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THE JOSS REPORT NOVEMBER 5, 2006 |
TECH TALK BY Scott R. Joss (Non member C.T.A)*
CASH CRB (CRY$Y)
In the Joss Report dated 10/15/06, I began to briefly discuss the cash $CRB because of a potentially bullish ‘head and shoulders’ bottom.
I explained that the $CRB is a composite index of various commodities.
On 10/15, I alerted traders that a potentially bullish ‘head and shoulders’ bottom might form and that the cash $CRB had developed a yet to be determined trade signal.
On 10/16/06, the cash $CRB posted a buy signal at 305.87
Why is this important?
If the cash $CRB posted a buy signal above 305.86 and posted multiple closes above 309.58, this might constitute a bottom for some products and a price advance for others.
Traders were and are advised to be on their toes between Election Day and the first quarter of 2007.
Remember: what influences market direction is supply/demand - AND policy changes.
The first objective for the cash $CRB will be 321.65.
JANUARY SOYBEANS (SF7)
In the Joss Report dated October 15th, I moved January Soybeans to ‘Tech Talk’ due to the explosive breakout from 577.00 and subsequent upside price advance.
This product is not for the faint of heart because of the higher or lower openings each day - which can be dramatic.
On 10/25/06, January Soybeans posted an unconfirmed yearly buy signal at 643.00.
As long as January Soybeans continue to post monthly closes at or above 643.00, funds will hold on to their long positions.
Last week, traders were introduced to a current development between Soybeans versus Corn ratio price spreads.
Longtime traders know that the typical and time-tested relationship between Soybeans versus Corn price ratio spread was between 2.3 to 2.5.
Let’s review an example from last week: If March Soybeans were priced at say 600.00, then March Corn would be priced between 240.00 and 260.75.
March Soybeans at 600.00 divided by 2.5 = 240 March Corn.
This year, and not since 1994-1996 has the ratio price spread between Soybeans versus Corn narrowed below 2.3.
Currently, the ratio price spread has narrowed to between 1.88 to 1.92 versus the previous week of 1.91 and 1.94.
The narrowing of the Soybean versus Corn price ratio spread suggests the market is trying to influence the farmer to plant more Corn instead of Soybeans.
Last week I gave some reasons why this is occurring;
1) Higher demand for Corn due to Ethanol production by ADM and Cargill.
2) A reported lower Crop Production in Corn from 11.144 billion bu. to 10.905 billion bu.
3) A lower U.S. 2006–2007 Carryover from 1.220 billion Bu. to 996 million bu.
4) A lower Global Carryover for 2006–2007 from 92.31 MMT in September to a recently reported 89.54 MMT.
Next week, traders will get a glimpse of a more current monthly USDA Crop Production.
This all adds up to the old adage of higher demand/lower supply equals higher prices.
The higher price of Corn may influence farmers to plant more Corn and refrain from the typical rotation of Corn crops to Soybean crops.
Let’s continue to keep an eye on the ratio spread between March Soybeans and March Corn - as this could get very interesting if the spread narrows to 1.64 and Soybeans reach 720.00.
If this were to occur, then Corn would reach 439.00. In addition, if a drought occurred this coming summer, I can’t imagine where prices might go.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week decreased by -8,972, posting a total open interest of 375,802 contracts.
Traders are advised not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed trade risk next week will be $3,400.
If you do not fit this risk profile, traders are advised to consult with their account executive for an option trading strategy.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Below are possible ‘trading modules’ for futures traders to consider next week:
Aggressive traders who established a long position at 577.00 or above are advised to move their stops below 599.50*.
Option traders who purchased January 580 calls are advised to risk 50% of current market price**.
Aggressive traders who either added to their long position or established a long position on a price pullback to 573.00 are advised to move their stops below 599.50*.
Option traders who purchased January 600 calls are advised to risk 50% of current market value**.
Aggressive traders who either added to their long position or established a long position at 582.00 or above are advised to place their stops below 599.50*.
Option traders who purchased January 600 calls are advised to risk 50% of current market value**.
Aggressive traders who either added to their long position or established a long position at 591.00 or above are advised to place their stops below 599.50*.
Option traders who purchased January 620 calls are advised to risk 50% of current market value**.
Aggressive traders who either added to their long position or established a long position on multiple closes above 612.50 are advised to place their stops below 599.50*.
Option traders who purchased January 640 calls are advised to risk 50% of current market value**.
Aggressive traders who either added to their long position or established a long position on multiple closes above 627.00 are advised to place their stops below 599.50*.
Option traders who purchased January 640 calls are advised to risk 50% of current market value**.
Very aggressive traders who either added to their long position or established a long position on closes above 655.00 are advised to place their stops below 599.50*.
Option traders who purchased January 640 calls are advised to risk 50% of current market value**.
# 1) If January Soybeans post a price decline towards 622.00:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 599.50*.
Option traders are advised to purchase January 600 calls, risking 70% of purchase price**.
# 2) If January Soybeans post multiple closes above 682.50****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 622.00*.
Option traders are advised to purchase January 680 calls, risking 70% of purchase price**.
