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
•  CHART WATCH 
•  CURRENT 'MONTHLY' RECOMMENDATION
•  FUTURES WATCH
•  COMING EVENTS AND DATA RELEASES

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

In my May 22nd newsletter, I mentioned my suspicion that there was a major policy shift about to occur. The fact that the U.S. Dollar had broken out of its three-year downtrend suggested that either some type of policy change was around the corner or we were looking at a long overdue market correction of the U.S. Dollar.
In fact, there is a policy change occurring - not in the U.S., but with the EU. The French have rejected the EU constitution - and so have the Dutch. Italy is threatening to pull out of their previous vote to unify Europe. Now what? Is the Euro in trouble?  The answer appears to be yes… unless they pull a rabbit out of their hat. France has an unemployment rate of 10.2%. Germany’s is even higher at 11.6%. This all compares with the data released on Friday that the U.S. unemployment rate fell to 5.1%. What does this mean? In my opinion, Europe must lower their rates to stimulate growth or risk a leadership shake up throughout Europe.
Will investors flock to safe havens such as the U.S. Dollar or the Japanese Yen?  Or will funds convert Euros to physicals like commodities? The U.S. Dollar, like most commodities, is near 20-year lows, offering not only a safe haven but also possible appreciation in value. 
Two weeks ago, I felt it was especially important that traders understand the big picture as it pertains to the Dollar. This week I believe we need to review the U.S. Dollar, as this may be something more than a short correction.
Until the EU stabilizes its internal problems, the U.S. Dollar may be just what the doctor ordered.  
JUNE US DOLLAR (DXM5)
The Dollar has most likely posted a spread double bottom, a low almost equal to the lows posted in 1995 at 80.14.
The daily Dollar chart had a downward trendline that began from highs of 120.94 (3/01/02) through highs of 90.95 (9/08/04) and was penetrated on 4/04/05 at 84.75.
After the initial penetration at 84.75, the Dollar traded to 85.14 before falling to retest the apparent major breakout. The subsequent price decline sent prices down to 83.31 (last week there was a typo of 88.31) on 4/22/05.
The Dollar needed a close above 85.14 to confirm a bottom for the Dollar.
The confirmation of a breakout occurred on 5/12/05 when the Dollar posted a close above 85.14.
The weekly and monthly charts also supported the daily charts.
The futures and cash Dollar have several unfilled price gaps above the current market price.
The most recent unfilled price gap for both is at 95.13.
WHAT DOES THE CASH DOLLAR CHART SHOW?
Two weeks ago I explained that I watch the cash Dollar because the price movement is fluid.
The cash Dollar chart and the futures Dollar chart broke out on the upside of its major downward trendline.
The cash Dollar had developed a bullish ‘cup’ with a ‘handle’ formation.
The cup formation started with the first high the cash Dollar posted at 85.39 following the initial breakout.
After posting highs of 85.39, the cash Dollars price fell to 81.28 before finding major support at 81.28.
From 81.28 lows, the cash Dollar again advanced with a second assault on the 85.39 highs - only reaching 85.32 highs.
The Dollar price from 85.39 highs to 81.28 lows back to 85.32 highs formed the ‘cup.’
The most important feature of this cup formation is the ‘handle’ - because when the breakout occurs above the cup, a major move is imminent.
The ‘handle’ was formed from 85.32 highs to 83.36 lows.
On 5/12/05 the cash Dollar advanced, breaching the cups highs of 85.39.
Once the cash Dollar posted a close above 85.39 highs, the buy signal was given.
WHAT IS THE TRADING OBJECTIVE FOR THE U.S. DOLLAR?
Our short-term objective of 87.21 was met on 5/31/05.
Our intermediate objective is still 89.60.
Our long-term objective will be 90.46.
If the U.S. Dollar posts a close above 1994 high’s of 92.29, that would suggest a runaway market.
Our next objective - if this should occur - would be the unfilled price gap at 95.13.
WHAT WERE /ARE TRADERS ADVISED TO DO?
Traders were and are still advised to not trade the Dollar because of low volume. However, they are advised to establish various positions based on the Dollar’s direction and influence.
Positions established should be products that move directly opposite the Dollar - such as the Euro currency (FX) and the Swiss Franc.
Other currencies not affected by the EU need watching because they are not involved directly with the current fiasco in Europe.
The Japanese Yen, British Pound and the Canadian Dollar are prone over the years to move either with the Dollar or against the Dollar. We will learn more over the next several weeks the effect a strong Dollar vs. a weak Euro will have on those currencies.
Commodity products that usually react opposite the U.S. Dollar are showing price appreciation, which embraces my assumption that a flight to physicals may be occurring.
Examples are:
Silver posted an intra-month buy signal at 740.00 on 5/31/05.
Crude oil developed a bullish ’falling wedge’, which broke out at 49.05 on 5/24/05.
Gold developed a bullish ’falling wedge’, which broke out at 420.40 on 6/02/05.    
Coffee has a pending monthly recommendation for June.
Sugar posted a weekly buy signal at 8.51 on 5/18/05 and a monthly buy signal at 8.82 on Friday.
These examples are just a few of many.
Traders are advised to not blindly trade the daily recommendations sent each market evening - but to concentrate on the chart formations that appear to be developing.
Rely more on weekly, monthly recommendations and developing formations.
Reoccurring formations that are currently featured are “falling wedges”, “cup and handles”, “flags” and “W” formations.
If you are unfamiliar with these formations or have trouble visualizing the formation on charts, please contact us or purchase John J. Murphy’s book “Technical Analysis of the Futures Markets” for examples.
Remember… reading a chart is an art and an ever changing art form. You must accept losses when wrong, flow with the markets, and always use risk management….
----------------------------------------------------
JULY SUGAR (SB5N)
July Sugar has been in a multi-year price advance, which began from lows of 6.11 (2/13/04) to recent highs of 9.40 (3/14/05).
Recently, Sugar had been in a 4-week price decline, which began from highs of 9.40 to lows of 8.13 (4/15/05).
Currently Sugar has traded from its lows of 8.13 to highs of 8.92
Sugar closed Friday at 8.88, which is above its 100-day moving average of 8.86 and its 200-day moving average of 8.77.
Sugar has four unfilled price gaps below the current market price. The most recent price gap is between 8.68 and 8.70.
Sugar has seven unfilled price gaps above the current market price. The most recent price gap is between 9.10 and 9.19.
For June, July Sugar has a monthly recommendation: Buy when trades 8.82 - Sell when trades 8.20.
Interesting Sugar facts:
The March of 2006 contract (compared to May 2006 and July 2006 and so on) is converting from ‘Cantango’ to ‘Backwardation.’
The definition of ‘Cantango’ is a condition in which distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity.
The definition of ‘Backwardation’ is a market condition in which a futures price is lower in the distant delivery months than in the near delivery months.
WHY IS THIS FACT IMPORTANT?
Generally when this condition arises - where spot futures prices overtake the distant delivery price, the market is bullish. The emphasis or need for the physical is so great that it outpaces the cost of storage, insurance and transportation.
  
