WELCOME TO THE JOSS REPORT - WEEKLY TRADE ADVISOR

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The Joss Report trading recommendations and weekly trade advisor was first published in October 1998. Since that time, the Joss Report research has continued to evolve into an important source of technical insight for many traders. Our goal is to provide traders with a 'trading plan' to prepare for the trading day and week ahead.
ClearTrade's own technical analyst, Scott Joss*, is a veteran futures trader with twenty-eight years experience on and off the trading floor - as a technical analyst, pit trader, account executive handling arbitrage for Smith Barney, former member of the CBOT, non-member CTA 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.
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The Joss Report Archived Weekly Trade Advisor 2005 

• TECH TALK - COTTON
• CHART WATCH - NOTES - EURO - CRUDE - SOYBEANS - LUMBER
•  CURRENT 'MONTHLY' RECOMMENDATIONS 
•  FUTURES WATCH
• COMING EVENTS AND DATA RELEASES

TECH TALK by Scott R. Joss (Non member C.T.A)* 

I would like to end this year's Weekly Trade Advisor with thoughts of what might influence Grains, Sugar, Cotton and other commodity products in 2006.

In the Weekly Trade Advisor dated 10/09/05, I expressed a view that some traders considered implausible: that Cotton and Grain prices were at possible historic lows.

The technical picture for the Ag products in general has been bleak since the monthly sell signals that were generated on 8/05/05. The Cotton chart has been similarly bleak since generating the 'inta-monthly' sell signal at 54.59 on 10/27/05.

As a technician, it's important to not only focus on the present -  but what might be developing in the future.

I have been writing on Sugar for the last twenty-eight weeks -  stressing to traders that the Sugar ‘trading modules’ I develop were long-term trades that may span a year or more to achieve.

Next year, I believe the same will hold true for all Ag products and Cotton.

Why might commodities enter a super price trend that may accelerate beyond trader's imaginations?

Let's go back to the basics of supply and demand.

- Low prices drives demand up - High prices drives demand down.

- Low supplies drive prices higher - High supplies drive prices down.

For 20 years this cycle has driven Ag prices through an almost predictable price pattern.

The exception to the rule has been weather.

Each year traders wonder if weather will affect the crop yields.

This past year, several products - such as Orange Juice, Crude Oil and Sugar - have been affected not only by weather but by policy changes.

However, through all the cycles - including weather, generally commodity prices will eventually seek price discovery.

As I explained in several past Weekly Trade Advisors, the only way to break the cyclical price balance permanently is POLICY CHANGE, such as Sugar.

For several months, I have discussed with ClearTrade clients and readers of the Joss Report that a possible policy change may take place in 2006 that might affect commodity prices in the future.  

This past week, beginning December 13th through December 18th, the all-important Doha Round talks took place in Hong Kong.

In case readers are unfamiliar with these talks, Ministers from 149 members of the WTO (World Trade Organization) met to discuss the all-important farm subsidy cuts.  

Talks had failed in past WTO meetings in both 2001 and 2003.

Until Sunday, the global trade treaty looked bleak in regards to farm subsidies cuts ever being enacted. However, at the last possible moment, a limited trade agreement was passed and a date of April 30, 2006 was set to finalize the road to global free trade.

What has been agreed to is a deadline for all farm subsidy cuts to be enforced by 2013.

What has not been agreed to is the text version of how this would be accomplished.

There was a victory this weekend for subsidy cuts in Cotton when the U.S. agreed, pending congressional approval, to cut Cotton subsidies by the end of 2006.

If the April meeting is successful, it will make NAFTA and CAFTA look insignificant.

I explained in the 10/09/05 Weekly Trade Advisor how farm subsidy cuts will affect commodity prices:

The WTO has been pushing for years to reduce - and finally cut subsides on all Ag products. Inexperienced traders and brokers (some quoted in reputable industry news) do not understand the affects future policy changes will have on commodities. Some traders think if we cut subsidies, prices will drop… but cutting subsidies has just the opposite effect.

Subsidies encourage excess production and suppress prices. Just imagine that YOU were being paid to grow a product - whether it was profitable or not. During good years, weather or crop rotation may allow you to make a nice living, and some years not. However, during those ‘not so good’ years you were getting paid a subsidy by the government to exist. Wouldn’t you ‘risk’ trying your hand at the weather roulette wheel the next year?

Cutting subsidies encourages producers to either become more efficient - or get out of the business. Fewer producers….less product ….higher prices.   

----------------------------------------------------

MARCH COTTON (CT6H)

This week I will begin developing several 'trading modules' for March Cotton because of a weekly buy recommendation and a daily buy recommendation last week.

The weekly recommendation: buy when trades 53.26 - sell when trades 51.94.

