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Author: JsnStein Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 113  
Subject: Market Summary 8-19-06 Date: 8/20/2006 8:49 PM
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Introduction

Nothing this week.


Currencies

The currencies are still displaying indecisive action. The U.S. dollar index is looking bearish after breaking an intermediate uptrend line but the British Pound, Euro, and Japanese Yen are not looking bullish. I believe we are at a turning point, as soon as a direction is defined the trend will be set for the foreseeable future (at least the next few months).

The Canadian dollar has formed a pennant. With the recent consolidation I would now be willing to play the short side for more than a quick break. However, I would still play a downside break more conservatively than an upside break. It really depends on crude oil though. If crude oil is strong any downside in the Canadian dollar will be limited, if crude oil is weak then any upside will be limited. Since I am currently playing crude oil (or rather, unleaded gas) I will be aware of the correlation.

Australian Dollar: Neutral to slightly bearish.
British Pound: Neutral to bullish.
Canadian Dollar: Neutral to slightly bullish.
Euro: Neutral to bullish.
Japanese Yen: Neutral.
U.S. Dollar Index: Neutral to bearish.


Energy

I am short unleaded gasoline but I don't like where I got in. There is strong support right below the current price. If support isn't taken out quickly and decisively I will look to cash in a little profit and better position myself later.

Crude Oil: Bearish, potential top.
Heating Oil: Neutral to bearish, potential top.
Natural Gas: Neutral.
Unleaded Gasoline: Bearish, potential top.


Grains

All the grains, except Rough Rice have turned bearish. Soybeans are breaking the lower bound of a long channel. Being at the end of the harvest season and with the inability of the massive heat wave a couple weeks ago to move this market higher, I would say the low-risk trades are all on the short side.

Corn: Bearish.
Oats: Neutral to bearish.
Rough Rice: Neutral to slightly bullish.
Soybean Meal: Bearish.
Soybean Oil: Neutral to slightly bearish.
Soybeans: Neutral to bearish, possible channel breakout.
Wheat (CBOT): Neutral to slightly bearish.


Interest Rates

Interest rates are still flirting with their downtrend lines. The 30-year bond has made a classic bottom formation but the other treasuries do not confirm the bottom. Due to this I changed my stance to neutral on all rates. A failed swing lower would turn me bullish.

2-year Notes: Neutral.
5-year Notes: Neutral.
10-year Notes: Neutral.
30-year Bonds: Neutral.


Meats

A potential top is forming in cattle. A swing higher would break the top and affirm the bullish trend a swing lower would complete the top. If a clean formation forms I may trade it otherwise I am focusing on other markets.

Feeder Cattle: Neutral to slightly bullish.
Live Cattle: Neutral to slightly bullish.
Lean Hogs: Neutral to slightly bullish.
Pork Bellies: Neutral to slightly bullish.


Metals

I am short December copper. On Thursday copper appeared to break out of the pennant formation to the downside. Then on Friday the action immediately reversed the breakout, coming within a point or two of my stop. I am still waiting to see if this was merely a jab or a true breakout. I am changing my stance to bearish on all the markets that have pushed through their pennants to the downside, as they are all sell candidates. However, if the break lower fails and these markets reverse, the markets could be quickly changed to bullish. A failure is a strong signal.

Copper: Bearish, pennant.
Gold: Bearish, pennant.
Palladium: Neutral to bearish.
Platinum: Bearish, pennant.
Silver: Neutral to bearish.


Softs

Sugar #11 is still in a solid bear trend although I think it is a little late to initiate any new positions. The spike lower last week usually comes at the end of a move.

Cocoa: Neutral.
Coffee C: Neutral.
Cotton #2: Neutral to bullish.
Lumber: Bearish.
Orange Juice: Neutral.
Sugar #11: Bearish.


Indexes (Stock Markets)

We finally got the bounce. I shorted this with the market showing bullish divergence at the most recent bottom. In my defense, bullish divergence doesn't usually work in a trend. But that was enough to get me out at the beginning of the bounce (at close to a full loss). The market must maintain upward momentum through immediate upside resistance; a stall would be bearish.

In summary, I am still bearish although cautiously. I changed my stance because I wouldn't attempt to short here. The recent break higher left a very clean bottom behind. (“bottom behind”? That doesn't sound right…) If the upside stalls I will be ready to aggressively short again. I will expect the Nasdaq 100 to stall out in the 1600 – 1650 range. The Dow and S&P could test their highs.

Dow Jones Industrial Index: Neutral to bearish.
Nasdaq 100: Neutral to bearish.
S&P 500: Neutral to bearish.


Open Positions (average true range)
Short Dec High Grade Copper, (.132 – that is a huge range, .20 is a limit move!)
Short Oct Unleaded Gasoline, (.047)


Liquidated (trade results)
Short Sept Nasdaq, (loss)


Jason
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