RE-VIEWING THE PREVIOUS WEEK & LAY-ING THE GROUNDWORK FOR THE WEEK AHEAD

Transcription

1 RE-VIEWING THE PREVIOUS WEEK & LAY-ING THE GROUNDWORK FOR THE WEEK AHEAD FOR THE PERIOD OF: January , 2009 I. STOCK INDICES Page 2 S + P 500* / Nasdaq 100 (mini)* / Dow Jones Industrial Average (Cash Index) II. INTEREST RATES Page 3 30 Year Treasury Bonds* / Eurodollars (ED)* / 10 Year Treasury Notes* III. CURRENCIES Page 4 U.S. Dollar Index* / Japanese Yen* / Euro Currency Unit (ECU)* IV. INFLATION MARKETS Page 5-8 Comex Gold* / Comex Silver* / High Grade Copper* / Platinum* / Soybeans* Wheat* / Corn* / Crude Light (Oil) & other Energy Markets* Special Situation Commodities (Coffee, Sugar, Cotton, etc.)* [* = Futures Contracts] See Page 8 for Terminology & System Trade Explanation 01/24/09 SYSTEM TRADE(S) UPDATE: Stock indices may have just set a secondary low this past week. They are expected to enter a 2 nd rally that could last into March Bonds & Notes powerfully validated analysis for a decline into February and are expected to extend this drop into at least Feb th. Traders should have exited ½ of Bond put options w/avg. gains of about $3,200/ option and be holding the other ½ w/avg. open gains of about $2,500/option. The Dollar rallied to monthly resistance and fulfilled cycle expectations for a rally into January 20 th. A 1-2 week pullback could be seen. The Euro dropped to monthly support while the Yen shot up to monthly resistance. Both currencies are expected to enter 1-2 week reactions. Traders should have entered Yen put options and be holding them near breakeven. Gold & Silver are fulfilling their potential for a rally into January th. More upside could be seen. Soybeans, Corn & Wheat are mixed but could see rallies into early-february. Energy markets are poised for a 2 nd rebound from major support. Lumber could be close to a major low while Cotton could set an intermediate peak in the coming week. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS & ACTUAL RESULTS ACHIEVED BY A PARTICULAR TRADING PROGRAM. ONE LIMITATION OF HYPOTHETICAL PERFORMANCE RESULTS IS THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK & NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS THAT CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM THAT CANNOT BE FULLY ACCOUNTED FOR IN PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. The Weekly Re-Lay? is written after the weekly close & transmitted by Monday s open. It is published/priced a minimum of 12 wks/qtr (48 wks/year). Alerts are market-driven intra-week updates sent before, during or after trading hours. For explanation of terms & indicators, see Eric Hadik s Tech-Tip? Reference Library or All Tech Tips? & the term Tech Tips? are trademarks of INSIIDE TRACK Trading. Information is from sources believed reliable but accuracy cannot be guaranteed. Principals/employees/associates of INSIIDE TRACK Trading may have positions in cited contracts. No part of this publication may be retransmitted or reproduced w/out the editor s written consent. All analysis & trade strategies are based on the entire trading session (not just pit-session ) unless otherwise specified. Trading Strategy results are based on entry & exit at the recommended levels and do not account for slippage or commission costs. Readers using this information are solely responsible for their actions & invest at their own risk. Copyright 2009 INSIIDE Track Trading Corporation PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. FUTURES TRADING INVOLVES SUBSTANTIAL RISK. POB 2252 NAPERVILLE IL // (fx) INSIIDE@aol.com