On 12/12/05, March Cotton posted a weekly buy signal at 53.26.

The daily recommendation for Friday: buy when trades 53.36 - sell when trades 52.89.  

On 12/16/05, March Cotton posted an 'intra-day' buy signal at 53.36.

For the last several weeks I've mentioned that the WTO would try to tackle cutting Cotton subsidies first and then work toward all farm subsidy cuts.

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated that the net change in open interest last week increased by 2,628, posting a total open interest of 100,063 contracts.

WHAT DOES THE COTTON CHART LOOK LIKE?

Cotton has been in a multi-year price decline that began from highs of 84.80 (10/31/03) to lows of 41.72 (12/31/04).

The long-term weekly Cotton chart had developed a bearish 'V' top formation.

The 'V' top downward trendline began from highs of 84.80 through highs of 73.91 (3/05/04) and 46.95 (2/18/05).

On 2/25/05, the weekly long-term 'V' top trendline was penetrated at 47.00.

The daily March Cotton chart had also developed a bearish 'V' top.

The 'V' top downward trendline began from highs of 59.25 (10/13/05) through highs of 53.50 (11/28/05), highs of 52.59 (12/05/05) and was penetrated on the upside at 52.40.

Confirmation of an upside breakout would occur on a close above 55.40, which was the last major high posted on 11/03/05.

Below are the most recent signals for March Cotton:

On 12/08/05, March Cotton posted a daily buy signal at 52.56.

On 12/12/05, March Cotton posted a weekly buy signal at 53.26.

On 12/16/05, March Cotton posted an 'intra-day' buy signal at 53.36.

March Cotton has two unfilled price gaps above the current market price. The first unfilled price gap above the current market price is between 56.00 and 56.30. The second unfilled price gap above the current market price is between 57.45 and 57.50.

March Cotton has no unfilled price gaps below the current market price. 

Cotton is a very volatile product and is not for the inexperienced trader.

Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.

The proposed Cotton weekly recommendation risk was and is $660, which means traders should have an account size of $6,600 per contract.

If you do not fit this profile, traders are advised to consult their account executives for an option trading strategy.

WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?

If March Cotton can post a monthly close above 55.40, this would constitute a trend reversal.

Aggressive traders who established a long position in March Cotton at 53.26 are advised to leave stops below 51.94*.

Option traders who purchased March 54 calls are advised to continue to risk 70% of purchase price.

Aggressive traders who either added to their existing long position or established a long position on the  'intra-day' buy signal at 53.36 are advised to leave stops at 51.94*.

Below are possible ‘trading modules’ for futures traders to consider next week:

# 1) If March Cotton first posts a higher high than last week's high of 53.75:

Aggressive futures traders are advised to either add to their existing long position or establish a long position, placing stops for this position at 51.94*.

Option traders are advised to either purchase March 54 calls or March 55 calls, risking 70% of purchase price**.

Our objective will be a challenge of 54.60 (11/14/05).

# 2) If March Cotton posts multiple closes and a monthly close above above 55.40:

Aggressive futures traders are advised to either add to their existing long position or establish a long position, placing all stops below 52.50*.

Option traders are advised to purchase either March 56 calls or March 57 calls, risking 70% of purchase price**.

Our next objective will be the unfilled price gap above the current market price between 56.00 and 56.30.

# 3) If March Cotton posts multiple closes above 57.20:

Aggressive futures traders are advised to either add to their existing long position or establish a long position, placing all stops below 53.30*.

Option traders are advised to purchase either March 58 or March 59 calls, risking 70% of purchase price**.

Our next objective will be a challenge of old highs of 59.25 (10/13/05).

# 4) If March Cotton posts multiple closes above 59.25:

Aggressive futures traders are advised to not add to their existing long position or establish a long position; traders are advised to let the market do the work for them. However, traders are advised to move all stops below 55.40*.

Option traders are advised to not purchase March calls; traders are advised to let the market do the work for them, risking 50% of market value.

Our next objective will be 60.30.

# 5) If March Cotton first posts a price pull back to support at 52.50:

Aggressive futures traders are advised to either add to their existing long position or establish a long position, placing stops for this position below 51.94*.

Option traders are advised to purchase March 54 calls, risking 50% of purchase price**.

Below are possible reversal ‘trading modules’ to consider next week:

# 6) If March Cotton first posts a lower low than last week's low of 52.50 yet reverses, posting a higher high than last week’s high of 53.75:

Aggressive futures traders are advised to place resting buy stop orders at 53.75.

If the resting buy stop order at 53.75 is activated, aggressive traders will have either added to their existing long position or established a long position.

If 53.75 is posted, aggressive traders are advised to place stops for this position at 51.94*.

Options traders are advised to prepare to purchase March 54 calls.

