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

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

Ps: Those of you, who may be new to my work, don’t be shy about emailing any questions you may have. The manuals should be available soon but in the meantime I have no problem answering any inquiry. My direct email is tom.mostlikely@verizon.net

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.

Daytrading by Ambush Update for Wednesday February 6, 2008

The computer crashed last night. We didn’t get things back working until mid morning. As a result you didn’t see an update and I didn’t trade today. What follows are my trades and comments for action from Monday.

Reporting trades from 2/04/08.

1: MARCH 30 YEAR T BOND

Economic reports were strong and even with stocks down today Bonds never could get any traction. Part of the reason is due to a new supply of 10 years coming to market on Wednesday followed by 30 years on Thursday.

I sold 119-14. As we dropped to 119-00 I rolled my stop to 119-03 and exited there a moment later for $343. I next bought 119-03 and rolled the stop to B/E as we touched -07. I got stopped at B/E and then watched it run to -15 with no way to get back in the trade. I sold -13 and was stopped at -11 gaining $63 as I’d rolled my stop as we tapped on -07. I got another chance to buy -03 at about 8:50 PST which I exited at -11 for $250. That ended my Bond day.

For Wednesday we’ll watch 119-16 and 120-00

2: MARCH CANADIAN DOLLAR

As we rolled thru 10000 I bought 10005 and exited at 10047 on an OB off 10050 … a number we identified in the weekend edition for $420. Next I sold 10046 with my stop at 10053. I rolled the stop to B/E as we passed thru 10040 and to 10033 as we broke 10030 and was stopped right there for $130. I bought the break of 10050 at 10055. I went to B/E with my stop at 10060 and was stopped at B/E as the CD turned back to 10050 after making a double top ay 10064. I sold a break of 10050 and bought a break higher both of which ended at B/E. I quit about 11:30 PST

All the weekend numbers for tomorrow, Wednesday

3: MARCH SWISS FRANC

We nailed the right number at 9160. Just one problem … we had it sold, not bought. The breaks came later in the day and escaped us.

Stay after the same numbers for weekend guidance for tomorow, Wed. The break above or below looks very juicy to me. Buy or sell as the whispers dictate.

4: MARCH MINI RUSSELL 2000

The whispers from 6 am to the break at 6:30 were more like screams we were going lower. I sold 727.70 and exited at 724.10 using OB theory for $360. I bought 722.50 and exited at 725.80 for $330. I bought 728.50 and exited at 728.60 for a whopping $10 gain. I bought 728.50 again and regretted it big time. I exited at 726.70 losing $180. I didn’t see another tradeable number until 722 late in the session. That was it for me.

All the weekend numbers are in play.

5: MARCH MINI $5 DOW

No numbers showed for me today

Stay on the Weekend numbers.

For those of you with no computer issues you should have had 12600 sold or at worst 12550 for a nice solid $1000 plus gainer.

6: APRIL GOLD

There’s the confirmation at 5:35; I sold 908.50 and exited at 898.50 for a cool $1000. I was done.

The 890/900 and 890/880 channels are it for tomorrow.