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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.
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ClearTrade's Archived Newsletters 2005
 

• 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)*

OCTOBER SUGAR (SB5V)
This week will be the biggest challenge Sugar has encountered in three-months.
Can Sugar close next week above 9.99?
Two weeks ago, I explored the concept that Sugar may or may not have extreme price pullbacks despite being over-bought. I believe - not only technically but also fundamentally - that prices are poised to climb higher, unabated - in the long-term. However, 30 to 40 tick pullbacks are not unusual in a bull market.  
Price pullbacks are healthy because they weed out the weak longs, strong longs can take some profits, and bears re-establish short positions. All of these factors rejuvenate the market for the next upward price move.
Last week Sugar challenged the 10.00 level and closed the week above this psychological level.
Floor traders will challenge the validity of this crucial 10.00 level next week.
Last week some technicians were anticipating Monday’s Sugar open because of a possible gap lower in Sugar prices. Many believed that the market was and is overbought and needs to work off excesses in buying.
Well - they were right.  Sugar did gap lower last Monday at by opening at 9.81 - however, funds stepped in and bought with both hands, posting an ‘intra-day’ buy signal at 9.90.
By week’s end, Sugar not only powered through 10.00 - but also ended the week posting an ‘intra-weekly’ buy signal at 10.00.
The new theme next week is coming from the Eliot wave theorists.
They are convinced that last week’s high of 10.35 was the fifth wave of their wave count.
Worry, worry, and worry…… what’s a trader to do?
Not much one can do but buy on price pullbacks.
ED&F Man Sugar, the premier sugar and cocoa dealer/shipper, issued an article in the Dow Jones on 7/01/05.
I quote: “Raw sugar prices will be well-supported in the near-term, while the recent increase in the white sugar market is mostly a summer phenomenon, trade house ED&F Man Sugar said Friday in its monthly report.” 
On 8/01/05, ED&F Man Sugar issued another article in the Dow Jones.
“Reduced sugar stocks in China, India and Middle Eastern countries could increase nearby demand even while futures prices are reaching new highs, trade house ED&F Man Sugar said Friday in its monthly report.”
“Potentially adding to that demand is the uncertainty of high-quality raw sugar availability during the off-season of Brazil’s key-producing center-south region as refineries lock in forward consignments, the report said.”
“Currently holding a near-record speculative long position in the New York raw sugar market, funds are expected to remain tight fisted even if a significant correction occurs as most will still be making money, said ED&F Man Sugar.”
“Funds bought their longs at an average of 9.18-cents a pound basis October, said ED&F Man Sugar.” 
Could it be that ED&F Man Sugar is behind the curve?
Monday my research will begin.
I will be curious which ports of demarcation (countries) ED&F Man Sugar’s behemoth-shipping conglomerate has relationships with. 
From my initial research, they appear to be mostly aligned with London, Europe, Australia, Africa and some presence in South America (losers of the recently passed CAFTA bill and WTO sanction subsidy report). However, I have yet to find a business relationship with neither the two largest sugar-producing countries - Brazil and India - nor the largest sugar refiner, Thailand.
Is Cargill ahead of the curve, thanks to CAFTA?
As I mentioned in the past two issues of my newsletter, Cargill has working relationships with Brazil and most of Central America.
Cargill, I’m sure, is well aware that the U.S. is one of the largest end users of sugar and will possibly be the largest end user of Sugar ethanol in the future (wake up - U.S. car manufactures)!
Do you think Cargill will use ED&F Man Sugar’s shipping to move ethanol and sugar by water - or do you think Cargill has plans to move goods by rail and truck straight up the continent to the U.S.?   
In addition, it has been reported that the Canadian Government, thanks to NAFTA, has bequeathed millions to build ethanol plants.
Will Canada use water or land to move ethanol to the U.S.?
Just thinking ahead…world policy changes do affect company policies.
The ‘Commitment of Traders’ report  - published each Friday -  indicated that the open interest increased by 28,722 contracts - and open interest was at a lofty 452,855 contracts. 
Higher highs with rising open interest equates to higher prices.
