrend should continue. The decline in OI could be caused by profit taking, but it would be wise to keep an eye on any further advances just to make sure the market still has enough strength behind it to continue.

Friday’s high is up against some resistance on the weekly charts. If the uptrend is to continue it will need to close above the 700 range. The next resistance appears to be around 725-730 which would roughly coincide with the 61.8% retracement on the daily chart.

The market has advanced rather quickly the last couple of weeks however, so we might be due for a profit taking pull back especially in light of declining open interest. If the market does pull back look for it to retrace to 664 which is the first level of support. Below here the next support is found at 655 and then around the 630 level, which also corresponds to the 50% retracement of the last two week uptrend.

Next week we will shift our focus to the March contract.

Wheat behaved pretty much as predicted and skyrocketed to the weekly resistance at 440 before topping out. The next couple of sessions saw traders get nervous with many of them taking profits thereby causing the market to decline later in the week. Whether the profit taking is over remains to be seen but the market has found support at the 50% level of the last rapid uptrend.

The market may decline a little further as traders continue to take profits but should find some footing at the long term support at 384-385. If the market continues to slide below here the next support can be found at 373 and 369 ½ with a small gap located between the two supports. There is more support below here at 362 with another small gap below this level.

As with most of the grain markets right now the predominant trend is up, so this is likely a short term pullback. Once the market has found its footing it will attempt to continue higher. Depending how far the market pulls back the first resistance to the upside would be the matching lows of last Wednesday and Thursday at 405. Above here there is some longer term resistance at 415 but not too much to keep the market from taking a run at the recent high or 440. If the market does muster enough momentum to create a new high then the next stop seems to be the BIG long term 50% retracement at 472 ½.

Silver floundered last week probably due to decreasing volume. Trading was especially light September 11 but seems to have rebounded toward the end of the week. While the current trend seems to be up the market has failed to commit to it fully by posting a convincing close above the first level of resistance at 460.50. The market has subsequently formed a channel which we could trade off of next week.

The upper boundary of the channel would be Friday’s high of 464 and the bottom of the channel could be bracketed using Tuesday’s low of 452.50. There is support and resistance to either side so it will require some market momentum to break through; otherwise you can expect the market to continue to channel.

A break to the upside seems for favourable in the short term as the market struggles to retrace 50% of the last downtrend at 479.60. The first serious level of resistance to the up side is found at 471 which coincide with the 618% retracement. If the market breaks below Tuesday’s low it will likely retest current lows at 445.50 and maybe even 440.

I hope no one took offence to this question. I posted it mostly out of my own curiosity and the responses confirmed what I suspected: that the vast majority of traders are men; although, I’m not exactly sure why this would be. After all trading doesn’t require great physical strength or some other characteristic that might be seen as primarily male.

To be a good trader you need to have the ability to make sound decisions based on your own reasoning as well as being able the to get out of bad decisions quickly. In fact, based on these criteria, it seems to me that these are primarily feminine characteristics. If you don’t believe me let me introduce you to some of my past girl friends! ;-)

While I do not know any women traders personally, I do know that some of the most intelligent posts I have read at the THT forum are posted by women. And while neither gender really has an advantage in choosing market direction, women might be more pragmatic and less emotional about executing their trading strategy than men.

Whether it is the competition of trading, or the challenge of triumphing against the odds, or the lure of riches which appeals more to men than women I don’t know; but as with every other sector of society, as self directed trading becomes more common place I am sure that you will see more women getting involved in the futures markets.

Do you strictly trade commodities or stocks, or do you dabble in both?

Send me your responses at ErichTHT@hotmail.com and I’ll share the results with you next week. Shaggy will also put up a survey at http://www.tradershelpingtraders.com/surveys.htm

“Rule One: In a losing game such as trading, we shall…assume we are wrong until proven correct! (We do not assume we are correct until proven wrong.) Positions established must be reduced and removed until, or unless, the market proves the position correct! (We allow the market to verify correct positions.)” — Phantom of the Pits.

The Phantom of the Pits is a mysterious, knowledgeable trader who many years ago shared his trading philosophy in the form of an on-line book/interview at the Futuresmag.com web site. In a nutshell this rule gives traders the key to executing a successful trading strategy, namely: make the market prove you right before getting in and get out quickly if you’re wrong.

Many new traders are under the impression that in order to be a good trader you need to be good at choosing the future market direction. While this is true to an extent it is not as important as structuring your trade in such a way as to let the market tell you which way it wants to go. I like to think of initiating trades as setting up scenarios for the market to fulfill. If the scenario is completed then I am in the trade, if it is not, then I stand aside or exit if I’m already in.

A simple way to make the market prove you right is to use stop orders instead of market orders. A market order will automatically fill you at whatever level the market is currently trading at; whereas a stop order will fill only when the market reaches or exceeds a certain price pre-determined by you. The advantage to using a stop order is that you are making the market prove that it indeed wants to go (or continue to go) the direction you want it to go, verses purchasing a market order and hoping the market will go in the direction you want it to go!

For example if you wanted to go long in a market you could simply purchase a market order at the current price and hope the market will continue long, or conversely, you could place a stop order above the current range to make the market prove it is going in the planned direction before you are filled. Where you want to place the entry order depends on the trading system you are using, but the simple fact of making the market prove its intentions will keep you out of trades that could be going against you.

The most obvious example of this type of trade is the sideways channel formation where you enter either long or short depending on which side of the channel the market breaks out. With a little thought however, you will see how this rule can be used in almost any trading situation.

For instance, you might be looking at a market that only has a good risk/reward potential to one side, in this example let’s say it is the short side. Rather than just purchasing a short contract at the market and hoping that prices will fall, you can place an order to enter short ONLY if prices begin moving in the right direction and exceed a predetermined level before entering the market.

This way if prices go against you and move up instead, you suffer no loss since you are not in the market yet: the market did not prove you correct. Besides, you did not see a good risk/reward potential to the upside which is why you established a trading scenario to the short side. If the market does move down and complete your scenario then, and only then, are you in the market and hopefully making profits according to your trading plan.