Reporting trades from 2/20/08.
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1: MARCH 30 YEAR T BOND
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USDH8 O=11524 HI=116-05 LO=115-07 CL=115-29

We continued the run south as economic reports out this morning
were slightly better than expected. Together with some comments
from FED members had the market in a mood to discount recession
talk and focus more on inflation.

I sold 115-14 shortly after the open and exited at -07 for $218.
We almost got low enough to let us play 115-00 but not quite. A
play of the quarter at -08 would have worked nicely. I bought
115-19. I didn’t like this trade from the start. In fact, I almost
didn’t take it as I felt we’d been on a bit of a long run. I exited
at 115-31for $375. I next bought at 116-03 and was stopped at
115-31 losing $125. I did 2 sells at 115-28 and got stopped at
116-01 losing $156 on one and BE on the other. I bought 116-03
once and was stopped at 115-29 losing $187. I made a net $125
on the day.

A very disappointing gat to say the least. On the bright side I
kept my discipline and kept the day positive. At least that reinforces
the confidence level in the methods we employ.

For Thursday we’ll watch 116-16, 116-00 and 115-16 for first
action.

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2: MARCH CANADIAN DOLLAR
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CDH8 O=9922 HI=9890 LO=9802 CL=9873

Dang it. We had the numbers so pegged. Problem is it did the break
of 9880 in the wee hours of the morning. It was a thing of beauty.
I thought the retest to 9802 was good enough to play so I bought
9807. I exited at 9828 on a pullback from just above 9830 for
$210. I missed a sell on the break below 25 but wasn’t too worried
by it. We retested 9800 again … or close enough at 9802 … I bought
9807 a second time and exited at 9825 for $180. I thought I was
entitled to a fill closer to 40 but you can guess how that conversation
went.I bought 9827 as we climbed above 9825. I could’ve had my
stop at 23 or 17 I chose 23 since we’d favorable moved some. I got
stopped at 9820 on a real violent spike lower for a loss of $70.
Naturally it took off to 9870 shortly thereafter. Not only did I suffer
the loss but it deprived me of an opportunity to get back in … so a
double whammy you could say. That’s why we call it trading and
not winning.

All the weekend numbers for tomorrow, Thursday

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3: MARCH SWISS FRANC
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SFH8 O=9096 HI=9107 LO=9076 CL=9102

I never got hooked up with the SF today. I watched the open of
RTH ready to go at 9100 but it happened really quick and I had
other fish fryin’ as well. I did nothing here but will sure be looking
for a resolution at 9100. Nice little triangle shaping up. It may
have happened already since we’re now at 9070. We’ll see at the
open.

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4: MARCH MINI RUSSELL 2000
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ERTH8 O=706.40 HI=712.90 LO=694.30 CL=711.70

The market saw tough sledding early as some caution krept into the
mindset of traders. I sold the break of 700 at 698.80 and closed
it at 697.10 for $170. I held this a long time in the overall scheme
of things. It just would not move so I gave up to tell the truth. I
sold 699.40 and exited at 695.10 for $430. I tried to buy the 698
break but couldn’t get it done until the 700 break. I bought 700.60
and exited at 699.50 losing $110. I bought 700.50 and patience
paid a dividend. I exited at 707.90 for $740. I sold 707.40 and
exited at 705.10 for $230.

I closed down at that point. The focus had diminished.

All the weekend numbers are in play.

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5: MARCH MINI $5 DOW
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EYMH8 O=12255HI=12465 LO=12230 CL=12429

I was waitin’, poised to go off at 12200. It didn’t get there but it
came close. I took a stab at selling 12400 late in the day. I made
lunch money and that was it.

Stay on the Weekend numbers.

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6: APRIL GOLD
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GCJ8 O=930.60 HI=949.20 LO=916.10 CL=937.80

I bought 921.50 and exited at 924.80 for $330. I couldn’t get
back in again until 930. I bought 931.50 and exited at 937.80 for
$630. I was gone from trading by the time 940 showed up.