Many Eliot wave followers are hoping Thursday’s high of 10.35 was the fifth wave of Sugar’s price advance.
If it isn’t the final leg, then many Eliot followers will find they must have miscounted an A, B, C correction somewhere along the rising flight-path of Sugar.
My belief technically is that sugar prices will go much higher - not only in the short-term but in years to come -  based on two very bullish ’W’ formations. These ’W’ formations have developed on the daily, weekly and monthly charts.  In addition, Sugar in 2004 posted an ‘intra-yearly’ buy signal at 8.85.
WHAT ARE THE TECHNICALS OF SUGAR?
Each week I stress to traders that the Sugar ‘trading module’ I have developed is a long-term trade that may span a year or more to achieve. Because of the possible length of the trade, traders have been advised to establish long positions in March 2006 futures and options.
The positions in the March contract are based originally on daily, weekly, and monthly trade signals from the July contract and now, October trade signals.
October Sugar has been in a multi-year price advance which began from lows of 6.12 (2/13/04) to recent highs of 10.35 (8/04/05).
Sugar closed Friday at 10.09, which is above its 100-day moving average of 9.03 and its 200-day moving average of 8.99.
Take note that the 200-day moving average is trying to cross over the 100-day moving average. If this were to occur, it would officially signal that Sugar is in a bull move.
Several weeks ago, I wrote that Sugar prices were entering backwardation - where front month prices are progressively higher than the back months, which is another indication of a bullish market.
Only two markets on the board are in backwardation…. Copper and Sugar.
Sugar has eight unfilled price gaps above the current market price. The first unfilled price 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 closest price gap is between 9.73 and 9.75.
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 posting a weekly close above past contract highs of 9.45 from 3/17/05.
On 7/13/05, Sugar posted a daily buy signal at 9.55.
On 7/15/05, Sugar posted its second weekly close above the major price breakout of 9.45 from 3/17/05.
On 7/21/05, Sugar posted an ‘intra-day’ buy signal at 9.55.
On 7/22/05, Sugar posted an ‘intra-week’ buy signal at 9.60.
On 7/22/05, Sugar posted its third weekly close above the major price breakout of 9.45 from 3/17/05.
On 7/25/05, Sugar posted a daily buy signal at 9.74.
On 7/29/05, Sugar posted its fourth weekly close above the major price breakout of 9.45 from 3/17/05.
On 8/01/05, Sugar posted an ‘intra-day’ buy signal at 10.00.
On 8/02/05, Sugar posted an ‘intra-week’ buy signal at 10.00.
This is the first weekly close above 10.00.
Multiple weekly closes above 10.00 are needed to confirm a breakout.
Last week's high was 10.35.
Last week's low was 9.75.
Last month's high was 9.99.
Last month's low was 9.10.
WHAT DO THE CHARTS LOOK LIKE?
Let’s review the technical analysis that is driving the Sugar market.
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, which supports the daily and long-term weekly charts, 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 main caveat still stands - that Sugar maintains a foothold above the middle of the first correlating “W,” which is at 8.85.
The second caveat is that Sugar maintains a foothold above the previous contract high of 9.45.
Can Sugar maintain a foothold above 10.00?
Each week I will continue to post Sugar’s 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).
Last week I discussed that Sugar had 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, it would intersect at 9.30.
The upward trendline mentioned above is at a 20% angle and if touched today would now intersect at 9.59.
However, last week I mentioned that another well-defined upward trendline had emerged.
The new trendline is at an approx. angle of 30%.
This new trendline began from lows of 8.77 (6/15/05) through lows of 9.35 (7/21/05) and if touched today would intersect at 9.70.
Minor support is at 9.70.
Major support is at 9.59.
I may be premature, but there may be a new parallel trendline that has developed.
Let’s keep an eye on it - just to be prepared.
This new trendline began from lows of 9.35 (7/21/05) through lows of 9.75 (8/01/05) and if touched today would intersect at 9.98.
The new trendline is at an approx. angle of 35%.
For several weeks, I described some Sugar option facts and will continue to provide updated information:
Last week Sugar options for a two-year ‘implied volatility’ average were ranked number 22 out of 45 - this week 18 out of 45 .
27) Sugar (SB) High 42.12% - Low 18.90% - Current 25.47%
