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

MAY COTTON (CT6K)
I began developing several 'trading modules' for March Cotton in the 12/08/05 Joss Report because of a weekly buy recommendation and several daily buy recommendations.
Several weeks ago I advised traders to liquidate their March Cotton and roll into the May contract.
This week I’m keeping an eye on May Cotton because the 18-month moving average above the current market price at 57.56 has encountered stiff resistance.
Until May Cotton can post multiple closes above 57.56 (4 business days), this product is susceptible to wild swings and a possible price failure.
Confirmation of an upside breakout is a close above recent highs of 59.60 (10/13/05).
On 12/6/05, May Cotton posted an ‘intra-day’ buy signal at 53.62.
On 12/12/05, May Cotton posted a weekly buy signal at 54.39.
On 1/20/06, May Cotton posted an 'intra-week' buy signal at 57.10.
The previously mentioned trade signals posted above suggest fund buying began from the 54.00 level in early December.
Major support will be at 54.40.
Two weeks ago I posed a question that still applies: Is Cotton ready for a major price advance - or will it fall victim to fund profit taking?
This product is for aggressive traders only and as traders can see, this baby can really move.
Over the last four-months I’ve made traders aware that subsidy cuts for Cotton had been agreed to by the U.S. at the Doha Round talks last year. The WTO had ruled against the U.S. subsidy and the completed text version deadline of how the cuts would be implemented is due by April 30. The recent news articles reported below would suggest that deeper Cotton subsidy cuts are needed to placate many third world countries. The 2002 farm bill, which funds farm subsidy programs, is set to expire in 2007 - but many farmers want Congress to keep it in place while negotiators pursue global trade talks at the World Trade Organization.
Switzerland: New proposal for cotton – WTO
February 23, 2006
World Trade Organization reporter stated that Benin, Burkina Faso, Chad, and Mali submitted new proposal (TN/AG/GEN/12) calling cotton subsidies to be cut more deeply and more rapidly than domestic support to other products.
The four proponents of the WTO work programme on cotton called for the reduction in trade-distorting domestic support to be three times higher than the cut agreed for domestic support in general, and the implementation period to be one third as long.
This would be accomplished by linking the general reduction formula to a coefficient 'c' when calculating cuts to cotton subsidies.
How cotton subsidies might be cut by three times more than overall domestic support is unclear, since for the proposals on the table, this would entail reductions of the order of 150 to 210 percent.
However, sources suggest that the four countries are, in coming weeks, likely to spell out how this coefficient 'c' would translate into a higher level of than that for other products. Major Cotton subsidizers such as the US reportedly did not comment on the proposal.
Some process-related concerns emerged at the meeting. Cuba and Sri Lanka wondered out loud about whether their views had been represented in consultations to which they had not been invited.
Some delegates suggested that countries not belonging to significant regional or other groupings in the negotiations risked being left on the margins of the discussions.
The next official 'agriculture week' is set to begin on 20 March.
In more recent articles- Saturday the Des Moines Register reported:
February 25, 2006
 
Ames, Ia. — the federal government must move beyond paying farmers to produce corn, soybeans and other crops and find ways to boost rural economies, U.S. Secretary of Agriculture Mike Johanns said Friday.
"That's what the future of farm policy has to be about," he said in a meeting with the Des Moines Register editorial board.
Government payments to farmers will be a hotly contested issue in the next year as Congress rewrites the farm law, Johanns said in a speech to several hundred people who attended a farm bill forum in Ames.
"There is a spirited debate going on in this country about farm subsidies," Johanns said. "We can deliver a good farm bill," despite the controversy over subsidy payments, he said.
The current farm law, which expires next year, has been criticized — and applauded — because of its use of production-based farm payments that reward larger farmers.
Johanns, who grew up on a dairy farm near Osage, said two-thirds of U.S. farmers receive no subsidies from the government, while corn, soybean, wheat, rice and cotton farmers receive 95 percent of the crop subsidies.
Another important factor in the debate over the next farm law will be negotiations under way at the World Trade Organization, Johanns said.
Brazil successfully led a World Trade Organization challenge to a U.S. cotton export subsidy program, Johanns said, and Canada has challenged U.S. corn exports there.

