Hello everybody! Man, I have missed you all more than you can imagine.

The time flew by since I stepped aside for a sabbatical of sorts in July.

I have been writing a ton; working on my manual. My health problems and Marsh’s passing have clearly made an impact. I am acutely aware of life’s fragility and my need to get my message in an endurable format.

The manuals have taken a good deal more time and effort than I supposed. Trading it everyday lulls you into a belief you can get it all on paper easily and quickly. Trust me when I tell you it ain’t so … not even … but it is getting close enough to being complete I thought it time to start back in sharing my daily trading activities with you again.

I’ve been trading all along and the results are still significant and very satisfying. I’ve not changed anything nor added anything new. We just keep on trusting that which works and our identification of “what’s most likely”.

I’m going to kick this off this weekend and give myself 30 days to get back in full swing. You’ll all get 2 weeks free and then the info will be by subscription. I’m not sure yet how we’ll price and distribute the manuals when available. I do know that subscribers will get a much-reduced pricing deal. Stay tuned for more details soon from Shaggy.

The new website will have a BBS in Vbulletin format I believe Shaggy said. I will be there consistently and frequently to answer questions and expand on what I’ve written. I expect to have a webinar of sorts on Saturday’s. It won’t likely be every week but it will be more than once a month.

I believe very strongly we’ll be much better off in our own house and expect we’ll be rockin’ ‘n rollin’ in short order.

The past 6 months has been a very volatile and thus rewarding time. We have seem stocks set new highs and then start backing off of late. We’ve seen Bonds react to lower rates and currencies at all time highs against the dollar. Let’s have a look!

BONDS

A look at the March US chart shows a high the last week of November just shy of 119-00 and an immediate sell off that eventually saw bonds break 5 points lower. Bonds banged on 113-16 twice before taking off on a tear higher culminating in a strong run on Wednesday above 119-00 before settling around 118-24. Thursday was a big I point failure that settled about 117-15. Friday closed up carrying us back to 118-08. I expect Bonds to appear nervous at this level. I do not think we’ll see a wholesale failure such as seen in late November … at least not yet.

We have a rather lightweight schedule of reports this coming week. Monday we have nothing. Tuesday we have Dec Retail Sales, Business inventories and Dec PPI. Wednesday we’ll see CPI and capacity/utilization numbers. Thursday we’ll look at Philly FED and housing starts … anybody think that will be good news? Friday we’ll have U of Michigan consumer sentiment. Light, as I said, but there are a few things to watch. Retail sales and PPI could throw up some disappointing numbers, which could propel Bonds higher. Monday we could see some lower action. A test of 118-16 could be an excellent sell as it tests and then fails. I like all the recent hits there accompanied by a failure each time. I won’t buy the break above 118-16. Too risky for me. I’ll play it either way at 118-00 and 117-16. That one’s a really juicy number I think. The support there has held atleast 4 times, maybe 5. It also was the price level from which the big late November break began. Either way it could be a nice trade for us. I have a suspicion we may be on these same numbers all week.

CURRENCIES

I don’t understand why but traders have priced in a 75 basis point drop in rates for the late month FOMC meeting. How they get there I don’t have a clue. We haven’t had a rate reduction of more than 50 BP since 1984 when then FED boss Volcker dropped 75BP after taking rates to 20% to curb double digit inflation. I think we’ll see some softening of this stance by traders as the likelihood of such a move gets examined in the light of day. I look for the dollar to find some traction this week. No, that doesn’t mean an increase of any significance but I do think the other currencies have a difficult time making much headway.

Canadian Dollar

The Canadian economy has been a real disappointment the past month. They put together a serious string of lackluster economic reports one after the other. The latest being the loss of some 18K jobs last week. Many watchers are suggesting Canada will drop rates atleast 50 basis points sooner than later. Trading last week left us sitting right on a very significant price level at .9800. I will definitely trade this level and I’ll do so either way buying a break above .9800 as it breaks thru .9806 or so. The stop will be at .9797 or 93 if you w3ant a tad more room. I’d want my stop to be at break even by the time it cruises thru .9820. I’ll roll my stop at .9835, .9850, .9875 and .9900. I doubt seriously the CD’s ability to get above .9900 and almost no chance at .9950. So, the higher we get on a long trade the more I’m inclined to reduce the chances of the trade backtracking by rolling the stop ever tighter challenging the market to come get me.