Last week Sugar options for a one-year ‘implied volatility’ average were ranked number 18 out of 45 - this week 6 out of 45
21) Sugar (SB) High 33.54% - Low 18.90% - Current 25.47%
Sugar options for a six-month ‘implied volatility’ average were ranked number 7 out of 45 - this week 4 out of 45 .
17) Sugar (SB) High 27.18% - Low 18.90% - 25.47%
What do these numbers boil down to?
Sugar option volatility is moving higher.
WHAT WERE TRADERS ADVISED TO DO LAST WEEK?
Aggressive traders who either added to their existing long position or established long positions for the last several weeks were advised to move their stops below 9.33.
Options traders who purchased either March 1100 calls or March 1200 calls were advised to continue risking 100% of purchase price.
If Sugar first posted a higher high than last week’s high and last month’s high of 9.99, aggressive traders were advised to either add to their existing long position or establish a long position, placing stops for this position only at 9.75.
If Sugar first posted a lower low than last week’s low of 9.76, aggressive traders were advised to place resting buy stop orders at 10.00.
If this were to occur, traders were advised to place stops for this position only below 9.73.
If Sugar was to first post a lower low than last week’s low of 9.76, aggressive traders were advised to buy against support at 9.57, placing stops below 9.30.
Our next upside objective was 10.66.
WHAT SHOULD TRADERS DO NEXT WEEK?
Aggressive traders who either added to their existing long position or established long positions for the last several weeks below 9.45 are advised to leave their stops below 9.30.
Options traders who purchased either March 1100 calls or March 1200 calls are advised to continue risking 100% of purchase price.
Aggressive traders who either added to their existing long position or established long positions last week on a higher weekly and monthly high of 10.00 are advised to place stops for this position only below 9.70.
If Sugar prices first pullback to support at 9.75, aggressive traders are advised to either add to their existing long position or established a long position, placing stops for this position only below 9.61.
If Sugar first posts a lower low than last week’s low of 9.75, aggressive traders are advised to place a resting stop buy order at 10.36.
If this were to occur, traders are advised to place a stop for this position only below 9.99.
If Sugar first posts a higher weekly high than last week’s high of 10.35, traders are not advised to add to their existing long position.
If this were to occur, traders are advised to let the market do the work for them and are advised to move all stops below 9.61.
If Sugar were to rotate higher, traders will wait for a close above the second “W” at 11.40 before adding to their existing long position or establishing a long position.
If Sugar is quiet next week and trades between lows of 9.75 and highs of 10.35, traders will be notified about a pending weekly recommendation for the following week.
Our next upside objective is 10.66.
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 first posts a close below 9.62, traders are to prepare for an assault on the contract high breakout at 9.45.
If Sugar posts a close below 9.45, traders are to prepare for an assault on the original breakout at 9.30.
If Sugar were to post a weekly close below the original breakout at 9.30, traders are to prepare for an assault of the monthly sell signal at 9.10 and possibly the 100-day and 200-day moving average at 9.03 and 8.99, respectively.
If Sugar were to post a monthly close at or below 9.10, traders are advised 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
----------------------------------------------------
SEPTEMBER US 30-YEAR BOND (US5U)
Several weeks ago, I moved the 30-year Bond to ‘Tech Talk’ because of a possible monthly breakdown from a nine-week trading range between 115-26 and 119-23.
I wrote that until bonds posted a monthly close below 115-26 or a monthly close above 119-23, they appeared to be in congestion.
On 7/29/05, Bonds posted a decisive close below 115-26 - ending the week and month at 115-10.
Bonds have no unfilled price gaps above the current market price.
Bonds have four unfilled price gaps below the current market price. The most recent gap is between 113-26 and 113-29. The second unfilled price gap is between 112-14 and 112-20.
The Bonds 100-day moving average is at 114-31 and the 200-day moving average is at 113-08.
Last week’s high was 115-13.
Last week’s low was 114-01.
Last month’s high was 119-04.
Last month’s low was 114-29.
WHAT DO THE CHARTS LOOK LIKE?
Bonds have a bearish ‘M’ formation or a one-two-three top.