There was almost $300o in play today. We got about a third of
that. We did good, not great, but good. Sure I would have liked
a bigger piece of the available pie. We had a little bad luck in
the way that the price flow played out today or it could’ve been
a much bigger day.

I’ll play 940/950 tomorrow if given the chance.

An assignment from the college had me in Chicago most all week. I returned home Valentine’s Day night. Obviously, I did not trade. That felt a little weird. Here I was in Chicago within a stone’s throw of the exchanges and I couldn’t trade. The numbers I put out in the weekend edition, if followed, produced a nice array of trades that should have easily produced a $3 – $4,000 week.

Were I in your shoes this would really be exciting for me. Here’s a trading discipline where I am not tied to the teacher. A regime I can trade on my own at my own pace without being joined at the hip to the teacher.Stay tuned here. I may have a surprise for you all. There is a chance I will be speaking in Denver before the Denver Trading Group on April 4th. I’m working on the details now and should have something definitive for you by the end of the week. The 4th is a Saturday and we’ll go all day long so it’ll be a great opportunity for those new to my approach to get in a full day of learning.

Shaggy is working her heart out on the website. I’m hopeful we’ll launch within a week or so. I’m also working on the hard/software allowing us to get together once a week or so to knock things around in a live webinar or something similar. Stay tuned here for more word on our progress.

Bonds

The past week’s weakness ended Friday on thoughts the U.S. economy is more resilient than previously thought mixed with the potential for more drastic rate cuts may be leading us into a sudden inflation spell. Economic reports thru the week were much more positive than expected. I think the turn had more to do with the overnight downgrade of the first of the bond insurers. The logical extension of this thinking is that in turn those holding the securities insured by the downgraded insurer will downgrade the securities which will in turn cause their downgrade. I think the market is looking for and expecting more bad news in the sub prime story.

Frankly, I don’t believe we have even seen half of the effects yet. I believe this will have wider impact thru June and maybe even into the 4th quarter before we can truly assess the magnitude. With a holiday Monday and a weak schedule of reports throughout the rest of the week it looks as though the Bonds will react to the output of the talking heads and look to the stock market for guidance. After a week with a 4-point trading range I expect things to be quieter this week. We’ll start off Tuesday focused on 117-16, 117-00 and 116-16.

CURRENCIES

Currencies seem now to divided into 3 camps – the U.S.Dollar, the “flight to quality” currencies and those benefiting from further evidence the recession is only a virus afflicting the U.S. Dollar. The Dollar seems unavoidably headed back to 75 unless it can muster some way make 76 hold on Tuesday. Although U.S. markets will be closed Monday, world markets won’t and I look for the Dollar to get pummeled in the interim. Word from the European front paints a quite rosy picture and more trouble for the Dollar as the Euro has lots going for it that must be valued into prices.

Canadian Dollar

The CD saw benefit this past week from better than expected US numbers, confidence from the Canadian economic reports and perhaps because of ongoing price strength in some physical Canadian commodities. However, if the US stock market comes under aggressive selling pressure and the financial/credit problems in the US create fresh anxiety, I think the CD could see some pressure. In fact, to avert weakness altogether, the CD might have to have another good set of reports this coming week. We have been essentially on target for the past 2 weeks.

The ranges weren’t great enough to produce any notable trades until Friday. If you got it, good on you. There is no need to alter our numbers any at all. We’ve been locked up in a 1005- to 9950 channel for the better part of 2 weeks. Given Friday’s big failure this may be over but I think not. There is still good reason to suspect next week will be 10050/9950 biz as usual.