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest last week decreased by 10,928, posting a total open interest of 124,431 contracts.
Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.
If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.
WHAT DOES THE MAY COTTON CHART LOOK LIKE?
May Cotton had been in a six-week price decline that began from highs of 59.60 (10/13/05) to lows of 52.65 (12/02/05).
May Cotton began its current nine-week price advance from lows posted at 52.65 to recent highs of 58.60 (2/06/06).
Cotton needs to maintain a foothold on a weekly and monthly close basis above 55.20 or a possible price failure might occur.
May Cotton has multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 59.80 and 60.80.
May Cotton has two unfilled price gaps below the current market price. The first unfilled price gap is between 54.75 and 55.00.
May Cotton has closed below its 40-day moving average at 56.86 and above its 50-day moving average - which as of Friday was at was at 56.32.
May Cotton closed Friday at 56.61 - which is above its 100-day moving average of 55.86 and its 200-day moving average of 55.22
Two weeks ago I noted that the 100-day moving average was attempting to cross the 200-day moving average. This moving average crossover that has occurred constitutes a change in trend and would suggest higher prices. However, it is imperative that May Cotton posts a weekly or monthly close above its major resistance at 57.56.
For several weeks I’ve written that May Cotton has developed a symmetrical bullish ‘V’ bottom formation or a ‘rounded saucer’ bottom formation.
The upward ‘V’ trendline begins at lows of 52.65 through lows of 53.80, 55.90 and if touched today would intersect at 56.01.
Because of the possible long-term implications of a Cotton 'policy' change (subsidy cuts), I am watching December Cotton. The December Cotton chart recently developed a bullish ‘head and shoulders’ bottom. The breakout occurred at 57.30.
May Cotton on the daily chart may be forming a bearish ‘V’ top or a bullish ‘double retracement.’
Traders will not know the outcome until May Cotton posts multiple closes under 55.75 or multiple closes over 58.60.
Listed below are the original trade signals that the May Cotton has recently posted:
On 12/01/05 and 12/02/05, March Cotton posted a potential spread 'double bottom' at 51.40 and 51.38, respectively.
On 12/6/05, May Cotton posted an ‘intra-day’ buy signal at 53.62.
On 12/12/05, May Cotton posted a weekly buy signal at 54.39.
On 1/20/06, May Cotton posted an 'intra-week' buy signal at 57.10.
On 2/02/06, May Cotton posted an ‘intra-week’ buy signal at 57.86.
WHAT WERE TRADERS ADVISED TO DO TWO WEEKS AGO?
http://www.cleartrade.com/images/letter_2_12_06
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Aggressive traders who liquidated their established long position in March Cotton and purchased May Cotton are advised to leave stops below 55.20*.
Option traders who purchased July 67 calls, July 70 calls, December 75 calls and December 77 calls are advised to risk 50% of purchased price.
Below are possible ‘trading modules’ for futures traders to consider next week:
# 1) If May Cotton posts a higher high than last week's high of 57.60:
Aggressive traders are advised to add to their existing long positions or establish a long position, placing all stops below 55.00*.
Option traders are advised to purchase July 67 calls, July 70 calls or December 75 calls, risking 70% of purchase price**.
# 2) If May Cotton posts multiple closes above 58.10 (4 business days):
Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 55.75*.
Option traders are advised to purchase July 67 calls, July 70 calls or December 75 calls, risking 70% of purchase price**.
Our objective will be a challenge of recent highs of 58.60.
# 3) If May Cotton posts multiple closes above 58.60 (4 business days):
Aggressive traders are advised to either add to their established long position or establish a long position, placing all stops below 56.01*.
Option traders are advised to purchase July 70 calls or December 77 calls, risking 70% of purchase price**.
Our intermediate-term objective will be an assault on 59.60.
# 4) If May Cotton posts multiple closes above 59.80 (4 business days):
Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 57.60*.
Option traders are advised to purchase July 70 calls or December 77 calls, risking 70% of purchase price**.
Our intermediate-term objective will be 60.80.
# 5) If May Cotton posts a lower low than last week’s low of 55.90:
Traders are to prepare for a possible price failure below 55.75.
Aggressive traders are advised to leave stops as proposed above*.
Option traders are advised to continue to risk 50% of July and December calls**.
Below are possible reversal ‘trading modules’ to consider next week:
# 6) If May Cotton first posts a higher high than last week's high of 57.60 yet reverses, posting a lower low than last week’s low of 55.90:
Aggressive futures traders and option traders are to prepare for a possible price failure below 55.75.
If existing long positions are stopped below 55.00, traders are advised to place resting buy stop orders at 57.61.
If May Cotton posted 57.61, aggressive traders will have reestablished their long positions, placing stops below 55.00*.
# 7) If May Cotton first posts a lower low than last week's low of 55.90 yet reverses, posting a higher high than last week's high of 57.60:
Aggressive futures traders are advised to place resting buy stop orders at 57.61.
If May Cotton posted 57.61, aggressive traders will have added to their existing long position, established a long position, or reestablished their long positions, placing stops below 55.00*.
Below are possible ‘monthly reversal trading modules’ to consider:
# 8) If May Cotton posts a monthly close at or below 55.00:
Aggressive traders will have liquidated their long positions and are advised to sit on the sidelines and wait for another trading opportunity.
I have compiled some Cotton option facts for traders:
Cotton options for a two-year ‘implied volatility’ average are ranked number 28 out of 45.
28) Cotton (CT) High 47.91% - Low 21.51% - Current 25.14%.
Cotton options for a one-year ‘implied volatility’ average are ranked number 28 out of 45.
28) Cotton (CT) High 38.90% - Low 21.51% - Current 25.14%.
Cotton options for a six-month ‘implied volatility’ average are ranked number 29 out of 45.
29) Cotton (CT) High 38.90% - Low 21.51% - Current 25.14%.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?CT06K
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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).