The middle of the ‘M’ is at 115-26.
Last week, the 30-year bond posted a weekly sell signal at 115-00.
Major resistance is at 115-26.
Minor resistance is at 115-00.
The short-term projection from the ‘M’ formation is 112-09.
The long-term projection from the ‘M’ formation is 111-26.
WHAT DOES THE 30-YEAR BONDS YIELD CHART LOOK LIKE?
Each week I keep a watchful eye on the 30-year bond yield chart because of its inverse relationship to the 30-year futures bond chart.
Bond traders are aware that as future prices drop, yields rise - and vice versa.
For the last nine-year’s bond yields have fallen from highs of 7.232 (7/31/96) to recent lows of 4.151 (6/30/05).
This recent low in yields almost matched the lows posted at 4.135 (6/30/03).
Yields appear to have posted a spread ‘double bottom.’
The daily yield chart shows a bullish ‘W’ formation; notice the inverse of the bond futures that have a bearish ‘M’ formation.
The left side of the ‘W’ was developed from a high yield of 4.466 to lows of 4.151.
The middle of the ’W’ was established between low yields of 4.151 and highs of 4.453.
The right side of the ’W’ was developed between low yields of 4.180 and 4.444.
The all-important breakout of the yields was at 4.453 - which is the middle of the ‘W’ formation.
What does all this mean?
Bonds prices are falling and interest rate yields are moving up.
Our first projection on 30-year yields is 4.721.
Our second projection on 30-year yields is 4.755.
Our third challenge will be the most recent high yields of 4.931 from 3/23/05.
WHY IS THIS OCCURING?
The reason for higher yields is difficult to attribute to any one factor.
Let’s list the possible reasons for higher yields and lower Bond prices:
1) Alan Greenspan’s departure from the helm of the Federal Reserve Board is in five months. His departure may erode the confidence of investors worldwide. Bond investors don’t take too kindly when faced with the ‘unknown.’
2) The recent economic indicators- i.e. employment numbers suggest that the U.S. economy is moving forward and may accelerate. I believe that 60% of inflation is due to higher hourly wages and 40% is due to commodity prices. Inflation is a Bond investor’s worst enemy.
3) The Federal Reserve has raised rates consistently over the past months - and it appears that they will continue to do so. Tuesday is the FOMC meeting and a .25% increase is expected … again.
4) Last week the Fed announced the re-issuance of the 30-year bond, which had been suspended several years ago. Bond investors are sensitive to more debt being thrust on the market.
5) Much like his 1998 ‘excess exuberance’ warning - Mr. Greenspan has now issued another warning: ‘the housing market is frothy’. Bond investors are smarter than the average bear and will take heed of this warning.
It appears that the average investor/speculator/developers of homes and commercial construction - domestically and abroad - have pushed real estate prices beyond the limits of any reasonable imagination.
In a possible repeat, just like in the dot.com era, there are groups of inexperienced investors gathering in herds begging for ‘get rich quick’ home-buying seminars.
Farmland last year gained 5% +, Donald Trump is selling homes in Harlem for two-million dollars, and trailer homes built in 1971 are being sold in California for a million dollars - without any ownership of land.
Pundits are saying ‘it’s a new world out there for home prices.’ Sound familiar? I’ve heard that one before  -  let me think…… oh yes -  back in 2000 they said ‘PE ratios aren’t that high.. ‘It’s a new world out there; stay in for the long haul.’ How many of you stayed in for the long haul? Not too many. Now they’ve turned form stocks to real estate.
Readers of my newsletters dating from 1999 through  2001were constantly informed of the bearish monthly ’diamond formation’ that was developing in the S&P 500.
I am now warning readers of a housing downturn - due to higher yield - that will affect mortgages.
It appears that today’s small and large investors are ‘in bed’ with many banks.
In the July 25th issue of Crain’s Chicago Business (page 22), there is an article called ‘Only game in town: Banks bet big on real estate. How long will property values protect lenders? - and I quote, “With business borrowing sluggish and fixed-income investment opportunities unattractive, many mid-size Chicago banks have had little choice but to load up on loans to real estate developers, exposing themselves to a future downturn in property values.”     