CD closed at 9904 on Friday. I’ll sell or buy any retest of 10000 or 10050 on Tuesday. Same thing goes for 10100. At 9975 I’ll either buy or sell dependent on whispers. 9950, 9925, 9910 and 9900 as well. 9880, 9850, 9825 and 9800 work both ways. I think we’ll stay within this range of prices for the moment. We’ll use the mentioned prices higher for rolls on longs and numbers lower for management of short trades. The initial stops go in at the next highest 3 or 7 for buys and the next lower 7 or 3 on shorts.

By example: if we bought 9880 the initial stop would be placed at 9893 preferred or 9897 if you wanted a bit more room to breathe. As we passed thru 9850 we’d roll our stop to a minimum of B/E â?¦ a very loose management play or to 9863, which would certainly qualify as a tighter move and might even be categorized as a “Once Broken” play.

We added a good deal more structure in the past 2 weeks but we’ll still employ periodic RRR for help whenever we feel the need.

Swiss Franc

I clearly see the Swiss as the primary flight to quality play in the face of the upcoming Dollar weakness. In fact, given the recent oversold status of the Swiss around this past week’s lows, I think the Swiss is poised for a rise above the 92.00 level. I wouldn’t be surprised to see the March Swiss regain levels above 92.50. Any retest of 9250 or 9200 gets sold instantly. 9160 can be sold as it breaks on any retest higher that fails.

We’ll also buy a break above 9160. 9140 is only good as a management number in my opinion. There is a band of SR between 9120 and 9110. We’ll play this as a SR range buying a retest below 9120 as it rises back above it and selling a break below 9110. Although 9110 has more hits 9100 is still an important number. We saw it break this past week and then a big swing to the upside on Thurs and Fri. 8970/60 is still a very sporty area to play if we get there anytime soon.

It is an area most likely to hold support. If we wind up selling 9110 you have to very suspect of the trade at 9000. You must roll the stop to B/E as soon as the price threatens 9100. 9080, 9035, 9000, the range at 8970/60, 8940, 8920, 8900 and 8880 are the numbers at which to set up ambushes and to use as management triggers.

The past week didn’t really alter our numbers of interest so we’ll stay with them. The stops are the 3 and 7 above on sells and the 7 and 3 below the entry point. Use periodic RRR and any of the numbers discussed here as management guides to trigger rolls or places to set stops or define “OB” plays.

INDICES

There are so many things going on at the same time it gets hard to really zero in on where we are and what to keep your thumb on to feel the pulse of stocks. Stocks have been quite volatile so far in the New Year and I see nothing on the horizon that will diminish the unease. I believe the 2 biggest factors are the continuing subprime fallout which I stated earlier has only about 50% of the iceberg showing and number 2 the FED’s continuing preoccupation with inflation to the exclusion of more intelligent and in depth monetary policy.

Developing cogent policy and implementing same is not simply opening a tin box of band aids. What might be overlooked by all the economic noise last week that I think may be the most important piece of economic data of the week is industrial production. This is a far more important economic number that may be more telling about current circumstance than many … maybe ANY … others.

IP rose 0.1% in January and is now back to the record level it hit in September. This report suggests there is no indication that manufacturing is slowing or going into retrenchment mode as almost always happens before a recession Mini Russell 2000

I think I’m not alone in my feeling about the IP numbers. What else might have kept the lid on selling on Friday when you have a major Citibank hedge fund barring any withdrawals, a major downgrade of a bond insurer, you have the ex-FED chair saying that the US economy appears to be headed into a recession. In fact, even the current Fed Chairman admitted to further US slowing ahead and suggested that US financial markets would remain under significant pressure.

The Fed Chairman also suggested that he expected more write downs ahead and expected further housing market travails. We need to watch the world markets tomorrow, Monday. Tuesday could be a wicked ride.We broke from 725 on Thursday on profit taking after Bernanke’s comments. I think the mid/late session rally on Friday was profit motivated as well as having to do with the IP strength. 722 acted just as we suggested it would in defining the highs on Wed and Thurs. We’ll be initially focused on the 700 line and our ambush points close by on either side for early action on Tuesday UNLESS we see movement away from there in Monday’s world trade.

