How to put a Head and Shoulders to work for you

British Pound (Dec.) –There is a suggested short entry from the 16271 close of Sept.18. We believe stop protection can be lowered to intraday penetration of 16271 or a close at or above 16208. It appears that a Head and Shoulders formation that had formed has seen the neckline penetrated. We believe the price objective of this H&S counts to approx.: 15175. Retracement resistance levels are approx.: 16135; 16251; 16367. The next series above is approx.: 16244; 16394; 16544.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Finding a short entry point in the stock indices

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We definitely thought this would be of interest especially to stock index traders.

We are writing this at just before 2:00 pm Central Time.

What we have been following today is the come back rally in the stocks and the charts above show that these major indexes have retraced the Fibonacci .618 pct from their high made Wednesday Sept. 25 to their lows since the highs were made. For those who might believe the timing is correct for short entries, especially following the reversals of last week, we believe this may be useful.

There was holiday type volume today with the celebration of Yom Kippur. And it is possible that it provided just the setting for a rally opportunity following the key reversals of last Wednesday. What it does for the traders looking to be short is to provide a potentially lower risk entry level for their short positions. It would seem to us at least, that new highs above those of September 23 would suggest that the timing for short positions was inappropriate at this time but this rally today has brought the entry level to a more reasonable risk reward position.

In the Dow Jones Industrials we show the high of Wednesday the 23rd as 9918.00. The low of Friday the 25th was the lowest price since the high was made and we show that to be 9641.00. The .618 Fibonacci ratio value of the high to low we calculate as 9812.00 and today’s high as of the time we are writing this has been 9823.70.

In the S&P 500 we calculate the .618 ratio to be 1065.26 where today’s high has been 1065.13 and for the NASDAQ 100 we calculated the .618 as 1730.15 and today’s high we show as 1733.79.

Good trading to all

Jeff Majer
Diego Pilar

CB&S Division of MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Trade Focus update - Natural Gas

Click to enlarge chart

This is an excerpt from this week’s Trade Focus. It was written in the early afternoon on Thursday September 24.

Natural Gas (Nov.) – Two weeks ago we introduced this marked to our coverage and actually saw a suggested long entry be elected. That is from a price level of 4025. We noted last week that the rather quick run up had touched against two points of resistance and that some participants might choose to reduce the size of the long entry position. Remaining long entries from the initial suggestion we believe can raise stop protection to intraday penetration of 4369 or a close at or below 4425. We also suggested last week that new or additional long entries could be initiated with intraday penetration of 4830 which has been penetrated. Suggested long entries from this entry approach we believe should place stop protection at intraday penetration of 4540. We believe the next area to expect stiff resistance should be 5320 or so and some long entrants may choose to reduce position size in that price area. Retracement areas of resistance are approx.: 4874 (hit) 5308; 5743. Extension targets active are approx.: 5019; 5155 and approx.: 5205; 5381.

For those not on our Trade Focus email list you may sign up for a trial at jmajer@mfglobal.com

We send the email version of the weekly Trade Focus the day it is written. We post it on to the website at www.cbandsbrokerage.com after additional prep work and compliance procedures which usually takes an extra day.

Let us know if there are any questions comments or even better if there are any answers you may have.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Emini S&P Trade Focus sneak peak

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S&P 500 (Dec. Emini) – Suggested long entries from the price level of 103600 we believe should raise the stop protection to a break even area with intraday penetration of 103700. A key outside reversal day was recorded in the major indices on Wednesday the 23rd following the FOMC announcement on rates and accompanying statement. For those looking to be short this market we believe we can suggest short entries can be initiated at a price level of 105000 or better. If elected stop protection we believe should be intraday penetration of 107900 or a close at or above 107650. Retracement levels of support are approx.: 104225; 103160; 102100. The next series below is approx.: 99450; 96920; 94375.