MAY SUGAR (SB6K)
Two weeks ago I will began developing several 'trading modules' for May Sugar because of a weekly recommendation.
May Sugar’s weekly recommendation: buy when trades 19.46 – sell when trades 17.64.
On 2/13/06, May Sugar posted a weekly sell signal at 17.64.
Remember - volatility is at extreme levels. Newly entered longs are looking for 25.00. Funds may have the all-important advantage on direction.
This product is for aggressive traders only.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest last week decreased by -8,951, posting a total open interest of 487,329 contracts.
Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed weekly trade risk was and still is $2,038.40, which suggests traders should have an account size of $20,380 per contract to trade this product.
If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.
WHAT DOES THE MAY SUGAR CHART LOOK LIKE?
May Sugar has been in an eight-month price advance that began from lows of 8.81 (6/15/05) to highs of 19.65 (2/03/06).
Until recently May Sugar had been in congestion between lows of 17.50 and highs of 19.65.
Until Sugar can post multiple closes (4 business days) below 17.50 or above 19.65, this product will remain in a trading range.
Our long-term objective from Sugars second bullish ‘W’ formation at 18.87 has been met on 2/2/06.
May Sugar has multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 19.80 and 19.85.
May Sugar has several unfilled price gaps below the current market price. The first unfilled price gap is between 16.00 and 16.10. The second unfilled price gap is between 15.34 and 15.43.
May Sugar has closed above its 40-day moving average and 50-day moving average - which as of Friday was at was at 16.91 and 16.38, respectively.
May Sugar’s close Friday was at 17.80 - which is above its 100-day moving average of 14.15 and its 200-day moving average of 11.87.
For two weeks it appears May Sugar has been developing a bearish ‘V’ top formation.
The downward ‘V’ trendline begins at highs of 19.65 through highs of 19.24 and if touched today would intersect at 19.10.
Listed below are the current trade signals that May Sugar has recently posted:
On 2/08/05 and 2/09/05, May Sugar posted a bearish key reversal pair.
On 2/13/06, May Sugar posted an unconfirmed weekly sell signal at 17.64.
On 2/23/06, May Sugar posted an ‘intra-day’ sell signal at 17.99.
May Sugar may be forming a bearish ‘triple crown’ top.
The three key points of the potential crown top developing are at highs of 18.60 (1/23/06), 19.65 (2/3/06) and 18.68 (2/23/06).
If this were to develop into a bearish ‘triple crown.’ the May Sugar would need multiple closes below recent lows of 16.72. However, the crown top would be suspect if May Sugar penetrated the highs posted Thursday at 18.68. Confirmation of a failure crown top would be multiple closes above 19.65.
WHAT WERE TRADERS ADVISED TO DO TWO WEEKS AGO?
http://www.cleartrade.com/images/letter_2_12_06
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
Aggressive traders who established a short position at the weekly sell signal of 17.64 are advised to leave stops at 19.46.
Aggressive traders who added or established a short position at the ‘intra-day’ sell signal on 2/23/06 at 17.99 are advised to leave their stop at 19.46.
Below are possible ‘trading modules’ for futures traders to consider next week:
# 1) If May Sugar first posts a higher high than last week’s high of 18.68:
Traders are to prepare for a possible price advance.
Aggressive traders are advised to leave their stops as mentioned above.
# 2) If May Sugar posts multiple closes above 19.65 (4 business days):
Aggressive traders will have liquidated their short positions and are advised to establish a long position, placing stops below 18.70*.
Option traders are advised to purchase May 20 calls or July 21 calls, risking 70% of purchase price**.
# 3) If May Sugar posts multiple closes above 20.01 (4 business days):
Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 19.65*.
Option traders are advised to purchase May 20 calls or July 21 calls, risking 70% of purchase price**.
# 4) If May Sugar posts multiple closes above 21.40 (4 business days):
Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 19.99*.
Option traders are advised to purchase May 2100 calls or July 2200 calls, risking 70% of purchase price**.
Our intermediate-term objective will be an assault on the 50% retracement level at 24.14.
# 5) If May Sugar first posts a lower low than last week’s low of 17.45:
Aggressive traders are advised to add to their established short position or establish a short position, placing stops for this position only above 18.68*.
Option traders are advised to purchase May 1750 puts or July 1600 puts risking 70% of purchase price**.
# 6) If May Sugar posts multiple closes below 16.72:
Aggressive traders are advised to add to their existing short position or establish a short position, placing stops for this position above 17.64*.
Option traders are advised to purchase May 1650 puts or July 1500 puts risking 70% of purchase price**.
# 7) If May Sugar posts multiple closes below 15.98:
Aggressive traders are advised to add to their existing short position or establish a short position, placing all stops above 16.91*.
Option traders are advised to purchase May 1550 puts or July 1400 puts risking 70% of purchase price**.
# 8) If May Sugar posts multiple closes below 14.98:
Aggressive traders are to prepare for an all out assault on the 200-day moving average at 14.15.
Aggressive traders are advised to move all stops above 15.98*.
Below are possible reversal ‘trading modules’ to consider next week:
# 9) If May Sugar first posts a higher high than last week’s high of 18.68 yet reverses, posting a lower low than last week’s low of 17.45:
Aggressive traders are advised to place resting sell stop orders at 17.44.
If May Sugar posted 17.44, aggressive traders are advised to place stops for this position above 18.20*.
# 10) If May Sugar first posts a lower low than last week’s low of 17.45 yet reverses, posting a higher high than last week’s high of 18.68:
Aggressive futures traders and option traders are to prepare for a possible price advance.
Aggressive futures traders are advised to place resting buy stop and reverse orders at 18.69.
If May Sugar posted 18.69, aggressive traders will have exited their short positions and will have established a long position, placing stops at 17.44*.
Below are possible ‘monthly reversal trading modules’ to consider:
I have compiled some Sugar option facts for traders:
Sugar options for a two-year ‘implied volatility’ average are ranked number 6 out of 45.
6) Sugar (SB) High 52.89% - Low 18.90% - Current 41.42%.
Sugar options for a one-year ‘implied volatility’ average are ranked number 7 out of 45.
7) Sugar (SB) High 52.89% - Low 18.90% - Current 41.42%.
Sugar options for a six-month ‘implied volatility’ average are ranked number 11 out of 45.
11) Sugar (SB) High 52.89% - Low 22.55% - Current 41.42%.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?SB06K
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?SB
* (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.'