2 STOCK INDICES Mar S+P (SPH/ESH) DJIA (Cash) Mar Mini Nd-100 (NQH) Mo Resistance: / ,230--9, Mo Support: ,118--8, Weekly Trend: Down Down Down Wk Resistance: ,268--8, Wk Support: ,823--7, Daily Trend: Down Down Down 01/24/ WEEK OUTLOOK: Stock Indices fulfilled intermediate analysis and the weekly HLS pattern, by declining into the week of January rd. This also increased the parallels between the late-2007/early-2008 action in Stock Indices and the ensuing late-2008/early action -- In 2007, the DJIA set a peak on Oct. 31 st and then dropped into Nov. 26 th. In 2008, the DJIA set a peak on Nov. 4 th and then dropped into Nov. 21 st. -- In 2007/2008, the DJIA rebounded into Dec. 10/11 th and then dropped into Jan. 22 nd. In 2008/2009, the DJIA rebounded into Dec. 8 th and then dropped into Jan. 23 rd (lowest close on January 20 th ). -- In 2008, Stock Indices then bounced into Feb. 26 th. In 2009, they have been projected to rally into late-february, fulfilling multiple price, wave and cycle projections. In addition, the decline into - and potential low during - January rd completes a 9-week highlow-low Cycle Progression as well as a corresponding 63-day high-low-low Cycle Progression. It also completed back-to-back declines of equal duration (Nov. 4 th --Nov. 21 st and Jan. 6 th -- Jan. 23 rd ). And, it fulfilled the daily HLS pattern, triggered on Tuesday (projecting a low by/on Friday). This sets the stage for a 2 nd rally into late- February/early-March while also setting the tone and parameters for the first half of This is in line with The January Cycle - and the likelihood that a January low could hold into mid-year. While the magnitude of the corresponding moves is likely to be different, the timing of intrayear reversals in the first part of 2009 is expected to be similar to that seen in 2008 as already demonstrated. SHORT-TERM (1-5 DAY) OUTLOOK: The DJIA & SPH closed the week just below their respective monthly support levels while the NQH barely tested the upper end of monthly support before rebounding. This places the Nasdaq 100 in a slightly better position, with regard to the 1-2 week trends and outlook. The daily trends, daily 21 MACs and intramonth trends remain down, so a bottom has not yet been signaled. However, the indices are hinting that a quick, 2-week rally could be seen / SPH is an initial objective for the next 1-2 weeks. Trading Strategy: No system trade. Eric S. Hadik -- Editor Page 2 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 Naperville IL (fx) INSIIDE@aol.com

3 INTEREST RATES Mar Bonds (USH) Jun Euro$ (EDM) Mar 10-Yr Note (TYH) Mo Resistance: Mo Support: Weekly Trend: Up/Neut (1) Up Up Wk Resistance: Wkly. Support: Daily Trend: Down Down Down 01/24/ WEEK OUTLOOK: Bonds & Notes remain on track for a decline into February that has been expected to drop below /USH & /TYH. These targets will take on increased significance in the coming week, as the markets head into month-end, due to the previously-described reasons: This target incorporates the early-december lows (127-10/USH & /TYH) and the monthly 2 nd Close Support levels (the November 2008 closes at /USH & /TYH). Since Bonds did remain below the January 15 th peak, a c=a downside wave target comes into play nearby - at /USH. A similar target comes into play around /TYH, depending on the peak used for calculation of the initial decline. Also important is the level of the weekly 8 Low MARC - in the coming week - at /USH. (If Bonds manage to bounce to about /USH to begin the week, it would also create an intra-week PHHS at /USH.) And, the weekly 21 High MAC also comes into play near /USH. A couple other factors need to be included in the discussion about an impending low 1 - Bonds just neutralized their weekly uptrend, pinpointing February 2--6 th as a critical and potentially decisive week. 2 - Both Bonds & Notes tested and held their weekly HLS levels (128-20/USH & /TYH), indicating that an intermediate bottom should take hold in the ensuing 1-3 weeks (no later than February 13 th ). 3 - Since Bonds & Notes remained below the highs of January 15 th, a daily high-high-low Cycle Progression pinpoints February 2/3 rd as a likely time for a multi-week bottom. Eurodollars turned their daily trend to down, signaling that an intermediate top is in place. SHORT-TERM (1-5 DAY) OUTLOOK: Bonds & Notes are in daily downtrends and did reverse their daily 21 MACs down on Monday, confirming expectations for a quick, sharp decline. They validated this by dropping to their respective weekly HLS levels. Some follow-through lower is expected in the coming week. Trading Strategy: 1--4 week traders should have bought March 30-Year Bond put options at an avg. of 42 ticks (/64ths) and be holding ½ of these w/avg. open gains of about $2,500/option. Exit these at /USH. Traders should have taken avg. profits of about $3,200/option on the other ½, exiting around 3-56 when Bonds hit /USH. Eric S. Hadik -- Editor Page 3 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 NAPERVILLE IL (fx) INSIIDE@aol.com

