WELCOME TO CLEARTRADE'S NEWSLETTER
ClearTrade's trading recommendations and weekly commodity newsletter was first published in October 1998. Since that time, our research has continued to evolve into an important source of technical insight for many traders. Our goal is to provide traders with a 'game plan' to prepare for the trading day and week ahead.
ClearTrade's technical analyst, Scott Joss, is a veteran futures trader with twenty-eight years experience on and off the trading floor - as a pit trader, account executive handling arbitrage for Smith Barney, former member of the CBOT and presently an IB. Scott prepares technical analysis in selected market groups when an opportunity presents itself and not only develops trading modules on selected trading opportunities but 'feeds-forward', advising traders what to expect and how to react.
At ClearTrade, we think it’s helpful to speak directly with traders who have requested our research and/or may be interested in establishing an account with us. Understanding your trading needs and goals is important. And we think you should have an opportunity to get to know who we are and what we offer on a one to one basis.
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TECH TALK by Scott R. Joss (Non member C.T.A)*
OCTOBER SUGAR (SB5V)
Sweet Sixteen…
When I left the CBOT trading floor and eventually moved to the retail sector in 1994, the rallying cry was “Sweet Sixteen.”
On 1/06/95, sugar peaked at 15.83.
Will this again become the mantra in this potentially explosive product?
Lately, many acquaintances that happen to be retail brokers have called asking us - ‘what are you trading… Beans, Crude, Gold?’
When we meekly answer ‘Sugar,’ their reaction is universal; Sugar has not moved in years….click.
For six-weeks I have written about Sugar and a possible price advance based on daily, weekly, and monthly charts. Each chart supports the other by the development of bullish “W” formations.
Because of these chart developments, traders have been advised to establish long positions based on daily, weekly, and monthly trade signals.
Once again I must inform traders that this is a long-term trade that may span a year or more to achieve.
Because of the length and time needed for development, traders have been advised to establish long positions in March 2006 futures and options based originally on the July contract trade signals and now - October trade signals.
Two weeks ago I wrote that I anticipated Sugar prices would take two steps forward and one-step back until a major breakout occurred. However, this has not yet happened.
October Sugar has been in a multi-year price advance which began from lows of 6.12 (2/13/04) to recent highs of 9.55 (7/07/05).
Sugar closed Friday at 9.54, which is above its 100-day moving average of 8.91 and its 200-day moving average of 8.88.
Sugar had eight unfilled price gaps above the current market price. The most recent price gap between 9.25 and 9.32 was filled on 6/27/05. The next unfilled gap above the current market price is between 11.72 and 11.80 (1/09/98).
Sugar had four unfilled price gaps below the current market price. The most recent price gap is between 9.39 and 9.45, which was posted Friday.
On 5/18/05, Sugar posted a weekly buy signal at 8.54.
On 6/17/05, Sugar posted an ‘intra-weekly’ buy signal at 9.04.
On 7/07/05, Sugar posted a major price breakout by a weekly closing above its past contract high of 9.45 from 3/17/05.
Last week's high was 9.55.
Last week's low was 9.25.
Last month's high was 9.46.
Last month's low was 8.70.
WHAT DO THE CHARTS LOOK LIKE?
The daily Sugar chart has developed a bullish “W” formation or a one-two-three bottom.
The all-important middle of the “W” is at 8.65.
The long-term weekly Sugar chart has the same formation as the daily chart, which is a bullish “W” formation.
The all-important middle of the weekly “W” is at 8.85.
The long-term monthly Sugar chart supports the daily and long-term weekly charts but has not only one but also possibly two “W” formations developing.
The all-important middle of the first monthly “W” is at 8.85.
The all-important middle of the second “W” is at 11.40.
Our short-term objectives are 12.88 and 18.87.
The caveat, as always, will be that Sugar maintains a foothold above the middle of the first correlating “W,” which is at 8.85.
We now have another caveat.
Sugar must maintain a foothold above the previous contract high of 9.45.