Last night I was at a social gathering and the conversation turned to real estate. A top sales executive remarked that he was thinking of switching careers to real estate. I responded by saying that mortgage rates will be moving higher soon and that real estate may not be the most advantageous career move. My remark elicited an audible gasp from other guests who had overheard our exchange. Almost in unison,   the group chanted ‘but real estate price never go down …. They always go up’.
Amazing….
Back to the 30-year Bond.
WHAT WERE TRADERS ADVISED TO DO LAST WEEK?
Last week Bonds had a weekly recommendation: buy when trades 116-14 - sell when trades 115-00.
Aggressive traders who established a short position at or above 115-10 were advised to move stops above 115-26.
Conservative options traders, were advised to hold their December 113 puts or December 112 puts, risking 60% of purchase price or unless Bonds close above 115-26 on a weekly basis.
If the 30-year Bond first rallied to minor resistance at 115-15, aggressive traders were advised to add to their existing short position, placing stops above 115-26.
If the 30-year Bond posted a lower low than last month’s low of 114-29, aggressive traders were advised to either add to their existing short position or establish a short position, placing stops for this position only above 115-15.
If Bonds posted a weekly close below 114-07, aggressive traders were advised to either add to their existing short position or establish a short position, placing all stops above 115-01.
Our first objective would be 113-08.
WHAT SHOULD TRADERS DO NEXT WEEK?
Aggressive traders who established a short position at or above 115-10 are advised to move stops above 115-13, which was last week‘s high.
Conservative options traders who purchased December 113 puts or December 112 puts are advised to continue to hold their options, risking 60% of purchase price or unless Bonds post a weekly close above 115-13.
Aggressive traders who sold against resistance at 115-15 are advised to place their stops above 115-13, which was last week‘s high.
Aggressive traders who sold on a lower low than last month’s low of 114-29 are advised to place stops above 115-13, which was last week‘s high..
Aggressive traders who sold on a weekly close below 114-07 are advised to place stops for this position only above 115-01, which was last week‘s weekly sell signal.
Our first objective will be 113-08.
If Bonds first rally to resistance at 114-29, aggressive traders are advised to either add to their existing short position or establish a short position, placing stops above 115-13.
If Bonds first post a lower low than last week’s low of 114-01, traders are advised to either add to their existing short position or establish a short position, placing stops for this position only above 115-01.
Conservative options traders, are advised to purchase December 113 puts or December 112 puts, risking 60% of purchase price or unless Bonds post a weekly close above 115-01.
If Bonds post a close below 113-01, aggressive traders are advised to either add to their existing short position or establish a short position, placing all stops above 114-07.
Our second objective will be the unfilled price gap between 112-14 and 112-20.
On the flipside….
If Bonds were to close on a weekly basis above 115-26, traders are advised to sit on the sidelines and wait for another 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
----------------------------------------------------
S&P 500 (SP5U)
Four week’s ago I discussed the possibility that the summer rally could be in place. However, the September S&P would need a close at or above 1225.20 by the close of business July 29th.
July 29th the S&P closed the month at 1239.10, which indicated the summer rally should continue.
However, as I said last week, I am not convinced that the S&P is safe right now because many indicators are showing divergences that are inconsistent with the new highs that were posted two weeks ago at 1248.00 and last week‘s high of 1248.40.
Traders need to remain cautious and on high alert for a possible price failure.
The September S&P has been in a four-week price advance that began from lows of 1186.50 (7/07/05) to highs of 1248.40 (8/03/05).
The S&P has three unfilled price gaps above the current market price. The most recent is between 1235.90 and 1236.70. The second unfilled price gap is between 1249.30 and 1250.80.
The S&P has 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.
On 7/12/05, the S&P posted an ‘intra-month’ buy signal at 1225.20.
On 7/20/05, the S&P posted an ’intra-day’ buy signal at 1233.90.
On 7/25/05, the S&P posted a ‘daily’ buy signal at 1238.10.
On 7/27/05, the S&P posted a ‘daily’ buy signal at 1237.60.
On 8/05/05, the S&P posted a ‘weekly’ sell signal at 1230.80.
 