If you want to receive the entire Trade Focus the day it is written you can join our trial subscription email list. And if you would like to establish your brokerage account with us which automatically places you on the email lis along with gaining access to us please inquire here:

jmajer@mfglobal.com

dpilar@mfglobal.com

312 261-7380

800 321-5810

Jeff Majer

Diego Pilar

CB&S Division of MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Bearish Divergence?

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We have heard many times probably since July from some of the bearish stock market tabloids how the NASDAQ making a new high while the DOW JONES and S&P 500 did not was a bearish divergence and to look out below.

Today we see the NASDAQ 100 made a new high while the DOW and S&P 500 did not. Based on what has happened over the past months when this divergence has occurred more than once, we see no reason to expect that this is a signal of a stock market high. We often say that anything can happen and usually does, but this particular example of divergence has not stopped the rally, bear market rally or not, from continuing. We would expect it will be more than this type of divergence to make its mark and take its toll.

Jeff Majer
Diego Pilar

jmajer@mfglobal.com
dpilar@mfglobal.com

312 261-7380
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Wheat: Patience required

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We thought that this was an opportune time to look at the wheat market. This has been a market where price has been steadily eroding since its all time high made in February 2008 when it reached over $13.00 per bushel. It is currently trading at a price of $4.60 per bushel for the December CBT contract (Chicago).

Our interest in discussing it now is to attempt to get ahead of the game and to be prepared for a potential change in direction. We have seen so many times over the years that substantial moves can begin very subtly. If not prepared ahead of time they may be missed or not more fully taken advantage of.

Clearly as of right now it appears that the price of Wheat remains headed downward. But we have noticed what may be divergence in some of the momentum indicators. That being where the indicator has not made a new low even though the price has.

As we said above, sometimes price moves begin very subtly. They may also take time to develop and to develop in a series of stages. We note that on the weekly chart that one major downtrend line has been broken. Even though the price of Wheat did not immediately respond by rising rapidly the trend line has never been reviolated by the market retreating back below it. We also see that the price did make a new low after the initial trend line break but that it remains above that trend line.

Many may not consider this significant. We do however. It is significant for what may be coming and is significant to alert us to remain aware of what this price trend is doing. Wheat is known for relentless trends and particularly when they are down trends. But our experience has shown that it may only take the upward break above the next trend line to ignite a price move of some significance that could present a valuable reward to risk situation. Even if it turns out to simply be a price correction of consequence.

Two of the greatest keys to success, particularly in trading markets, are discipline and patience. We have seen other market situations develop over a period of time much like what could be happening with Wheat. We refer to the breakout above that first trend line as a stage 1 breakout. It does not require market action be taken at this time, in our opinion, but patience should allow for being ready to do so when that opportunity arises.

How can we help you to be more alert to situations like the one discussed here?

jmajer@mfglobal.com
dpilar@mfglobal.com

Jeff Majer
Diego Pilar

CB&S Division
MF Global Inc.

312 261-7380
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Fibonacci ratio retracements

These monthly charts provide a demonstration of why we include Fibonacci ratios for retracements in our market analysis.


The Dow Jones Industrials retraced .618 from the 1987 crash low of 1706.9 to the Oct. 2007 high of 14,198.1 with the March 2009 low of 6,470.0



The S&P 500 had a Great Depression low in June 1932 of 44.0. From that low it then peaked in March 2000 at 1552.87. The Oct. 2002 low was an almost perfect 50 pct. retracement at 768.63.


Soybeans had an Oct. 1969 low of 236 1/8 and an all time high of 1660 in July 2008. The December 2008 low was just a few pennies through the .618 retracement at 777.

These are just a few examples of what makes this such a valuable tool in our opinion. Hopefully you would agree. If you think using these powerful ratios can improve your results wouldn’t it be worth contacting us to see how we might help put them into action for you?