Why might this be occurring?
1) Ethanol demand is up 123% from last year.
2) Ethanol is produced from Sugar. Brazil is the leading grower of Sugar. Thailand is the largest refiner of Sugar. India is the largest user of Sugar.
3) 60% of all cars made in Brazil run on ethanol.
4) Crude oil prices are above $50.00 a barrel.
5) President Bush has made it clear he wants a comprehensive energy policy.
6) President Bush has now made it his personal project to pass CAFTA with South America.
7) Recently the EU was admonished by the WTO for subsidizing Sugar. 
8) Sugar is cheap. For example:
If Sugar is at 8.88-cents per pound and each future contract represents 112,000 pounds, that means to purchase outright - in cash, a single contract would be $9,945.60.
If sugar went to zero you would lose $9,945.60 per contract.
Is there any other product on the futures board that can compare? 
WHAT DO THE CHARTS LOOK LIKE?
On 5/18/05, Sugar posted a weekly buy signal at 8.51.
On 6/03/05, Sugar posted a monthly buy signal at 8.82.
The daily Sugar chart appears to be developing a bullish “W” formation or a one-two-three bottom.
The left side of the “W” formation began from highs of 9.40 to lows of 8.13.
The middle of the “W’ was formed between 8.13 lows to 8.70 highs to 8.21 lows.
The right side of the “W” was established from lows of 8.21 to current highs of 8.92.
The all-important middle of the “W” is at 8.70. 
Let’s discuss the long-term weekly chart and monthly chart.
The long-term weekly Sugar chart has the same formation as the daily chart, which is a bullish “W” formation.
There is a major difference between the two - which happens to be that the long-term weekly Sugar chart broke out of its downward trendline on 9/03/04.
The downward long-term trendline began from highs of 15.83 (1/06/95) through highs of 11.40 (10/20/00) and was breached at 8.40 (9/03/04).  
Once Sugar posted a close above 8.40, it traded to highs of 9.48 (2/04/05) before pulling back to retest the 8.40 breakout.
On 4/15/05, Sugar retested the downward trendline which had sloped down to 8.02.
When Sugar touched the trendline at 8.02, buyers stepped in to support prices.
The left side of the “W” on the long-term weekly Sugar chart began from highs of 11.40 to lows of 4.82.
The middle of the “W’ was formed between 4.82 lows to 8.85 highs to 5.54 lows.
The right side of the “W” was established from lows of 5.54 to current highs of 9.48.
The all-important middle of the “W” is at 8.85. 
Let’s discuss the long-term monthly Sugar chart.
The monthly chart has not only one but also possibly two “W” formations developing.
The first and closest “W” developed similar to the daily and long-term weekly.
The left side of the “W” on the long-term monthly Sugar chart began from highs of 11.40 to lows of 4.82.
The middle of the “W’ was formed between 4.82 lows to 8.85 highs to 5.54 lows.
The right side of the “W” was established from lows of 5.54 to current highs of 9.33.
The all-important middle of the “W” is at 8.85.
The second possible bullish “W” is even more intriguing than the others are.
The left side of the “W” on the long-term monthly Sugar chart began from highs of 15.83 to lows of 3.93.
The middle of the “W’ was formed between 3.93 lows to 11.40 highs to 4.82 lows.
The right side of the “W” was established from lows of 4.82 to current highs of 9.33.
The all-important middle of the “W” is at 11.40.
What would all of this mean if Sugar did begin a major price advance?
First, Sugar must maintain a foothold above the middle of the correlating W‘s, which is a 8.85.
If this were to occur, our short-term projection from the immediate “W “would be simple.
Let’s do the math.
The lowest point of the daily and weekly “W” is at 4.82.
The middle of the “W” is at 8.85.
8.85 - 4.82 = 4.03
4.03 + 8.85 = 12.88
Our first objective will be 12.88.
Now, for the more interesting aspect of the second potential W formation….
The middle of the “W” is at 11.40.
11.40 - 3.93 = 7.47
7.47 + 11.40 = 18.87
Our second long-term objective will be 18.87.
 
