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FuturesCom Investment Publications
Morning Comments Monday August 2nd,2004
Serving Professional and Individual Traders World Wide since 1988
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"Observation. experience , memory and mathematics -- These are what a successful trader must depend on. He Must not only observe accurately but remember at all times what he has observed. He cannot bet on the unreasonable or on the unexpected, however strong his personal convictions maybe about man's unreasonableness or however certain he may feel that the unexpected happens very frequently. He must bet always on probabilities--that is try to anticipate them. Years of practice at the game, of constant study, of always remembering, enables the trader to act when the unexpected happens as well as when the expected comes to pass. A man can have great mathematical ability and unusual power of accurate observation and yet fail in speculation unless he also possesses the experience and memory "

-Reminiscences of a Stock operator-1929
Saturday July 31st, 2004
5:00 AM eastern time

Crude hit closed at contract highs at $43.80 giving a weekend buy rule, which is when a market makes new contract highs and closes within 10 % of that high there is a 70 % chance it will open higher after the weekend.
If it does not then caution to the side of the trend if warranted. The Failure of Yukos was on oil traders minds and any reduction of supply will cause oil to spike..Yukos is not likely to fail or stop production for any length
of time , with the worse case scenario being , it does stop production. the company is then broken up and oil exports resume at full speed with new management and ownership..

However many oil traders are now saying the 'sky is the limit'. We suspect that a sharp decline in crude prices is not far off, from what level is something only the market knows

Open BW Positions

The Frenzied Forex Front

On the Month the dollar ended higher against the euro, yen, Swissy and canuck 1.4%, 2.17%, 2.47% and 0.29% respectively, while finishing fractionally lower against the Cable and Aussie . The Swiss Franc Futures made an outside month down.. A higher monthly high and lower low.. and closed under last months lows a rare and generally negative occurrence..

On Friday the dollar was largely unchanged after coming back from losses set in after the release of
2nd quarter GDP and bombings in Uzbekistan.

U.S. GDP showed a decline to 3.0% from a revised 4.5% in Q1.. Weathermen (Economists) and traders were expecting a GDP number of around 3.7 or so .. as it was the1st quarter revision made up for the lower 2nd quarter miss..

The key here should be the revision of the Q1....Thinking back a bit .. during the last recession at the beginning of this decade GDP number were consistently revised downward after being reported as ok..
Expect more upward revisions as the opposite may well be occurring now..

The Chicago PMI report rose to a 6 month high at 64.7, surprising consensus forecasts of around 60.
The stronger than expected increase in the July Chicago PMI to a 6-month high of 64.7 from June’s 56.4, was the highest percentage increase Since November 2002.

Overseas, the Eurozone June CPI came in at 2.4% annual rate. The figure is within the ECB's target rate of close to 2.0%” and a tad under the estimate of 2.5 %... Euro Bulls/Dollar Bears will claim a ECB rate hike is now likely and that inflationary impact from the recent rise in Oil prices will cause inflation to exceed the ECB’s explicit target on inflation.

However,   with unemployment near 10 % in France, and with Germany's Jobless numbers at their highest point since the reunification . the ECB is hardly in a position to gladly and rapidly ratchet up rates.

Rates will not prevent supply push inflation from Oil. In addition one mitigating factor is that many Agricultural commodity prices are generally substantially lower than even two months ago and it should alleviate some pressure on inflation..   Finally one has to think if there is anything to really slow down with a rate hike. ?

'Oh where is the Europe from 25 years ago.'.. When i first began working on the IMM ?

   The ECB has been criticized from this writer and European politicians for not doing enough to promote growth in the region. While at the same time it remains under the gun from the financial markets and traders looking to profit from a move in interest rates upwards… The foremost thought on the ECB's mind should hardly be an inflation worry when 10 % unemployment in some countries is around the corner...

The OECD says the euro zone's unemployment rate will be 8.8% in 2004 virtually no change form 2003 and at its highest level since the rate of 9.4 % in 1999.

While the region shows a strengthening industrial recovery, there continues to be sloppy domestic demand and virtually no job growth. Which implies short term cycles are still being inhibited by larger structural and Macro cycles. Going all the way back to the first 1/2 of the 20th century and the massive loss of life resulting from the Great War and WWII

    ECB's own analysis shows productivity has gradually worsened over the past two decades.