Here are the numbers for the Russell for the coming week: 648, 665, 672, 682, 685, 688, 692, 695, 698, 700, 704, 706, 708, 713, 717, 722, 728, 735, 740, 745, 747, 750, 752, 756, 758, 760, 762, 764, 767, 770, 773, 775, 778, 780, 785, 790, 794, 798, 800 and 802.

I will not sell anything below 648 and I will not buy anything above 794. $5 Mini DOW You can fill in the blanks here with all the comments from above. 12400 played a major roll in defining and limiting action last week. It will be crucial this week too. 12200 is a potent line in the sand. If price flow arrives there we’ll see a battle royal as the enemy will have max assets to play there. Almost more than any other market periodic RRR is your best management friend in the DOW.

Let’s trade these numbers this week: we’ll start with the quad top at 13850. We’ll sell a failed retest there but not buy yet … exactly the same play at 13800. 13750, 13700, 13650 (#2 on the hit parade of strength), 13600 (mostly on its big fat round number credentials as opposed to hits), 13550, 13500 (see 13600 above), 13450, 13425, 13400, 13350, 13300, 13240 (probably is really 13250; play however you see it) 13200, 13150, 13125, 13100, 13050, 12940/50 as a range, 12880, 12840, 12800, 12650/60 as a range, 12600, 12550, 12500, 12400, 12200 and 12000. No sells below 12200.

You can buy any retest at or near 122 or 120 as they fail to push lower and turn back north.

GOLD

I have no idea why Gold isn’t at $1000. I can’t imagine how anyone could dream up a more price supportive flight to quality scenario than presently exists. The bulls are firmly in control despite Friday’s almost $15 range lower. Some … including me … might say it is fitting to take another swipe at 900 proving the support there real and capably showing shoulders stout enough to hold an attack on $1000. Tuesday I’d love to see a retest of 900 that fails to press lower turns and allows us in at 901.50 and then sets sail for 920. I can see that so clearly. 920/930 is the highest channel I’m comfortable playing. All of them up to that level are in play. Have a great week of trading.

-Tom

Nothing could make the case for the importance of a game plan to attain success more than last Sunday’s Super Bowl. A clearly more talented team was reduced to loser by a superior game plan.

Now, of course, it took a tremendous execution effort to get the game plan into play but it was the superior plan that resulted in victory to the inferior force. Well, at least that’s what they’d like you to believe.

This was not an inferior team. IT was a team with some weaknesses and some strengths. It was exactly so for their opponents … some weaknesses and some strengths. The difference in the game arose from the Giants minimizing their weaknesses and maximizing their strengths. Oh, true, some of the Patriot’s strengths were shinier, more visible, more publicized than were the Giants’.

The Giants did not chose to play the game in such a way that would favor the Pat’s. The Giants were able to accurately assess their opponent and play the game so that the odds favored them. The Giants manipulated the game in a way that had a significant bearing on the outcome. Yeah, like they won. They won a game almost everyone said they couldn’t.

This is a mirror on our world of trading. We ARE the Giants. We understand and accept our weaknesses and our strengths. We understand our opponents out size, out gun, out fund us. We understand we have to play the same game different than they do to survive on the same playing field. We ARE different so we must play different. We exploit our strengths and disguise our weaknesses. We play the game by understanding and manipulating the odds to always favor us or we take our risk from the table … just like the Giants did last Sunday. We keep things simple, we know our enemy, we know ourselves. We play our Super Bowl everyday. We never have a bye, we never have a “laugher” game. We let up on the accelerator or down on our guard we are toast. So, why does everyone try to teach us to play like our opponents? Could it be they don’t really play so don’t understand the reality of playing the game?