Jeff Majer
Diego Pilar

jmajer@mfglobal.com
dpilar@mfglobal.com

312 261-7380
800321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Natural Gas Fibonacci

click chart to enlarge

This is an update to the Natural Gas price move we have been covering the past week or so. By now those who have been reading this blog spot have seen our use of Fibonacci retracements and extensions. As can be seen in this daily chart of the November Natural Gas futures the first .618 retracement level of significance has been reached at today’s high (Wed. 9/16/09). It’s still open as we prepare this and could continue to new daily highs, but we have learned through experience the value of these ratios.

This also doesn’t mean that the move is over. It is, though, something traders should not only be aware of but perhaps use as a barometer for adjusting their trading positions. This could mean adjusting quantity or stops. It may mean for some traders that new trade initiation is in order. It could also be to trade against it or to now watch for a new signal if and when the level is penetrated.

Whatever it may be, we felt it notable and important enough to get the word out that this level of significance has been hit.


Happy trading

Jeff and Diego

CB&S
Division of MF Global Inc.

jmajer@mfglobal.com
dpilar@mfglobal.com

312 261-7380
800 321-5810
www.cbandsbrokerage.com

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Gold and Dollar Potential

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Here is a quick look at two markets gaining a lot of attention today. The charts included are a weekly of the Dollar Index and a weekly of Gold. We have included the Fibonacci Extension overlay as we interpret them.

The Dollar chart shows it has reached what we refer to as the first target which is approximately 76170. The second target that is displayed is at approximately 75000.

In the Gold chart the extension targets shown the way we have constructed this are approximately 106400 and 110650.

We are not saying that these will or must be hit but believe they provide reasonable guidelines and may help in managing positions in these markets. As always, we are open to discussion on such matters.

A scenario under consideration is that if the stock market continues to rise to projections off approximately 112500 and 122500 basis the S&P 500 then this could likely improve the chances of the Dollar Index and Gold reaching these targets. These S&P 500 projections mentioned are approximate levels representing the .500 and Fibonacci .618 ratio retracement using the October 2007 high and the March 2009 low.



Good trading to all

Jeff and Diego

www.jmajer@mfglobal.com
www.dpilar@mfglobal.com

312 261-7380
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

S&P and NASDAQ 100. Is this it or is there more??

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We are looking at the S&P 500 today because it has reached a level of significance that we wanted to reference. Since March of 2009 the S&P has moved in a distinct form from its 666.79 low. The first major high point we see as 956.23 made June 11. The subsequent correction low stopped at 869.32 on July 8. The market has now reached a level equaling the .618 Fibonacci extension of the first major move up added to the correction low of July 8. We like to refer to this .618 extension as the first target.

We are not saying that it stops here even now, or forever, but our experience has provided us with an understanding that pauses, however brief or lengthy, often come at this first target price prior to moving on to the next. Our experience has also provided us with enough instances where the second target is eventually made. In this case the .750 Fibonacci extension target is approximately 1086.00.

It is important to note too that this or any market does not have to do what it may have done in the past. Markets may fall short or exceed but we find the guidelines that the Fibonacci ratios present as another good tool for traders.

click charts to enlarge

The other charts we have posted today are of the NASDAQ 100 both weekly and monthly. The weekly chart shows extension target levels where the .618, as we interpret it here, has also been reached and somewhat exceeded. Using a starting point of the March 9 low of 1040.52 to its June 8 high of 1511.89 and the correction low on July 6 of 1394.87 we get the Fibonacci .618 extension target at approximately 1686.00 and the .750 extension at approx. 1748.00. The high of today, Tuesday Sept. 15 as we are preparing this has been 1700.33.

The monthly chart we use here is to illustrate some retracement levels that may become significant points of resistance. First of all using the October 2007 high of 2239.23 and the November 2008 low we get the .500 retracement of approx. 1629.00 and the .618 retracement of approx. 1773.00. As it can be seen the .500 retracement resistance level was penetrated leaving the .618 at approx. 1773.00 as the next Fibonacci retracement ratio of significance.

On a larger scale for the NASDAQ 100 are the retracement levels still remaining from the March 2000 high to the October 2002 low. The Oct. 2007 high did not quite reach even the .382 retracement level where the S&P 500 and Dow Jones Industrials exceeded their 2000 highs. This was the internet bubble inherent to the NASDAQ.