4 CURRENCIES Mar Dollar (DXH) Mar Yen (JYH) Mar Euro (ECH) Mo Resistance: Mo Support: Weekly Trend: Up/Neut (2) Up Down Wk Resistance: Wkly. Support: Daily Trend: Up Up Down 01/24/ WEEK OUTLOOK: The Dollar remains locked in a range between its mid-july low and its mid-november peak and could remain there for several more weeks (possibly months). This is reinforced by the Dollar s inability to reverse its weekly trend to down - with a weekly close below 78.77/DXH - and its reluctance to reenter the prevailing weekly uptrend, which would take a weekly close above 86.40/DXH. It had the chance to re-enter its weekly uptrend but failed to do so. The Dollar completed a 60-degree Cycle Progression and tested its monthly resistance while rallying into this past week. The fact it did not close beyond these levels increases the likelihood for a reversal lower and more consolidation. In addition, this was the 2 nd week following the test (and holding) of the weekly LHR on Jan th. This signaled that an intermediate top should take hold no later than January 30 th. So, the action of the past week fits this criterion. The Euro remains in its weekly downtrend, increasing the probability that new lows will be seen in the coming months. It dropped below the /EC level, allowing it to spike down to monthly support before rebounding. As described last week, a 7-week low-lowhigh-high Cycle Progression portends a secondary peak around February 2--6 th. On a little bit larger scale, the Euro is poised to see an overall decline into late-april/early-may, 180 degrees from its late- October low and 360 degrees from its late-april 2008 peak. The primary downside (price) target - for this overall decline - will be discussed in the February INSIIDE Track. The Yen maintains the potential for a sharp correction leading into early-february, after retesting its 3-6 month upside objectives at /JY. The Yen still needs a weekly close below /JYH to neutralize its weekly uptrend and confirm that an intermediate correction is underway. SHORT-TERM (1-5 DAY) OUTLOOK: The Dollar surged into January 20 th - when daily cycles aligned - and tested monthly resistance in the process. It has consolidated since then. The Dollar is in a daily uptrend and would not neutralize it until a daily close below 85.82/DXH. The Euro is the opposite, remaining in a daily downtrend until a daily close above /ECH. The Yen needs a daily close below / JYH to signal a new reversal lower. Trading Strategy: 1--4 week traders should have bought February Japanese Yen put options at about ticks and should be holding these around break-even. Risk a daily close above /JYH. Take profits on ½ of these if/when /JYH is hit. Eric S. Hadik -- Editor Page 4 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 NAPERVILLE IL (fx) INSIIDE@aol.com