# 3) If January Soybeans post multiple closes above 696.00****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 639.00*.
Option traders are advised to purchase January 700 calls, risking 70% of purchase price**.
Our objective will be 724.50.
# 4) If January Soybeans post multiple closes above 738.00****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 672.00*.
Option traders are advised to purchase January 720 calls, risking 70% of purchase price**.
# 5) If January Soybeans post multiple closes above 757.50****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 694.00*.
Option traders are advised to purchase January 740 calls, risking 70% of purchase price**.
Our objective will be 800.75.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?S07F
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?S
MARCH COTTON (CTH7)
This week I’m adding March Cotton to ‘Tech Talk’ due to a pending trade signal for next week.
March Cotton has been in a nine-week price decline that began from highs of 60.35 (8/07/06) to current lows of 51.25 (10/18/06).
Recently, March Cotton has traded from lows of 51.25 to highs of 54.00 (10/27/06).
In the previous article, I wrote about the ratio price spread between Soybeans and Corn.
Traders should note there is also a ratio price spread between Soybeans and Cotton.
The higher price of Soybeans may influence farmers to plant more Soybeans and refrain from the typical planting of Cotton in their area.
Traders must now keep an eye on the ratio spread between March Soybeans and March Cotton that is currently at 12.6.
If Soybeans reach 720.00, it would make sense for March Cotton to possibly be at 57.14 or higher.
March Cotton has two unfilled price gaps above the current market price. The most recent unfilled price gap is between 56.90 and 57.20.
This product is not for the faint of heart because of the higher or lower openings each day - which can be dramatic…. and the vicious personality of this product.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week increased by 1,583, posting a total open interest of 185,353 contracts.
Traders are advised not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed trade risk will be $805.
If you do not fit this risk profile, traders are advised to consult with their account executive for an option trading strategy.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Below are possible ‘trading modules’ for futures traders to consider next week:
The trading modules listed below are for very aggressive traders. Less aggressive traders are advised to wait for several trade signals before establishing a position.
# 1) If March Cotton posts 53.81 and multiple closes above 54.05****:
Very aggressive traders are advised to establish a long position, placing all stops below 52.20 and refer to trading module # 6*.
Option traders are advised to purchase March 55 calls, risking 70% of purchase price**.
# 2) If March Cotton posts multiple closes above 55.05****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 52.40*.
Option traders are advised to purchase March 56 calls, risking 70% of purchase price**.
# 3) If March Cotton posts multiple closes above 56.40****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 53.80*.
Option traders are advised to purchase March 57 calls, risking 70% of purchase price**.
Our objective will be 57.20.
# 4) If March Cotton posts multiple closes above 57.70****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 54.05*.
Option traders are advised to purchase March 58 calls, risking 70% of purchase price**.
# 5) If March Cotton posts multiple closes above 58.30****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 56.40*.
Option traders are advised to purchase March 59 calls, risking 70% of purchase price**.
# 6) If March Cotton posts 52.19 and multiple closes below 51.85****:
Very aggressive traders are advised to establish a short position, placing stops at 53.81 and refer to ‘trading module’ # 1*.
Option traders are advised to purchase March 52 puts, risking 70% of purchase price**.
# 7) If March Cotton posts multiple closes below 51.25****:
Very aggressive traders are advised to either add to their existing short positions or establish a short position, placing all stops above 52.40*.
Option traders are advised to purchase March 51 puts, risking 70% of purchase price**.
Our objective will be 48.50.
# 8) If March Cotton posts multiple closes below 48.40****:
Very aggressive traders are advised to either add to their existing short positions or establish a short position, placing all stops above 51.25*.
Option traders are advised to purchase March 49 puts, risking 70% of purchase price**.
# 9) If March Cotton posts multiple closes below 47.80****:
Very aggressive traders are advised to either add to their existing short positions or re-establish a short position, placing all stops above 51.25*.
Option traders are advised to purchase March 47 puts, risking 70% of purchase price**.
Our objective will be 45.00.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?CT07H
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?CT
DECEMBER SILVER (SIZ6)
In the Joss Report dated October 15th, I added December Silver to ‘Tech Talk’ due to a trade signal on the weekly and currently on the monthly chart.
On 10/16/06, December Silver posted a buy signal on the weekly chart.
On 11/01/06, December Silver posted a buy signal on the monthly chart.
The daily chart has developed a bullish ‘W’ formation.
If this bullish formation were to continue, December Silver must continue to post weekly closes above the middle of the ‘W’ of 11.840.
This product is not for the faint of heart because of the higher or lower openings each day - which can be dramatic due to extreme volatility.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week increased by 1,137, posting a total open interest of 110,237 contracts.
Traders are advised not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed weekly trade risk three weeks ago was $5,100.
The proposed trade risk for November will be $8,550.
If you do not fit this risk profile, traders are advised to consult with their account executive for an option trading strategy or trade mini Silver contracts.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Below are possible ‘trading modules’ for futures traders to consider next week:
Aggressive traders who established a long position at 11.730 or above are advised to move their stops below 11.820*.