If 534.30 is posted, option traders are advised to purchase March 54 calls, risking 70% of purchase price**.

# 7) If March Cotton first posts a higher high than last week's high of 53.75 yet reverses, posting a lower low than last month’s low of 51.94:

Aggressive futures traders will have exited their existing long positions and are advised to wait for another trading opportunity .

Options traders are to prepare to exit their March 54 calls**.

If March Cotton posts a close below 51.94, option traders are advised to exit their March 54 calls and are advised to wait for another trading opportunity.

I have compiled some Cotton option facts:

Cotton options for a two-year ‘implied volatility’ average are ranked number 39 out of 45.

39) Cotton (CT) High 47.91% - Low 22.57% - Current 23.11%.

Cotton options for a one-year ‘implied volatility’ average are ranked number 39 out of 45.

39) Cotton (CT) High 38.90% - Low 22.57% - Current 23.11%.

Cotton options for a six-month ‘implied volatility’ average are ranked number 37 out of 45.

37) Cotton (CT) High 38.90% - Low 22.57% - Current 23.11%.

Options are cheap.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?CT06H
-----------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?CT

* (Futures traders and their account executives are advised to discuss this suggested stop).

** (Option traders and their account executives are advised to discuss the suggested risk).

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.'

MARCH SOYBEANS (S6H)

March Soybeans are developing a possible monthly recommendation for January.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?S06H
-----------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?S

---------------------------

MARCH TEN-YEAR NOTE (TY6H)

March Ten-year Notes are developing a possible monthly recommendation for January.
 
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?TY06H
-----------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?TY

---------------------------

MARCH CRUDE OIL (CL6H)

March Crude Oil is developing a possible monthly recommendation for January.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?CL06H
-----------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?CL

---------------------------

MARCH EURO-CURRENCY (EC6H)

The March Euro-currency is developing a possible monthly recommendation for January.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?EC06H
-----------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?EC

---------------------------

MARCH LUMBER (LB6H)

The March Lumber is developing a possible bullish 'W' formation and a monthly recommendation for January.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?LB06H   
 

CURRENT 'MONTHLY' RECOMMENDATIONS
FOR DECEMBER:

 - FEBRUARY LEAN HOGS LH6G)

- FEBRUARY PORK BELLIES (PB6G)

FUTURE WATCH

Future watch will list developing 'monthly' recommendations to watch in December for January. 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 December 30 and sent via email for January.

- MARCH U.S. 30-YEAR BOND

- MARCH TEN-YEAR NOTE

- MARCH SOYBEANS

- MARCH CRUDE OIL

- MARCH LUMBER

- MARCH EURO-CURRENCY

- MARCH SWISS FRANC

COPYRIGHT WARNING AND NOTICE: It
is a violation of federal copyright law to
reproduce all or any part of this publication or
its contents by email, facsimile, xerography,
scanning or any other means, without
permission.
Copyright 2005, Joss Report - S.R. Joss Inc and ClearTrade®Inc. All rights reserved.
If you are receiving this report from any other source than S.R. Joss Inc or ClearTrade® Inc. please contact us at 800- 493-4444.

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

* The Joss Report trade recommendations and weekly trade advisor is prepared by Scott Joss, Non- Member C.T.A.

Scott Joss is a 'non member' CTA and is providing the Joss Report weekly trading advisor and trade recommendations to ClearTrade® Inc. clients. Scott Joss 'is a principal' of ClearTrade® Inc. and 'is a registered IB member' with the NFA.

ClearTrade® Inc.
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DISCLAIMER:

* COMING EVENTS AND DATA RELEASES:

Calendar provided by Briefing.com, Inc. Data is provided for informational purposes only, and is not intended for trading purposes. Neither ClearTrade, Inc. nor any of its data or content providers (such as Reuters, CSI, and Briefing.com) shall be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

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.

Unless otherwise indicated, the links presented in this publication/newsletter are in no way affiliated with ClearTrade®, Inc. Likewise, sites linked through ClearTrade's Joss Report weekly trade advisor newsletter are not necessarily connected with ClearTrade®, nor do any such links imply an endorsement by either party.

ClearTrade, Inc. does not necessarily promote or endorse the services or publications described herein. Unless otherwise indicated, ClearTrade Inc. has had no role in the production or review of these products or services and makes no warranty, either expressed or implied, as to their contents, accuracy or 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.

REPRODUCTION OR REBROADCAST OF ANY PORTION OF THIS INFORMATION IS STRICTLY PROHIBITED WITHOUT THE WRITTEN PERMISSION OF S.R. JOSS INC./CLEARTRADE® INC.

The contents of this newsletter are copyright 1997-2005, Scott R. Joss/S.R. Joss Inc./ClearTrade® Inc. *TM. All Rights Reserved.

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