The retracement levels in the NASDAQ 100 using the March 2000 high of 4816.35 and the October 2002 low of 795.25 (yep that’s right) gives a .382 fib retracement value of approx. 2331.00, a .500 value of approx. 2805.00 and a .618 fib retracement value of approx. 3280.00.

We wanted to make note too of the uptrend line that is drawn using the October 2002 and July 2006 lows. After breaking through to the downside in September of 2008 on its way to its eventual low in November 2008 (retested in March 2009), this former uptrend line may be ripe for a retest before all is said and done. And finally notice that the 50 month moving average is currently hitting at approximately 1690.00.

We are not saying that any of these levels will be, have to or are going to be reached. We will say, though, that there are some traders that do find these Fibonacci ratios and tools such as these as beneficial to helping make trading decisions.

It is very often the management of trading positions that turns out to be what determines trading success in the long run. We hope this brief discussion has provided some value. If this sort of information and the use of it can help you and your trading plan send us an email or give us a call.

jmajer@mfglobal.com

312 261-7380
800 321-5810

Jeff Majer
Diego Pilar

CB&S Division
MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Natural Gas Follow up and Follow Through

click to enlarge charts

We said the other day when first mentioning the Natural Gas market situation that we would be following up. Above are updated daily charts for the October and November futures contracts.

As can be seen there was a nice move upward off this recent low point. So far it has stopped against its .500 point of the most recent and last wave down. Interestingly, the downward correction of this first upthrust held at the .500 support point too.

We have heard on the television financial news station this morning that one of the big investment banks has told its clients that they expect natural gas prices to reach 6.000 by year end. We are not passing judgment on the prediction but thought very worthy of mention.

We have said that the Natural Gas market has been known to be volatile in nature. It is possible, though, that this could be the beginning of a prolonged move. At least prolonged from the viewpoint of futures markets.

Is this something that should be considered for participation? Only you, the individual investor or trader can answer that question. If we can help in determining that for you or in determining possible approaches to this market we would be pleased to do so.

jmajer@mfglobal.com
312 261-7380
800 321-5810

Jeff Majer
Diego Pilar

CB&S Division
MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Natural Gas

click charts to enlarge

The charts above are of the daily November Natural Gas and the monthly Natural Gas futures contract.

While there has been an incredibly steep decline after reaching a high point in July of 2008 Natural Gas appears to be signaling it may be ready for at least a retracement bounce of some amount. There is an upward reversal showing on the daily chart with the possibility being set up on the monthly. The weekly does not display this same pattern, however.

It also appears to us that the structure of the move off the low as seen on the daily chart has the potential of producing further upward thrust. We are including here what we said in this week’s Trade Focus which was written yesterday the 10th. The market has already moved somewhat away from our price suggestion and actually has approached some of its first levels of resistance, but Natural Gas is known to be volatile. We will be updating on this situation as it progresses.

From Trade Focus - Sept 10th
Natural Gas (Nov.) – This is a new market we are adding this week. It appears that there has been a reversal off the recent low on a daily basis. It is a bit more pronounced on the October contract but the October is due to expire September 28. This tends to be a rather volatile market, perhaps even more so than crude oil; therefore it may not be for everyone. But after a prolonged down trend it appears natural gas is showing signs of at least placing a temporary bottom. We believe we can suggest that long entries can be initiated at a price level of 4025 or lower and that stop protection should be intraday penetration of 3765. Retracement resistance levels are approx.: 4114; 4308; 4503. The next series above is approx.: 4252; 4495; 4738. Since this has been such a steep decline over many months there will be additional levels above the market that will be stated here as they approach.

If interested in joining the weekly Trade Focus email list so that it will reach you by Thursday afternoon let us know. We will be happy to oblige.

As always, send any comments or observations to jmajer@mfglobal.com.