Let’s review the past-unfilled price gaps above the current market price so we can reference them quickly if the need presents itself.
1) Price gap between 11.72 and 11.80 (1/09/98).
2) Price gap between 13.50 and 13.61 (2/19/82).
3) Price gap between 19.80 and 19.85 (4/03/81).
4) Price gap between 25.85 and 26.20 (2/13/81).
5) Price gap between 31.25 and 31.30 (1/09/81).
6) Price gap between 33.85 and 35.05 (11/28/80).
7) Price gap between 51.20 and 53.20 (11/29/74).
8) Price gap between 59.20 and 61.10 (11/22/74).
Currently, Sugar has a well-defined upward trendline that began from lows of 8.32 through lows of 8.35, and lows of 8.77. If this trendline were touched today, it would intersect at 9.10.
Sugar option facts trader should note:
Sugar options have been ranked number 40 out of 45 for a two-year ‘implied volatility’ average.
40) Sugar (SB) High 42.12% - Low 18.90% - Current 19.98%
Sugar options have been ranked number 39 out of 45 for a one-year ‘implied volatility’ average.
39) Sugar (SB) High 33.54% - Low 18.90% - Current 19.98%
Sugar options have been ranked number 38 out of 45 for a six-month ‘implied volatility’ average.
38) Sugar (SB) High 27.18% - Low 18.90% - Current 19.98%
What do these numbers boil down to?
Sugar options are CHEAP!
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Aggressive traders who either added to their existing long position or established long positions at the ‘intra-weekly’ buy signal of 9.04 are advised to move their stops below 9.10.
Aggressive traders who either added to their existing long position or established long positions at 9.13 are advised to move their stops below 9.10.
Options traders who purchased either March 1100 calls or March 1200 calls are advised to continue risking 100% of purchase price.
If Sugar first posts a higher high than last week’s high of 9.54, traders are advised to either add to their existing long positions or establish a long position, placing stops for this position only at 9.24.
If Sugar first posts a lower low than last week’s low of 9.25 yet reverses and posts a close above last week’s high of 9.55, traders are advised to either add to their existing long positions or establish a long position, placing stops for this position only at 9.24.
If Sugar posts a close above 9.82, traders are advised to either add to their existing long position or establish a long position, placing stops for this position only below 9.45.
Conservative traders are advised to purchase multiple March 1200 calls, risking 100% of purchase price.
Our next objective will be 10.66.
If Sugar posts a close above 10.66, traders are advised to either add to their existing long position or establish a long position, placing stops for this position only below 10.33.
If Sugar does post a close above 10.66, traders should prepare for a possible assault on the previous high and the second ‘W’ of 11.40.
Our next price objective will be the gap between 11.72 and 11.80 (1/09/98).
On the flipside…
If Sugar were to reverse and post a monthly close at or below 8.70, traders are to sit on the sidelines and wait for another trading opportunity.
DAILY CHART:
http://bohl.minot.com/d_Chart.cgi?SB05V
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WEEKLY CHART:
http://bohl.minot.com/w_Chart.cgi?SB
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S&P 500 (SP5U)
Can’t keep a good market down for too long - and last week proved it.
The September S&P had been in an eight week price advance that began from lows of 1143.00 (4/20/05) to highs of 1225.20 (6/17/05).
Recently, the S&P had been in a three-week price decline that began from highs of 1225.20 to lows of 1186.50 (7/07/05).
Currently, the S&P has traded from lows of 1186.50 to highs of 1217.00 (7/08/05).
The S&P has two unfilled price gaps above the current market price. The most recent is between 1249.30 and 1250.80.
The S&P have four unfilled price gaps below the current market price. The most recent gap is between 1180.50 and 1184.50.
On 7/07/05, the S&P posted an ‘intra-week’ buy signal at 1208.60.
Last week’s high was 1217.00.
Last week’s low was 1186.50.
Last month’s high was 1225.20
Last month’s low was 1192.50.