MAY SOYBEANS (S6K)
This week I will begin developing several 'trading modules' for May Soybeans because of a weekly recommendation for next week and a potential monthly recommendation for March, which will not be revealed until the close of business February 28.
May Soybeans have a weekly recommendation for next week: buy when trades 611.25 – sell when trades 582.75.
The potential monthly recommendation(s) will be broadcasted Tuesday evening via email.
This product is for aggressive traders only.
The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest last week increased by 13,512, posting a total open interest of 376,082 contracts.
Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.
The proposed weekly trade risk is $1,425, which suggests traders should have an account size of $14,250 per contract to trade this product.
The proposed monthly trade risk will be calculated on the close of business February 28.
If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.
WHAT DOES THE MAY SOYBEAN CHART LOOK LIKE?
May Soybeans have been in a five-month price decline that began from highs of 741.00 (6/24/05) to lows of 559.50 (11/28/05).
Recently, May Soybeans have traded from lows of 559.00 to highs of 643.00 (1/04/06) before reversing and posting recent lows of 572.50 (1/18/06).
Currently, May Soybeans have been in congestion between lows of 583.00 and highs of 617.00.
May Soybeans may have possibly posted a mini ‘spread double bottom’ at the 583.00 level.
May Soybeans have multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 617.00 and 620.00.
May Soybeans have several unfilled price gaps below the current market price. The most recent unfilled price gap is between 559.50 and 555.00.
May Soybeans have closed below its 40-day moving average and 50-day moving average - which as of Friday was at was at 599.00 and 603.75, respectively.
May Soybeans closed Friday at 590.25 - which is below its 100-day moving average of 598.50 and its 200-day moving average of 624.75.
Listed below are the current trade signals posted recently:
On 2/17/06, the May Soybeans posted an unconfirmed weekly buy signal at 610.25.
Traders need to be aware that Soybean Oil prices have been advancing. However, Soybean Meal posted a monthly sell signal at 177.90 last week. It has been my experience in 29-years of trading grains that Soybean Oil prices and Soybean prices may advance just so far - but without Soybean Meal prices moving higher, any price advance may not be sustainable. So we need to watch May Soybean Meal to give us a clue to direction and momentum.
May Soybean Oil has a weekly recommendation for next week: buy when trades 23.63 – sell when trades 22.95.
Soybean Oil is also developing a potential monthly recommendation for March, which will not be revealed until the close of business February 28 and will be broadcasted via email Tuesday evening.
On March 10 the USDA Crop Production and Supply/Demand report is due out at 7:30 am C.S.T. Also, on March 31 the all-important USDA grain stock and planting intention report is due out at 7:30 am C.S.T.
This may be a long yet rewarding month for the grains.
WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?
For next week May Soybeans have a weekly recommendation: buy when trades 611.25 – sell when trades 582.75.
Below are possible ‘trading modules’ for futures traders to consider next week:
# 1) Aggressive traders are advised to wait for the potential monthly recommendation before establishing a position in the May Soybeans.
Please call ClearTrade or IM (Instant messenger) us through Yahoo, Msn, Hotmail or Gmail at cleartraderesearch@hotmail.com to review our monthly ‘trading modules.’ 
I have compiled some option facts for traders:
Yen options for a two-year ‘implied volatility’ average are ranked number 15 out of 45.
15) Soybeans (S) High 45.45% - Low 19.62% - Current 27.43%.
Soybean options for a one-year ‘implied volatility’ average are ranked number 22 out of 45.
22) Soybeans (S) High 45.45% - Low 20.21% - Current 27.43%.
Soybean options for a six-month ‘implied volatility’ average are ranked number 7 out of 45.
7) Soybeans (S) High 29.23% - Low 20.21% - Current 27.43%.
DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?S06K
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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?S
* (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).