Last week’s high was 1248.40.
Last week’s low was 1227.50.
Last month’s high was 1248.00.
Last month’s low was 1186.50.
WHAT DO THE CHARTS LOOK LIKE?
As long as the S&P 500 maintains a foothold above the highs of 1993 - which was 1111.50, the S&P is in an up-trend.
Major support for the S&P is at the current ‘intra-week’ buy signal of 1208.60.
Minor support for the S&P is at the current ‘intra-month’ buy signal of 1225.20.
As I previously mentioned, many technical indicators have divergences with the contract highs posted at 1248.40 last week and 1248.00 the previous week. This disturbs me.
On Friday, the S&P posted a weekly sell signal at 1230.80.
Adding some significance to this weekly sell signal at 1230.80 is the fact that it was posted after establishing new contract highs at 1248.40.
This could be a precursor to a trend change and a price failure in the weeks and months ahead.
One indicator that stands out like a sore thumb is the VIX index.
I’ve taken excerpts from Investopedia.com to explain what the meaning and function is of the VIX.
The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index and represents the implied volatility on the S&P 100 (OEX) option. This volatility is meant to be forward looking and is calculated from both calls and puts that are near-the-money. The VIX is a popular and widely used measure of market risk.
Introduced by the CBOE in 1993, VIX is a weighted measure of the volatility for eight OEX put and call options. The eight puts and calls are weighted according to the time remaining and the degree to which they are in- or out-of-the-money. The result forms a composite hypothetical option that is at-the-money and has 30 days to expiration. VIX represents the implied volatility for this hypothetical at-the-money OEX option. Typically, VIX has an inverse relationship to the market, which means that a rising stock market is viewed as less risky and a declining stock market more risky. The higher the perceived risk is in stocks, the higher the implied volatility and the more expensive the associated options, especially puts. Hence, implied volatility is not about the size of the price swings, but rather the implied risk associated with the stock market. When the market declines, the demand for puts usually increases. Increased demand means higher put prices and higher implied volatilities.
To read more about the VIX index.  
During periods of market turmoil, the VIX spikes higher, largely reflecting the panic demand for OEX puts as a hedge against further declines in stock portfolios. During bullish periods, there is less fear and therefore less need for portfolio managers to purchase puts.
The VIX has been in an approx. two-year downturn, beginning from highs of 23.26 (9/30/03) to recent lows of 9.88 (7/20/05).
Currently, the VIX has moved to highs of 12.92, which have not been visited since 7/07/05.
The Stock Market was trading between 10,175 and 10,310 and the S&P was trading at 1186.50 and 1203.20.
Notice that these were the lows before the markets moved to recent contract highs.
Worried? ….. I am.
WHY IS THERE AN INCREASED FEAR DEVELOPING IN THE STOCK MARKET?
Quite possibly the same reasons that I previously listed for the 30-year Bond, with the caveat that Bond investors and Stock Market investors are in direct competition for yields and dividends.
Investors may be reluctant to believe that the Stock Market can compete with a 5% plus yield from a 30-year Bond - which is backed and guaranteed by the full faith of the U.S. government.   
Many funds must believe that the current earnings for the third quarter may not be repeated by the fourth quarter.
Funds must decide if the Stock Market can beat a 5% guaranteed yield by remaining in the market.
Fear and indecision is setting in.
Fund managers usually get a year-end bonus or a percent of profits and/or management fee for year-end performance. Would you take a risk that the Stock Market will move 5% higher or 530 points higher by the year end?