WHAT DO THE CHARTS LOOK LIKE?
Could this be the start of our traditional summer rally?
As long as the S&P 500 maintains a foothold above the highs of 1993 - which was 1111.50, the S&P are in an up-trend.
If the S&P can post a monthly close at or above last month’s high 1225.50 by the close of business July 29th, this would constitute a continuation of the current up-trend.
WHAT WERE TRADERS ADVISED TO DO LAST WEEK?
Friday, aggressive traders were advised to establish a long position at 1208.60, placing stops below 1192.50.
Conservative traders were advised to establish a long position at 1209.00 in the Emini S&P, placing stops below 1192.50.
WHAT SHOULD TRADERS DO NEXT WEEK?
Traders that established a long position in the S&P should keep their stops below 1192.50.
Traders that established a long position in the Emini S&P should keep their stops below 1192.50.
If the S&P first pulls back to 1208.60, traders are advised to either add to their existing long position or establish a long position, placing stops below 1192.50. Conservative traders are advised to use the Emini S&P.
If the S&P first posts a higher high than last week’s high 1217.00, traders are advised to either add to their existing long position or establish a long position, placing stops for this position only below 1203.20.
Our first objective will be an all out assault on recent highs of 1225.20.
If the S&P post a weekly close above 1225.20, traders are advised to either add to their existing long position or establish a long position, placing all stops below 1208.60.
Our short-term objective will be to fill the unfilled price gap above the current market price between 1249.30 and 1250.80.
Our long-term objective will be 1263.90
On the flipside…
If the S&P were to post a close below last month’s low of 1192.50, traders are to prepare for an assault on last week’s low of 1186.50.
If the S&P posts a close below last week’s low 1186.50, traders are advised to establish a short position, placing stops above 1192.50.
Our objective will be to fill the unfilled price gap below the current market price between 1180.50 and 1186.50.
DAILY CHART:
http://bohl.minot.com/d_Chart.cgi?SP05U
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WEEKLY CHART:
http://bohl.minot.com/w_Chart.cgi?SP
CHART WATCH by Scott R. Joss (Non member C.T.A)*
Readers and clients call during the week and ask: What are you watching?
Watching can mean that the markets are developing a 'recommendation' or a chart pattern that has not yet fully developed - or may never develop.
During the course of the week or month it is not uncommon to find an `intra-day, intra-week or intra-month' recommendation that was previously not revealed when this newsletter was written.
Products that currently fit into this 'watch' category are listed below and should be 'watched.'
- DECEMBER SOYBEAN OIL (BO5Z)
- NOVEMBER SOYBEANS (S5X)
- DECEMBER CORN (C5Z)
- SEPTEMBER WHEAT (W5U)
This week all four gain products listed above will be placed on ‘chart watch.’
Each is developing possible monthly recommendations for August, which will not be revealed until the close of business July 29th.
The exception of the products listed is Soybeans - which has a weekly recommendation for next week.
Buy when trades 736.25 - Sell when trades 676.75.
It has been my experience that when a group of related products - in this case grains - are all developing potential monthly recommendations, it is time to step back and sit on the sidelines.
What appears to be developing in each of these products is an emotional response to weather that generally sends prices gyrating in an uncontrollable manner, resulting in markets that are volatile and unpredictable.
The result of this turmoil is a loss of confidence, money, and sense of direction for the long-term.
WHAT SHOULD TRADERS DO?
Wait.
In practical terms - let the locals (pit traders), hedge funds, and commercial funds search for price discovery and when the dust settles, our true direction will be revealed.
Bottom line: preserve your capital for future opportunities that will develop in these explosive markets.
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SEPTEMBER US 30-YEAR BOND (US5U)
Bonds have been placed on ‘chart watch’ because of a possible monthly recommendation for August.
The 30-year Bond has been in a six-week trading range between 115-26 lows and 119-23 highs.
Until bonds post a monthly close below 115-26 or a monthly close above 119-23, they appear to be in congestion.
