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

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.