Aggressive traders who either added to their existing long position or established a long position on a price decline to 11.455 are advised to move their stops below 11.820.
Aggressive traders who either added to their existing long position or established a long position on, at, or above 12.310 are advised to move their stops below 11.820.
# 1) If December Silver posts a price decline to 12.280****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 11.820 and refer to trading module # 4*.
# 2) If December Silver posted multiple closes above 12.680****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 11.820*.
# 3) If December Silver posted multiple closes above 12.890****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 12.310*.
Our objective will be 13.100.
# 4) If December Silver posted 13.350 and multiple closes above 13.370****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 12.680*.
# 5) If December Silver posted multiple closes above 13.500****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 12.850*.
Our objective will be 13.900.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?SI06Z
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?SI
DECEMBER GOLD (GCZ6)
In the October 15th Joss Report, I moved December Gold to ‘Chart Watch’ due to a pending trade signal on the weekly chart.
I advised traders to be on their toes in case direction and momentum turned positive.
This week I’m moving December Gold to ‘Tech Talk’ due to a bullish ‘head and shoulders’ bottom.
The left shoulder developed between lows of 576.60 and highs of 612.40.
The head established itself between lows of 563.50 and highs of 595.00.
The right shoulder is developing between lows of 573.00 and highs of 604.00.
The downward sloping ‘neckline’ breakout last week was at 600.00.
Multiple closes above 615.40 have confirmed a bottom is in place.
The upside price objective from the ‘head and shoulders’ is 648.90.
December Gold has two unfilled price gaps above the current market price. The first unfilled price gap is between 637.50 and 641.00. The second unfilled price gap above the current market price is between 699.00 and 700.00.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest last week decreased by -8,117, posting a total open interest of 323,481 contracts.
This product was and is for very aggressive traders only.
Traders are advised not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed risk of the ‘head and shoulders’ bottom is $4,050.
If you do not fit this risk profile, traders are advised to consult with their account executive for an option trading strategy or trade mini Gold contracts.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Below are possible ‘trading modules’ for futures traders to consider next week:
Aggressive traders who established a long position at 604.00 are advised to place their stops below 599.50.
Aggressive traders who either added to their long position or established a long position at 612.40 are advised to place their stops below 599.50.
Aggressive traders who either added to their long position or established a long position at 615.50 are advised to place their stops below 599.50.
Aggressive traders who either added to their long position or established a long position at 615.50 are advised to place their stops below 599.50.
Aggressive traders who either added to their long position or established a long position at 622.60 or above are advised to place their stops below 599.50.
# 1) If December Gold posts a price decline to 612.40****:
Aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 599.50*.
# 2) If December Gold posted 631.40 and multiple closes above 637.50****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 613.20*.
Our objective will be 641.00.
# 3) If December Gold posted 647.00 and multiple closes above 648.50:
Aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 631.30*.
# 4) If December Gold posted multiple closes above 655.70:
Aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 637.50*.
# 5) If December Gold posted 666.50 and multiple closes above 668.20:
Aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 648.50*.
# 6) If December Gold posted 678.50 and multiple closes above 683.00:
Aggressive traders are advised to either add to their existing long position or establish a long position, placing all stops below 658.80*.
Our objective will be 700.00.
DAILY CHART:
http://www.bohlish.com/d_Chart.cgi?GO06Z
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?GC
DECEMBER 10-YEAR NOTE (TYZ6)
For several weeks the December 10-year Note was added to ‘Chart Watch’ due to varying trade signals.
This week the December 10-year note will be added to ‘Tech Talk’ due to a pending trade signal on the monthly chart.
If the December 10-year Notes do not post a buy or sell trade signal by the end of November, then new ‘trading modules’ will be posted for the March 10-year note contract.
The December 10-year Note has an unfilled price gap below the current market price at 104-130 (7/06/06).
On 11/03/06, the December 10-year Note posted a sell signal at 108-065.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest last week decreased by -105,092, posting a total open interest of 2,413,564 contracts.
This product was and is for very aggressive traders only.
Traders are advised not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed trade risk for November will be $2,110.
If you do not fit this risk profile, traders are advised to consult with their account executive for an option trading strategy.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Below are possible ‘trading modules’ for futures traders to consider next week:
Very aggressive traders who established a short position at 108-065 are advised to place their stops at 108-220.
# 1) If the December 10-year Note posts 108-220 and multiple closes above 108-240:
Very aggressive traders are advised to establish a long position, placing stops at 106-185 and refer to ‘trading module’ # 4*.
# 2) If the December 10-year Note posts multiple closes above 109-240****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing stops below 108-220*.
# 3) If the December 10-year Note posts multiple closes above 110-060****:
Very aggressive traders are advised to either add to their existing long position or establish a long position, placing stops below 108-310*.
Our objective will be 110-190.
# 4) If the December 10-year Note posts 106-210 and multiple closes below 106-190:
Very aggressive traders are advised to either add to their existing short position or establish a short position, placing stops at 108-220 and refer to ‘trading module’ # 1*.
# 5) If the December 1