5 INFLATION MARKETS Feb Gold (GCG) Mar Silver (SIH) Mar Sybns (SH) Apr Crude (CLJ) Mo. Resistance: Mo. Support: Weekly Trend: Dn/Neut (2) Up Up Down Wk. Resistance: Wk. Support: Daily Trend: Up Up Up/Neut (2) Up 01/24/09 GC/SI: 1-4 WEEK OUTLOOK: Gold & Silver are slowly advancing and could trigger a more significant advance in the coming weeks. This is due to the weekly trends, the intrayear trends and a 6-week low-low-low-low Cycle Progression in Gold. The low of January th perpetuated this cycle and projects a new 6-week cycle that is more likely to be a 6-week advance. If so, it would carry Gold higher into February th. Silver s cycles are a little different but agree on the potential for more upside in the coming weeks. Silver has been projected to see another rally into late-january, at which time a minor peak could take hold. However, the combination of an ongoing week Cycle Progression, a 360-degree cycle and a Golden Ratio (1.000 down/.618 up) wave relationship project an overall advance into mid- March one year from the March 2008 peak. The weekly trend in Gold could help corroborate this scenario. It has turned neutral twice and could turn up with a January 30 th close above 903.8/GCG. If this takes hold, it would signal a likely 1-2 week pullback AND an ultimate rally to higher highs. Platinum - based on its daily trend pattern - is likely to retest its recent highs. However, it still needs a weekly close above /PLJ to turn its weekly trend to up and to signal any additional upside potential. Copper still needs a daily close above / HGH to turn its intra-month trend up and confirm an intermediate bottom. Based on the weekly trend pattern, a 90-degree move from the October 30 th peak and a 50% retracement in time, Copper could see a rebound into month-end. However, Copper could be setting a larger base from which a 1-2 month advance could emerge. It just pulled back to retest its January low - and held - and then turned its daily 21 MAC up while rebounding. This is looking like the early stage of a 3 or c wave advance that could see acceleration once it confirms a bottom. The CRB CCI Index still needs a weekly close above to reverse the weekly trend to up and to signal that a larger-degree advance is underway. It, too, is showing that a more significant rally could be seen - leading into late-february or early-march. SHORT-TERM (1-5 DAY) OUTLOOK: Gold & Silver are in daily & intra-month uptrends that should prompt a rally into the final days of January. Trading Strategy: No system trade. (continued on page 6) Eric S. Hadik -- Editor Page 5 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 Naperville IL (fx) INSIIDE@aol.com

6 INFLATION MARKETS (con t from pg. 5): GRAINS: Soybeans, Corn & Wheat are giving mixed signals - on a daily basis - but are all still likely to rally into the first week of February, when geometric cycles converge. Corn still needs a weekly close above 414.5/CH to join Soybeans & Wheat in reversing its weekly trend to up. This signal will be a key factor in determining whether Corn - and potentially all the grains - have additional upside potential after early- February. If Corn fails to reverse its weekly trend to up - by February 6 th - it could usher in a bearish period for the ensuing 1-2 months. ENERGY: Crude Oil, Unleaded Gas & Heating Oil are increasing the potential that a b wave low is taking hold and a c wave rally is unfolding. This was first signaled by the daily 21 MACs turning up last week (Jan th ) and then reinforced by Crude giving a weekly 2 Close Reversal higher this past week. At the very least, I expect this rally to last into February 5/6 th. However, it could extend into the second half of February. This will be strongly influenced by whether or not these markets are able to give daily - and then weekly - closes above 56.86/CLJ, /RBJ & /HOJ in the near future. Natural Gas has spiked down to /NGJ and is still expected to set a bottom by January 30 th. If so, an upside 50% retracement in time would create a rally into May - dovetailing with when a month high-high-high-high-lowlow-high-high Cycle Sequence again comes into play. Trading Strategy: No system trade. SPECIAL SITUATION MARKETS: Cotton is giving mixed signals but finally closed above 50.34/CTH to turn its intra-month trend up. The problem is that this took place near the end of the month, casting doubt on whether this signal will have any practical value. As Cotton enters the final 5 days of the month, I am more focused on the weekly trend (which has remained down throughout this entire 10-week rebound from the November 12 th low, and would not even turn neutral until a weekly close above 51.30/CTH) and the monthly close... The reason this is significant is two-fold: 1 - The monthly cycles, described over the past two months. The January 3, 2009 Weekly Re-Lay summed it up best when it stated: If Cotton does surge into mid (or late) January without reversing its weekly trend to up, this would validate a 10-month low-lowlow-high-high Cycle Progression and project an ensuing decline - potentially lasting 10 months - during Cotton has done exactly that, rallying into late- January without reversing its weekly trend to up. So, if a peak and reversal lower is seen in the coming week, it would set the stage for a new bear market. This leads into the second reason that the action of the next 1-5 days is important: 2 - The potential for a monthly key - or 2 Close - Reversal lower. Cotton has spiked above the high of December, BUT, would only have to close below 49.02/CTH to generate a monthly key reversal lower. (continued on page 7) Eric S. Hadik -- Editor Page 6 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 Naperville IL (fx) INSIIDE@aol.com