Last week's high was 8.92.
Last week's low was 8.59.
Last month's high was 8.81.
Last month's low was 8.21.
WHAT WERE TRADERS ADVISED TO DO TWO WEEKS AGO AND LAST WEEK?
On 5/18/05, traders were advised to establish a long position at the weekly buy signal of 8.51, placing stops below 8.13.
Conservative traders were advised to purchase multiple March 1200 calls, risking 100% of purchase price.
On 6/3/05, traders were advised to either add to their existing long position or establish a long position at the monthly buy signal of 8.82, placing stops at 8.20.
Conservative traders were advised to either add to their existing March 1200 calls or purchase multiple March 1200 calls, risking 100% of purchase price. 
WHY WERE OPTION TRADERS ADVISED TO PURCHASE FAR OUT CALLS?
Readers of my newsletter know that I prefer futures to options and that if options are suggested - they are generally just out of the money.
In this particular case, I am advising traders to purchase calls for approx. $89.60 plus commissions and fees because of the impending bullish factors I have listed.
I priced out the March of 2006 calls because of price and time. Each of the past Sugar rallies was in play for a minimum of a year.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Traders who established a long position at 8.51 are advised to move their stops to 8.20.
Traders who either added to their existing long position or established a long position at 8.82 are advised to move their stops to 8.20.
If Sugar were first to pull back in price to the monthly buy signal at 8.82, traders are advised to either add to their existing long position or establish a long position, placing stops at 8.20.
If Sugar posts a higher high than last week’s high of 8.92, traders are advised to either add to their existing long position or establish a long position, placing stops for this position only below 8.70.
If Sugar posts a close above 8.98, traders are advised to either add to their existing long position or establish a long position, placing stops for this position only below 8.82.
Our first objective will be to fill the recent unfilled price gap between 9.10 and 9.19.
If Sugar posts a close above 9.19, traders should prepare for an assault on contract highs of 9.40.
If Sugar posts a close above 9.40, traders are advised to either add to their existing long position or establish a long position, placing all stops below 8.82.
On the flipside…
If Sugar were to reverse and post a monthly close at or below 8.20, traders are to sit on the sidelines and wait for another trading opportunity.

DAILY CHART:
http://bohl.minot.com/d_Chart.cgi?SB5N
------------
WEEKLY CHART:
http://bohl.minot.com/w_Chart.cgi?SB

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.'

- There is no Chart Watch this week.

CURRENT 'MONTHLY' RECOMMENDATIONS
FOR JUNE:

- DOW JONES (DJ5U)
- SUGAR (SB5N)
- COFFEE (KC5N)

FUTURE WATCH

Future watch will list developing 'monthly' recommendations to watch in June for July. 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 June 30 and sent via email for July.
 
- CORN
- WHEAT
- SOYBEAN OIL
- GOLD
- ORANGE JUICE
- COFFEE
- FEEDER CATTLE
- CANADIAN DOLLAR

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

====================================

* 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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Mailto:research@cleartrade.com 
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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 newsletter are in no way affiliated with ClearTrade, Inc. Likewise, sites linked through ClearTrade's 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.

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.

REPRODUCTION OR REBROADCAST OF ANY PORTION OF THIS INFORMATION IS STRICTLY PROHIBITED WITHOUT THE WRITTEN PERMISSION OF CLEARTRADE, INC.

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

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