This congestion is great for writing options, however - this strategy can and has backfired on even the most experienced professional.
I personally never write options because of two separate, unrelated experiences that occurred when I was at the CBOT.
The first experience was when I was an account executive, technician, and independent IB for Smith Barney. One in-house trader had developed a strategy that depended on the bonds trading in a five-point range.
When Bonds traded the high end of the range, he would sell at the money calls.
When Bonds traded the lower end of the five point trading range he would sell at the money puts.
All went well with this strategy for several expirations.
However, once the inevitable breakout occurred, this misguided in-house trader was ill prepared to deal with the fact and consequently lost not only mega bucks - but also his career.
The second occurrence was during the 1987 stock market crash.
At that time, my expertise was in ‘point and figure' charting.
I had been following the Bond market using several scales - 1x3, 2x6, 4x12 and 8x24.
Each chart was forming rounded bottoms. Volatility was low. How low?
Premium in the Bond calls were at ‘cabinet bid’ across the board.
Just about every option trader was short calls and long puts.
This presented an opportunity not only for me but also for my in-house Smith Barney traders.
I advised all to purchase just out of the money November calls.
With two weeks until expiration, all appeared grim and morale was low.
Well… the outcome is history. The Stock Market dropped initially 500 points (yes, back in the old days a 500-point drop was considered a major event). Traders were caught short calls and long puts.
Traders around the world flocked to safety by purchasing U.S. Bonds as their vehicle of choice.
Bonds were limit-up for several days. Fortunes were made and lost.
What lessons did I learn from these experiences?
1) Never sell premium… the risk is unlimited.
2) Options traders understand Deltas, Vegas, Gammas and Theoretical Prices but direction is not their strong suit - to put it mildly.
3) My personal use of purchasing options is strictly as a trading vehicle within a defined period.
WHAT SHOULD TRADERS DO?
Wait and let the option traders tighten the noose a little more - and prepare for a trading opportunity.
DAILY CHART:
http://bohl.minot.com/d_Chart.cgi?US05U
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WEEKLY CHART:
http://bohl.minot.com/w_Chart.cgi?US
CURRENT 'MONTHLY' RECOMMENDATIONS
FOR JUNE:
There are no current monthly recommendations.
FUTURE WATCH
Future watch will list developing 'monthly' recommendations to watch in July for August. By listing these products, traders can `feed-forward' with anticipation and focus - centering on products that will provide direction and hopefully, opportunity.
Traders should begin studying the 'daily', 'weekly' and 'monthly' charts for the products listed below. Don't forget between now and the end of the month, some or all of these products may be de-listed.
'Monthly' recommendations will be revealed on the close of business July 29 and sent via email for August.
- Potential monthly recommendation for August will be posted in future newsletters.
July 2005 |
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Weekly Reports |
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*** The above dates can change without notice. *** |
NOTE:
If you do not completely understand this information, you are advised to take NO action until speaking with your Account Executive.
ClearTrade, Inc. may be reached at 800-493-4444
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* Recommendations and Newsletter prepared by Scott Joss, Non- Member C.T.A.
Scott Joss is a 'non member' CTA and is providing recommendations to ClearTrade, Inc. clients. Scott Joss 'is a principal' of ClearTrade, Inc. and 'is a registered IB member' with the NFA.
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* COMING EVENTS AND DATA RELEASES:
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Market recommendations are strictly the opinion of the writer and are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve substantial risk. In no event should the content of a market letter be construed as a promise that you will profit or that losses can or will be limited in any manner whatsoever.
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Past results are no indication of future performance. Information provided in this newsletter is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
Scott Joss is a 'non member' CTA and is providing recommendations to ClearTrade, Inc. clients. Scott Joss 'is a principal' of ClearTrade, Inc. and 'is a registered IB member' with the NFA.
NOTE: Past results are no indication of future performance. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
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The contents of this newsletter are copyright 1997-2005, Scott R. Joss/ClearTrade, Inc. *TM. All Rights Reserved.