Smart fund managers are employing risk management.    
WHAT WERE TRADERS ADVISED TO DO LAST WEEK?
Traders that established a long position in the S&P over the last several weeks below 1225.20 were advised to either leave their stops below 1225.20 or liquidate their long positions.
If the S&P first posted a higher high than the previous week’s high and the previous month’s high of 1248.00, traders were advised not to add to their existing long position or establish a long position. However, traders were advised to move all stops to 1230.70.
All traders should have liquidated their long positions early Monday or were stopped out at 1230.70 on Friday.
Aggressive traders were advised to establish a short position at 1230.70, placing stops above 1248.40.
Conservative traders were advised to establish a short position in the Emini S&P at 1231.00.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
If first the S&P were to rally to fill the gap between 1235.90 and 1236.70, traders are advised to either add to their existing short position or establish a short position, placing stops above 1248.40.
If the S&P were to first rally to resistance at 1230.70 yet reverse posting a lower low than last week‘s low of 1227.50, aggressive traders are advised to wait for the S&P to post a close below 1225.20 to either add to their existing short position or establish a short position, placing stops above 1236.70.
If the S&P posts a close below 1224.00, traders are to prepare for a possible price failure.
If the S&P posts a close below 1216.70, traders are advised to either add to their existing short position or establish a short position, placing stops for this position only above 1227.50.
If the S&P posts a close below 1208.50, traders are advised to either add to their existing short position or establish a short position and prepare for an all out attack on the 1200.70 support level.
If this were to occur, traders are advised to move all stops above 1218.10.
If the S&P were to post a monthly close below 1186.50, traders are advised to either add to their existing short position or establish a short position, placing all stops above 1200.70.
Our objective will be the unfilled price gap below the current market price between 1180.50 and 1184.50.
On the flipside…
If the S&P were to first post a lower low than last week’s low of 1227.50 yet reverse and post a higher high than last week’s high of 1248.40, traders are advised to sit on the sidelines and wait for another trading opportunity.
DAILY CHART:
http://bohl.minot.com/d_Chart.cgi?SP05U
------------
WEEKLY CHART:
http://bohl.minot.com/w_Chart.cgi?SP
----------------------------------------------------
- DECEMBER SOYBEAN OIL (BO5Z)
- NOVEMBER SOYBEANS (S5X)
- DECEMBER WHEAT (W5Z)
- DECEMBER SOYBEAN MEAL (SM5Z)
Last week, all of the products listed above had and still have monthly recommendations and in addition, Soybeans, Soybean Meal and Soybean oil had weekly recommendations.
Last week I decided that because all four products were intertwined and influenced each other, I would design a ‘trading module’ for Soybeans - the king of the group. 
NOVEMBER SOYBEANS (S5X)
November Soybeans had been in an eighteen-week price advance from lows of 519.50 (2/09/05) to highs of 770.00 (6/22/05).
Recently, Soybeans had been in a volatile trading range between 751.00 highs and 666.00 lows.
I will remind traders as I did in Coffee last week; this product is extremely volatile and should only be traded by aggressive traders. This is not for the inexperienced trader or the faint of heart.
Clients should be cautioned that they must have an equity to risk ratio of no more than 9% to trade this product.
That means if the risk in Beans is $4,275 - you must have an account size of $39,000 per contract.
If you do not fit this profile, consult your account executive and consider an options strategy.
 