The average rate of productivity growth has dropped 50 % since 1980.. Since 1996, productivity growth has averaged less than 1% per year. The worst sectors are the construction and finance/ business.
While Productivity growth in the manufacturing sector which is key to living standards has remained broadly stable.

During the same time frame the U.S. has raised its rate of productivity growth and standard of living. According to the ECB calculations, Since 1980, U.S. real per capita GDP has risen cumulatively by around
60% .. In the Eurozone the rate is about 40%..

Americans have on average become 50% richer than our European friends Since 1996 the Gap has widened
which is likely caused by the fall of the Soviet Union and Reunification of East Germany into Germany.
Toss in the declining work week and hours worked comparatively to the U.S and the U.K and European unemployment is stuck at 9% of the workforce, nearly double that in the U.K.

We have been saying for some time that Europe's labor markets must be reformed and there are signs this is happening as workers at some plant are agreeing to longer work weeks to keep jobs ...

These reforms must kept up and their pace hastened.. A sharply stronger Euro does not help this..

On the Fiscal side, according to the OECD high deficits are the euro zone's biggest economic problem.
According to the OECD' s latest survey of the Eurozone " "The most acute macroeconomic policy challenge relates to fiscal consolidation and coordination, which is vital for the single currency, but currently under stress".

All one has to do is follow recent squabbles over the stability and growth pact.. The Pact itself is undergoing a sever test as governments strive for growth at the cost of fiscal stability Deficit stability targets that when planned , in my opinion did not consider a slowdown of the magnitude that has occurred. after the pact was enacted... Perhaps some countries should consider selling gold to finance reforms.

The OECD sees the European Central Bank keeping interest rates on hold as long as the medium-term inflation outlook remained favorable, in addition it said "If evidence of weakling of economic activity surfaces, with moderating inflationary pressures, the ECB should stand ready to reduce its interest rates," .While "At the same time, the ECB should continue to be vigilant to upside risks," it said.

The OECD now mentions that it is "striking" that, with accelerating global economic pickup, growth in the euro zone "has been recovering much more hesitantly than in many other OECD countries." In May, the 30-nation OECD forecast U.S. economic growth of 4.7% this year, Japan should grow by 3.0% growth and the U.K. 3.1%. while the Euro zone's 2004 growth will be shallow , while 2005 should show a moderate 2.5 % growth.

We have said this before and will say it again ..Structural reforms on labor and a slightly weaker Euro would greatly help the Eurozone move forward and find the path it once had....

Across the Channel.....Thursday of next week the Bank of England is expected to raise rates another 25 bp to 4.75% , this is largely built in to the Cable but still a favorite theme of Cable Bulls and helped lift it off its lows last week .. one thing to note the pound is largely unchanged to weakish since the last time they raised rates..

In Asia the Yen rose early a bit Friday after the inflation figures showed a move from -0.1% from –0.2%,
Many traders surmise this should cause the end of the Bank of Japan’s zero interest rate policy. Concluding that once Japan’s deflation ends the BOJ could begin to undo the ultra easing in the monetary system, which would be yen positive.

Not likely , with last months Japans domestic bank lending to businesses down for the 78 month in a row.. WHY SHOULD RATES GO UP ? The yen may get help by a rising Nikkei . Nevertheless ,traders should not rule out a trade towards 120.00 in Dollar / Yen .. in a larger picture.

The 15 year Seasonals suggest firmer dollar / yen into early week or two of aug.. same with cable , canuck and swiss.. The election cycle based on speculative trading in dlr / swiss suggests a strong dollar that usually is stronger to considerably in sept /nov than it is at end of June.

Spot numbers .. Dlr/ Swiss 12740 to 12680 is now nearby support and band resistance near 12890 is the likely resting area. If the euro slips under 11975 then 11920 should trade and may bring out sellers.. Inability to stand on top of 12030 would increase chances of a decline , the close under is not friendly...Sellers should show up at 12102 and 12175.. Cable should hold 17940, sellers should appear near 18280 and 18400
Dlr / canuck if over 13350 looks likely to test 13460 .. Aussie should be broadly range bound ..play the range
Resistance is at 7074 to 708... big picture suggests Dlr / Yen should test 11300.. if standing on top of 11155 with 11010 to 10960 a likely resting area..