BONDS

The Bond auction on Thursday spooked the trade into a very sharp sale. At the open Friday buyers came back for the perceived bargain prices. Not all the way back mind you. There is a great deal of concern that inflationary heat is not far down the road and with it comes higher yields on a variety of investments that may make bond yields appear anemic. Aside from the technical reaction to the big losses and Friday rebound, the bond market will be looking to the performance of the stock market for guidance. Next week’s events calendar is quite light early in the week and then heats up late with the Treasury budget out on Tuesday; retail sales and business inventory numbers on Wednesday; initial claims and trade figures on Thursday; and the New York Fed Index, import / export prices, industrial production, and consumer sentiment on Friday. 118-00 will function as strong support this week with 120-00 acting as the ceiling. We’ll likely bounce around that 2 point range all week. This should work to our advantage and allow us to take consistent chunks from the markets choppy range bound trade. Our first focus Monday will likely come on at 119-00 and then either 119-16 or 118-16. My guess is 119-16 early in the week and 118-16 later. I’m watching the quarters to see if they deserve to be played. So far the answer is no bit that may change later in the week. Stay tuned.

CURRENCIES The U.S. Dollar has many items of support at the moment. Between the weak auction of Bonds and the ECB holding fast on rates the Dollar bulls had an impressive rally last week. To sustain this current strength we’ll need to see some world softening and to see the S&P slip below 1320. The focus is now on the threat of a global slowdown. The U.S. will be lobbying fellow G7 delegates to make some coordinated rate drops to avert a much wider spread slowdown. Watch for news out of the G7 talks as well as post conference whispers to move the market all week long.

Canadian Dollar

The combination of being over sold technically and reports that were in the bull camp’s favor had the CD flying higher on Friday. This came after some clear downward bias Monday thru Thursday as we’d predicted last week. I don’t see anything coming that will take the CD back to 101. I think we’ll play off 100 all week moving slightly higher, then failing and pressing back higher again off trades near 9900. This is pretty much the same range we used to our advantage all last week. There is no reason to change the numbers in play for this week so we’ll simply restate last week’s comments.

CD closed at 9987 on Friday. I’ll sell or buy a decision by the market at 10050 on Monday. Same thing goes for 10100. We’ll certainly sell anything that even remotely looks like a retest of 10000. I’ll buy there also on a break out higher but the management will be very tight indeed. At 9975 I’ll either buy or sell dependent on whispers. 9950, 9925, 9910 and 9900 as well. 9880, 9850, 9825 and 9800 work both ways. I think we’ll stay within this range of prices for the moment. We’ll use the mentioned prices higher for rolls on longs and numbers lower for management of short trades. The initial stops go in at the next highest 3 or 7 for buys and the next lower 7 or 3 on shorts. By example: if we bought 9880 the initial stop would be placed at 9893 preferred or 9897 if you wanted a bit more room to breathe. As we passed thru 9850 we’d roll our stop to a minimum of B/E … a very loose management play or to 9863, which would certainly qualify as a tighter move and might even be categorized as a “Once Broken” play.

The higher numbers we’ve added don’t have as much structure to derive management guidance from as do the lower numbers. This, of course, means we’ll look harder at periodic RRR to keep us safe.

Swiss Franc

As we said last week nothing but sells and sell we did all week long with some outstanding results. The numbers we ID’d and worked so well last week are right on target for this week again. We are a bit lower on the scale than last week but still zeroed in on the right numbers so we’ll carry on into the coming week without change.

The Swiss is hanging out just above some very strong support numbers about 9110 or so. We can expect to see some tough to discern motivation for this market coming from the U. S. Equity Markets and fundamental news on the recession or lack thereof. It’ll be choppy and fast changing.