7 More significant, however, would be a monthly close (January 30 th ) below 47.91/ CTH, which would generate a monthly 2 Close Reversal lower. There are a myriad of factors (cycles and other technicals) arguing for another decline in Among them is the yearly 2 Close Reversal lower that was triggered in I will be detailing these factors in a forthcoming INSIIDE Track. For now, the short-term trend is up until a daily close below 47.12/CTH. If this is seen in the coming week, it could spur a quick drop into February th, 90 degrees from the Nov. 12 th bottom. Coffee did give a weekly close above /KCH, signaling that a larger-degree advance could be unfolding. However, it remains at or below monthly resistance - at /KCH - and would need to close above this range to signal a new wave higher. If Coffee rallies further, immediately, it would set the stage for a pullback into the first week of February and then a new rally week traders should NO LONGER use the strategy discussed in the 1/21/09 Alert. If Coffee now pulled back enough to trigger this, it would probably decline further. A new trade could set up in the ensuing week. Sugar continues to validate multiple cycles and Cycle Progressions that have been expected to generate a rally into late-january and then a pullback into late-february or early-march. These include a 90-degree cycle that linked highs in early- March 2008, late-august 2008 (1 week early) and early-december This is reinforced by the weekly trend that has twice turned neutral, identifying the week of January th as a potentially decisive one, when the weekly trend could turn to up. Sugar has also perpetuated a 6-week low-lowlow-low Cycle Progression - that next comes into play during the week of February th and an intervening 3-week low-low-low-low-low Cycle Progression that could extend the current rally into the week of February 2--6 th. Sugar turned multiple trends back to up this past week, increasing the potential for a surge above 13.00/SBH. Live Cattle & Lean Hogs remain bearish and will not show any signs of setting a bottom until daily closes above 86.90/LCJ & 66.50/LHJ. There is a chance that they could both set a low - in the coming week - and then rally to a high (that could hold for several weeks) during the ensuing week. This would create a 30-degree low-high-high Cycle Progression. Lumber has dropped to new 22-year lows in what is looking more and more like a blow-off (or exhaustion) decline. It is fulfilling cycle expectations for a decline into January 2009 that perpetuates a month high-high-high-low Cycle Progression and a 10- month low-low-low Cycle Progression, connecting the May 2007 & March 2008 lows (with a Jan low). (continued on page 8) Eric S. Hadik -- Editor Page 7 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 Naperville IL (fx) INSIIDE@aol.com

8 It also culminates a 3-year decline from the January 2006 peak and a 1.5 year (540 degrees) decline from the July 2007 peak and comes on the 8-year anniversary of the January 2001 bottom. This creates an 8-year high-low-low Cycle Progression that also incorporates the early-1993 MAJOR top. Perhaps even more significant is the fact that Lumber is doing this within a few months of the 34- Year Anniversary (2xs the 17-Year Cycle) of its late-1974 bottom. If a low was set this past week, it would also complete a 5-week high-high-low Cycle Progression and a 1/.618 (8-week/5-week) lowlow-low cycle. The first sign that a low is forming would be a daily close above /LBH. Until that occurs, this blow-off decline remains intact and should be respected. System Trade Strategies provide a small sample of corresponding action, seeking to choose the perceived lowest risk/ highest probability trades based on specific patterns - with strict money management being first priority. They do not imply the only action to corresponding analysis, are not always directly linked to the published analysis, and should be viewed/traded as a whole (portfolio). They represent just one particular approach that should be understood and implemented in its proper context and in the context of treating trading as a business. There are many other applications for the analysis and readers should seek to integrate it with their own trading approach, utilizing our proprietary indicators, identification of daily & weekly trends, cycles & resistance/support zones. Always use synergy & prudent money management (see Tech Tip? Reference Library). Daily & weekly trends are a lagging indicator based on a proprietary pattern that is not revealed. These trends are used as a backdrop and/or confirming signal - not a trigger mechanism. Eric S. Hadik -- Editor Page 8 of 8 Copyright 2009 INSIIDE TRACK Trading POB 2252 NAPERVILLE IL (fx) INSIIDE@aol.com