The following commitment of IMM traders chart shows considerable liquidation of long Euro .. but still long..
While the highly speculative Swiss is more dramatic and in balance and large traders are now in a posture to begin to Sell swiss ,while the small traders are still net long..

Call or e-mail if you need analysis of any other Commitment reports ...

-No change in Dollar friendly posture--Stay tuned for Flashes and updates-

On to the Nitty Gritty..

Sept Yen
Resistance should appear near 9044 to 9060 region
Support should appear near the 8964 to 8934 region

Sept Euro Currency (EC)
Support should appear at 11975 and 11920 . below that a test of 11805 is likely.
Resistance is at 12030 and 12102 and 12175..
BW Traders should go short if a close under 11917 occurs

Sept Swiss Franc
Resistance should appear near 7836 to 7864 and 7939 to 7954.
Support should appear near 7777 to 7763 and 7689 to 7675

Sept British Pound
Recommended open positions short at 18135
Support should appear near 18080 , a close under is negative and augurs for a test of 1.7800 to 1.7740
Resistance should appear near 1.8150 to 1.8220 and 1.8400

Sept Canadian Dollar
Recommended open position short at 7507
Support should appear near 7486, a slip under augurs for a test of the 7428 to 7414 region
Resistance is at 7550 and the 7587 to 7601 region

Sept Aussie Dollar
Recommended open position short at 6951
Support should appear near 6919 to 6906 and the 6836 to 6809 region
Resistance should appear at 6990 to 7003and the 7074 to7088 region

The Sensational Stock and Bond Markets

Dow Jones Industrial Average
Resistance should appear near 10,185 and 10, 257
Support should appear near 10136 to 10120 and 10104..Below that 10,037 to 10,021 should hold.

September SP500
Recommended open position Long 4 at 1124 80 avg
Resistance should appear near 1115.5..an extended trade over is freindly and augurs for an eventual
test of 1130.00 to 1136.00 region. Which now appears more likely than not
Support should appear near 1101.00 to 1096.00 then 1082.00 and the 1068.00 to 1058.00 region.

Nasdaq Composite
Support should appear near 1883 and the 1865 to 1858 region.
Resistance should appear near 1902 to 1909 , beyond that a test of 1927.5 is likely

Sept Mini Nasdaq 100
Resistance is at 1415.00 to 1421.00 and 1437
Support is at 1399 and the1383.00 to 1377.00 region

Sept 10 Year T-Note
Resistance should appear near 111-07 and 111-22
Support is at 110-22 then 110-07 and 109-22

Precious Metals

December Gold
Recommended open position short at 389.7
Resistance should appear at 398.2 to 399.2
Support is at 392.9 to 390.9

Sept Copper
Support should appear near 127.40 to 126.80 and 123.80 to 123.20
Resistance should appear near 131.00 and 133.40 to 134.60

Sept Silver
Recommended open position short at 633
Support should appear 651 to 648.5, a slip under augurs for a test of 643 to 641.5
Resistance is at 665.5 to 667.5 and 674 to 675.5..Beyond that 690.5 to 692 should cap a rally

The Exciting Energies

Sept Crude Oil
Resistance should appear near 4425 to 4446 and 4503 to 4514
Support should appear near 4381 to 4370 and 4310 to 4304

Sept Unleaded Gas
Recommended open position short 12435
Resistance should appear near 1.3100 then 1.3340 to 1.3460 and 1.3770 to 1.3830
Support should appear near 1.2740 to 1.2680 and 1.2380 to 1.2320

Sept Heating Oil
Resistance should appear near 1.1920 to 1.2030 and 1.2320 to 1.2380
Support should appear near 1.1690 to 1.1640 and 1.1360 to 1.1300

The Lively Livestock
October Cattle
Support should appear near the 8857 and 8777 to 8762.. below that a test of 8682 to 8667 is likely.
Resistance is at 8932 you 8967 then 9047 to 9062 and 9137 to 9157

August Hogs
Recommended open position Short 7557
Support is at 7762 then 7692 to 7672 and 7602 to 7587
Resistance is at 7837 to 7867 and 7937 to 7957

October Hogs
Recommended open position Short 2 at 6612 avg
Resistance is at 6990 to 7002 then 7072 to 7087 and 7142 to 7172
Support is at 6907 then 6837 to 6807 and the 6757 to 6742 region