Any retest of 9200 gets sold instantly. 9160 can be sold as it breaks on any retest higher that fails. There is a band of SR between 9120 and 9110. We’ll play this as a SR range buying a retest below 9120 as it rises back above it and selling a break below 9110. Although 9110 has more hits it is 9100 that really holds the key to future Swiss price flow. If 9100 goes down I suspect the gates are open to 9000 and maybe to 8970/60 where resides the next most likely to hold area of support. If we wind up selling 9110 you have to very suspect of the trade at 9000. You must roll the stop to B/E as soon as the price threatens 9100. 9080, 9035, 9000, the range at 8970/60, 8940, 8920, 8900 and 8880 are the numbers to set up ambushes on and to use as management triggers.

The stops are the 3 and 7 above on sells and the 7 and 3 below the entry point.

INDICES

The story this week is the lack of market reaction from the almost sure signing into law of the stimulus package balanced against the threat of higher impending inflation which various FED officials keep talking about in every speech they give. This gives us strong forces pulling at he market from both ends. That usually means fairly choppy action until something or someone sets off some defining sentiment the trade picks up and runs with. Ranges will dominate action all week long. We need to keep our eyes on the Opeckers as well. They are talking production cutbacks once again like the true friends they are. Yeah right.

Clearly the path of least effort is down and I think we’ll soon see prices headed that way I, in fact, not from the opening bell forward.

Mini Russell 2000

I think most market watchers were expecting or hoping for some positive vibe from the expected passage of the stimulus package to take hold of prices. It clearly didn’t happen. The path of least resistance remains downward. We cannot ignore the support line at 692, which may hold things up a while. If that breaks we’ll head for 685/680. I don’t see a break higher than 733 with current dynamics and probably a very hard time to get past 722. That should pretty well define our movement this week. Here are the numbers for the Russell for the coming week: 648, 665, 672, 682, 685, 688, 692, 695, 698, 700, 704, 706, 708, 713, 717, 722, 728, 735, 740, 745, 747, 750, 752, 756, 758, 760, 762, 764, 767, 770, 773, 775, 778, 780, 785, 790, 794, 798, 800 and 802. I will not sell anything below 648 and I will not buy anything above 794.

$5 Mini DOW

I will not buy any price tomorrow. A break lower will be very quick and violent should it occur . I’ll simply wait for any advance to a known resistance number and try to get a sell off there. Watch the daily updates for any change in philosophy.

While not the strongest line on the chart 12400 is certainly the most important. If we break above we will climb to the magnet line at 12600. THERE is where the DOW will decide its short-term future. 12800 is beyond argument the strongest line on the chart both in terms of hits and considering what the market has done on prior visits to that price level. Assigning strength to an SR line is clearly about the frequency of hits but observing what the market did at that level on those prior visits can derive an unmistakable sign of true power in a number. On the downside the support at 12200 must hold or we are in danger of a major bloodletting.

Let’s trade these numbers this week: we’ll start with the quad top at 13850. We’ll sell a failed retest there but not buy yet … exactly the same play at 13800. 13750, 13700, 13650 (#2 on the hit parade of strength), 13600 (mostly on its big fat round number credentials as opposed to hits), 13550, 13500 (see 13600 above), 13450, 13425, 13400, 13350, 13300, 13240 (probably is really 13250; play however you see it) 13200, 13150, 13125, 13100, 13050, 12940/50 as a range, 12880, 12840, 12800, 12650/60 as a range, 12600, 12550, 12500, 12400, 12200 and 12000. No sells below 12200. You can buy any retest at or near 122 or 120 as they fail to push lower and turn back north.

GOLD

The begging of last week saw Gold prices slipping but by midweek it was back on the track moving higher. We closed Friday at 918 and change … less than $20 from all time highs. There is enough news and speculation about Gold prices to fill 2 pages. The two major sentiments seem to revolve around the stimulus package and inflation comments by FED officials. Toss in a dose of ETF buying recommendations by the World Gold Council and you have a recipe for higher still prices. The good news is we don’t have to figure out direction we just merrily ply our channels and go about our business,

For Monday we’ll be following the 930/920 channel.

Have a great week of trading.

-Tom