JUNE EURO-CURRENCY (EU6M) 

JUNE CANADIAN DOLLAR (CD6M) 

JUNE BRITISH POUND (BP6M)

This week I will add the June Euro-Currency, June Canadian Dollar and the June British Pound to ‘Chart Watch’ because of pending monthly recommendations in each of these products for March, which will not be revealed until the close of business February 28. Subscribers will receive ClearTrade’s broadcast of monthly recommendations Tuesday evening. You are invited to contact us by or IM to discuss our game plan and ‘trading modules.’

WEEKLY EURO CHART:

http://www.bohl.minot.com/w_Chart.cgi?EC

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WEEKLY CANADIAN CHART:

http://www.bohl.minot.com/w_Chart.cgi?CD

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WEEKLY POUND CHART:

http://www.bohl.minot.com/w_Chart.cgi?BP

CURRENT 'MONTHLY' RECOMMENDATIONS FOR FEBRUARY:

- MARCH SOYBEAN MEAL

- MARCH OATS

- MAY SOYBEAN MEAL

FUTURES WATCH

Future watch will list developing 'monthly' recommendations to watch in February for March. 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 February 28 and sent via email for March.

- MAY SOYBEANS

- MAY SOYBEAN MEAL

- JUNE EURO-CURRENCY (FX)

- JUNE CANADIAN DOLLAR

- JUNE BRITISH POUND

ECONOMIC DATA