The long is the less attractive trade to my eye. I would really like to sell the CD on a break below .9800 say as it breaks .9797 or .9793. My stop will be 9803 or 07 if you want more legroom. The problem with this trade is we have no structure to speak of below .9800. I mean .9600, .9500 and .9400 are there on the chart but it was a long time ago in a month far away when OI and volume were almost invisible. I do like the set up in step with the fundamental rumblings though. From a management perspective all we can do is roll this to B/E by .9780 and then roll the stop every 20 points or so and start really pressing the trade once we get above $300 in accumulated profit.

Swiss Franc

The Swiss looks to be getting some benefit from a creeping risk adversity that seems to taking control of the purse strings every where. I’ll trade either way off .9100 and certainly sell a retest and failure at .9150. I’ll place my stop at .9153 or 57 on the sell at .9150. I’ll roll the stop to B/E as we pass thru .9140. We’ll roll the stops again at .9130/25 and as we approach .9100 I’ll crank them down to .9107. If we get a shot at initiating trades at .9100 we’ll have the stop on the buy at .9097 and .9103 or 07 on the sell there. Any sell from .9150 or .9100 will run out os steam near .9025 or so. Make sure the stops get tight as we approach there. We’ll certainly trade the support/resistance there as well with stops at .9017 on the buy and .9033 on the sell. I think the Swiss will be a stable venue, maybe the most stable of them all and therefore a comfortable but not overly rewarding place to try a proposition. Carry trades are liable to get less and less popular with the Swiss as the capital generator which could cause a sharp drop in price much as we saw in late November when the trade took 400 points out of the price.

Even though we suspect stability here we know that things can happen quickly and we therefore always stay firmly attached to our rules and belief in tight stops and not tolerating a market backing up on us.

INDICES

Not much follow through from Friday’s action today. The earnings season for 2 quarter results starts later this week. If you’ll remember the corresponding period in April for the first quarter earnings you’ll recollect how nothing mattered for those 2 weeks but earnings news. I suspect it will be so again this time around. This should be especially true the balance of this week with economic reports almost invisible. The market will be looking for corrective excuses. I think we could tumble on the right disappointment but I do not see a big rally off good numbers.

Mini Russell 2000

The risk adverse sentiment is strengthening by the day. We still haven’t seen the sub prime issue in our mirror. Many thought the B of A acquisition of Countrywide would be viewed as major surgery but it was correctly identified as a mere band aid. The Merrill Lynch 15 billion write down and a peek at Citibank 2.5 billion ball in the air did not escape notice. The markets are in for a rough several months. Until confidence increases and the smell and taste of risk disappear the market will have a tough job in getting investors to stick around and bring serious capital to the party. I took notice of a couple of noted analysts comments to the effect that earnings wise we are already in a recession. I believe it will take some sustained earnings good news to right the ship … interest rate drops have too long been perceived as the answer.

Here are my numbers for the Russell to kick off the week: 704, 708, 712, 717, 720, 722, 727, 740, 745, 750, 752, 757, 760, 764, 767, 770, 775, 780, 785, 790, 794, 798, 800 and 802. I will not sell anything below 708 and I will not buy anything above 794.

$5 Mini DOW

More than any other index I believe it will take earnings to restore confidence in the DOW. Although the DOW is generally perceived as the home of the “blue chips” and therefore all is well I think that perception gets turned around to say if THEY don’t have earnings the rest of the issues must be in really bad shape. When we do start to come out of this hyper risk assessment look for companies that distribute a high percentage of their goods overseas. The uberlow dollar will benefit this scenario nicely.

The playable DOW numbers for next week begin at 12600 and climb each 50 points to 13900. No buys above 13900 and no sells below 12650. I wouldn’t be playing the DOW right now unless I had a set I just could not turn my back on.

GOLD

As much of a struggle Gold has been the past almost 1 year the tables turned our way big time about the 2nd week of September. During this period our accumulated profits in the Gold market came with just a few thousand dollars of equaling our total take in the Russell for the year. It was a beautiful thing and I hope you all persevered with the $10 Gold Strategy as it would have paid off in a big way. Tomorrow we’ll be looking to sell a retest in the 80th percentile at 908-910 or buy a break into the 920-930 channel below the 20th percentile. We can certainly buy on a retest of the 900 mark or sell if we break back into the 890/900 channel. If you’ve been reluctant to trade Gold in my absence I can understand that but suggest you brush up on the $10 Gold Channel Strategy and get your fair share.

Tom

Trading commodity Futures and options on futures involves significant risk. You must consult licensed professionals or your own advisors before trading to determine if it is suitable for you. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. You must consult your broker or advisor before making any trade to insure current prices, margin requirements and other factors determinant to suitability. By reading this newsletter you agree to make no trade relying in whole or in part on the comments of the writer. You agree before doing any trade contained herein to consult your charts and advisors to verify all information and make your own decision.