Soybeans need to have multiple closes either above 751.00 or below 666.00 to break out of the current trading range. Until that occurred, Soybeans would continue in a volatile trading range.
Confirmation of a breakout on the upside would be a close above 770.00.
Confirmation of a breakout on the downside would be a close below 660.50.
Soybean’s 100-day moving average is at 659.75 and 200-day moving average is at 612.00.
Soybeans have four unfilled price gaps below the current market price. The most recent is between 646.50 and 649.00.
Soybeans have one unfilled price gap above the current market price between 677.50 and 679.00.
Soybeans had and still have a monthly recommendation for August: buy when trades 751.25 - sell when trades 665.75.
The monthly recommendation is not completed until the close of business August 31st.
If Beans close at or above 711.25 on the close of business August 31st, Beans will have posted a monthly buy signal.
If Beans close at or below 669.75 on the close of business August 31st, Beans will have posted a monthly sell signal.
On 8/05/05, Beans posted a weekly sell signal at 669.75.
On 8/05/05, Beans posted an unconfirmed monthly sell signal at 665.75.
On August 12th the all-important monthly USDA Crop Production Report, Supply and Demand figures will be released  - and the last trading day for August Beans .
 
Last week’s high was 709.00.
Last week’s low was 649.00.
Last month’s high was 751.00.
Last month’s low was 666.00.
WHAT WERE TRADERS ADVISED TO DO LAST WEEK?
Soybeans had a weekly recommendation last week: buy when trades 711.25 - sell when trades 669.75.
If November Soybeans first post a weekly sell signal at 669.75, aggressive traders were advised to establish a short position, placing a stop and reverse resting order at 711.25.
If this was to occur and the stop reverse was activated, traders would effectively be long and were advised to place their stops below 700.00.
If Soybeans posted a monthly sell signal at 665.75, aggressive traders were advised to either add to their existing short position or establish a short position, placing a stop and reverse resting order at 711.25.
Conservative traders were advised to purchase November 640 puts, risking 70% of purchased value.
If this was to occur and the stop was activated, traders would effectively be long and were advised to place their stops below 700.00.
If Soybeans posted a close below 660.50, traders were to prepare for an all out assault on the 100-day moving average at 657.25 and possibly the unfilled price gap between 646.50 and 651.00.
If this were to occur, aggressive traders are advised to move all stops above 669.75
Our first objective was to fill the price gap between 646.50 and 651.00.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
As previously mentioned, Beans posted a weekly sell signal at 669.75 and an unconfirmed monthly sell signal at 665.75.
Traders are advised to use caution because of Friday‘s closing price.
Bean prices posted lows of 649.00 early in the session but by the close had recaptured two-thirds of their losses and settled at 669.00 - which were just below the weekly sell signal of 669.75.
Technically, this may be considered an exhaustion tail and may turn prices higher.  
Aggressive traders who established a short position at the weekly sell signal of 669.75 are advised to leave their stops above 711.25.
Aggressive traders who either added to their existing short position or established a short position at the unconfirmed monthly sell signal of 665.75 are advised to move their stops for this position only above 687.50.
If Beans post a close below 665.75, aggressive traders are advised to either add to their existing short position or establish a short position, placing all stops above 687.50.
Conservative traders are advised to purchase November 620 puts, risking 70% of purchased value.
If Soybeans post a close below 660.50, traders are to prepare for an all out assault on the 100-day moving average at 659.25 and possibly the unfilled price gap between 646.50 and 649.00.
If Beans post a close below 646.50, aggressive traders are advised to either add to their existing short position or establish a short position, placing all stops above 666.00.
If Soybeans post a weekly close below 634.75, aggressive traders are advised to either add to their existing short position or establish a short position, placing all stops above 651.00.
Our second objective will be the second unfilled price gap between 618.00 and 621.00.
Our long-term objective will be 581.00
On the flip side…
If Soybeans post a weekly close above 711.25, aggressive traders are advised to establish a long position, placing stops below 666.00.
Conservative traders are advised to purchase November 780 calls, risking 70% of purchased value.
If Soybeans were to post a close above 719.00, aggressive traders are advised to either add to their existing long position or establish a long position, placing a stop for this position only below 711.25.
If Soybeans were to post a close above 735.50, aggressive traders are advised to either add to their existing long position or establish a long position, placing a stop for this position only below 719.00.
If Soybeans were to post a close above 741.00, traders are to prepare for an assault on the monthly buy signal at 751.25.
Traders are advised if this were to occur to move all stops below 719.00.
If Soybeans post an ‘intra-monthly’ buy signal at 751.25, traders are advised to either add to their existing long position or establish a long position, placing all stops below 735.50.
Conservative traders are advised to purchase November 800 calls, risking 70% of purchased value.
If Soybeans post new contract highs and close above contract highs at 770.00, traders are advised to either add to their existing long position or establish a long position, placing all stops below 751.25.
Our first objective will be 810.00.
Remember the monthly buy signal of 751.25 or the monthly sell signal of 665.75 will not be confirmed until the close of business August 31st.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?S05X
------------
WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?S

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.'

- NO 'CHART WATCH' THIS WEEK

CURRENT 'MONTHLY' RECOMMENDATIONS
FOR AUGUST:

- U.S. 30-YEAR BOND (US5U)
- SOYBEANS (S5X)
- WHEAT (W5Z)
- SOYBEAN MEAL (SM5Z)
- SOYBEAN OIL (BO5Z)
- GOLD (GC5Z)
- LEAN HOGS (LH5V)
- COFFEE (KC5Z)
 

FUTURE WATCH

Future watch will list developing 'monthly' recommendations to watch in August for September. 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 August 31 and sent via email for September.

- DOW JONES
- CRUDE OIL
- COTTON
- LIVE CATTLE
- FEEDER CATTLE
- JAPANESE YEN
- 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.

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

ClearTrade, Inc.
5415 N. Sheridan Rd.
Suite 2104
Chicago, IL 60640

(800) 493-4444
(773) 561-9777 Voice
(773) 561-9775 Fax

Mailto:research@cleartrade.com 
http://www.cleartrade.com/ 


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

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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