August Pork Bellies
Recommended open position Short 10395
Resistance should appear near 10472 then 10577 to 10627 and10682 .
Support is 10362 to 10317 and 10187

Stay tuned for BW updates and Flashes

The Grande’ Grains

December Corn
Support should appear near 222 3/4 to 221 3/4 and 218 1/2 to 217
Resistance is at 226 3/4 to 227 1/2 and 231 1/2 to 232 1/4

November Soybeans
Support is at and the 565 1/4 to 564 and the 557 3/4 to 555 1/2 region ..
Resistance is at 571 3/4 to 572 3/4 and 579 1/4 to 580 1/2.. beyond that sellers should appear near
585 1/2 to 588 and cap a rally

December Soymeal
Support should appear near 173.8 to 173.1 and 169.6 to 168.9
Resistance should appear near 177.4 to 178.0 and 180.8 to 182.2

December Soybean Oil
Resistance should appear near 2126 to 2134 and 2170 to 2185
Support should appear near 2042 to 2034 and 1996 to 1982

Sept CBOT Wheat
Support should appear near 310 1/4 to 309 1/4 and the 304 1/2 to 303 3/4 region….BW Traders can buy at 304 3/4 for a bounce and risk a close under 291 3/4 for three days in a row..
Resistance should appear near 314 3/4 to 315 3/4 and 319 1/2 to 321 1/4.

Stay tuned for BW Updates and Flashes

The Satisfying Softs

September Coffee
Recommended Open position long 2 at 7020 avg
Support should appear near 6670 to 6655 and the 6590 to 6575 region.
Below that 6510 to 6485 should contain a decline
Resistance should appear near 6740 to 6755 and 6810 to 6835

Sept Cocoa
Recommended open position Short at 1594
Support is at 1642 and 1615 to 1609.. below that a test of 1576 to 1569 is likely.
Resistance is at 1689 to 1696 and 1731 to 1738 .

October Sugar
Recommended Open Position Short at 811
Support should appear near 823 to 819 and 814
Resistance should appear near 847 to 852..Beyond that sellers should appear near 877 to 882..
BW Traders can sell at 876 and risk a close over 917 for three days in a row.

December Cotton
Support should appear near 4380 to 4370 then 4315 to 4305 and 4250 to 4235
Resistance should appear near 4445 then 4505 to 4515 and 4570 to 4585

- A Ship in Harbor is Safe...But that is not what ships are built for –

Happy Trading!
Bill wil@futurescom.com

1-866-409-3890
Saturday July 31st 2004
6:00 PM South Florida Beach Time

THIS PUBLICATION IS SUBJECT TO REVISIONS AND CONTAINS THE VIEW AND OPINIONS OF THE AUTHOR, EXCEPT WHERE OPINIONS ARE ATTRIBUTED TO OTHER SOURCES. WRITTEN PERMISSION IS REQUIRED PRIOR TO ANY DISTRIBUTION OR REPRODUCTION. FUTURES TRADING ARE RISKY AND CAN CAUSE SUBSTANTIAL FINANCIAL LOSS. THE USE OF OPTIONS AND OPTION TRADING INVOLVES A HIGH DEGREE OF RISK. THE USE OF STOPS MAY NOT LIMIT LOSSES TO INTENDED AMOUNTS. SPREAD POSITIONS MAY NOT BE LESS RISKY THAN OUTRIGHT FUTURES POSITIONS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. SOURCES ARE BELIEVED TO BE RELIABLE BUT NO ASSURANCE IS MADE FOR ACCURACY. ADDITIONAL RISK DISCLOSURE IS AVAILABLE.
FuturesCom Investment Publications Copyright@1996-2004 all rights reserved

Recommended Open BW Positions
Short Sept British Pounds 18135
Short Sept Canadian Dollars 7507
Short Sept Aussie Dollar 6951
Long 4 Sept SP500 1124.80 avg
Short Dec Gold 389.7
Short Sept Silver 633
Short Sept Unleaded Gas 12435
Short August Hogs 7550
Short 2 October Hogs 6612 avg
Short August Pork Bellies 10395
Long 2 Sept Coffee 7020 avg
Short Sept Cocoa 1594
Short Oct Sugar 811

Terms