If you need to establish your trading account you can contact us directly at the email address above or click on this link:

http://www.cbandsbrokerage.com/openanaccount.html

Or call:
312 261-7380
800 321-5810

Jeff Majer
Diego Pilar
CB&S Division

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Dollar Index

click charts to enlarge

The charts above are of the dollar index. One is a daily and the other a weekly chart. With the dollar getting so much attention these first days back after the US Labor Day holiday we thought it would be a good time to present the picture of what this beleaguered currency looks like

The daily chart displays a downward sloping trading channel which has seen the low end reached with today’s lower market.

The weekly also displays the channel line being touched and also we have included the Fibonacci retracement levels where it can be seen that the Dollar Index has breached the important .618 level of support but has yet to close below it.

It may be a good idea to exercise some patience prior to initiating short positions at this price level until further development. It is always a good idea, we believe, to avoid selling support or buying resistance.

jmajer@mfglobal.com
312 261-7380
800 321-5810

Jeff Majer
Diego Pilar
CB&S Division
MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Gold and Crude

Click charts to enlarge

The above charts are daily charts of December Gold and October Crude Oil. Both are trading considerably higher on the day as we are preparing this blog at 10:30 AM Chicago time (CDT); Tuesday Sept. 8. There has been a breakout in the gold as illustrated here which occurred during last week’s trading. Using what we believe to be a standard measuring technique using the base of the triangle added to the point of breakout the potential price objective comes to approximately $1105.

The Crude Oil chart shows that it is attempting to break over a near term down trend line but with a significant Fibonacci resistance at approximately 7195.

Many are asking what has gotten in to these markets today. We have seen a few factors that are providing influence. First is that the US Dollar is trading sharply lower. This typically has been supportive to commodities such as precious metals and crude oil.

We have heard that The UN is now talking about a new global currency. Also the G20 communique stated that monetary and fiscal stimulus would continue and this may help maintain at least the perception of a less risky environment therefore reducing the safe haven status of the US Dollar.

Goldman Sachs forecasts $85.00 per barrel crude oil and also, we understand that that a popular oil ETF is due to liquidate its crude assets which may be reallocating investment capital into gold. There has also been some chatter of Chinese interest in accumulating gold as an inflationary hedge.

We believe this will make for interesting price action particularly over the next few days. We are not suggesting here to either buy or sell either commodity but certainly noting that there could well be opportunities for trading ideas being presented.

As always this is something we discuss more in depth with our clients but we encourage any questions, comments or better still, any answers directed to us at:

jmajer@mfglobal.com

312 261-7380

800 321-5810

Jeff Majer

Diego Pilar

CB&S Division

MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Sugar - Powdered!!

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In this week’s edition of our Trade Focus which was prepared on Thursday during the course of the business and trading day, we had this to say about the sugar market:

Sugar (Oct.) – Sugar may be poised for a correction of some consequence if not having placed its top. Tomorrow’s close will be important as to whether it signals a weekly reversal. For now we believe that the more aggressive well margined trader can initiate short positions at a price level of 2350 or above with suggested stop protection of intraday penetration of 2490. The retrenchment resistance levels based on the monthly data are approx.: 1889 (hit); 2402m (hit); 2915. The next series above is approx.: 2663; 3414; 4166.

Unfortunately only our email mail list of clients and subscribers were able to receive this prior to trading today (Friday Sept. 4). There would have been a chance for those who agreed with the idea and plan to have initiated the short entry in the October Sugar prior to its more than 250 collapse (at today’s lows) and 150 lower daily close. Every point in the Sugar market is worth $11.20. If a short entry was initiated at 2350 and the close was 2160 that would be 190 points x 11.20 which equals $2,128 per contract.

We do not like to sound like we deserve a pat on the back or leave a wrong impression of any sort by bringing this instance to attention. As they say, even a blind squirrel finds an acorn every now and then.

What this may illustrate, though, is that if you wait to see the Trade Focus on the website which often is a full day after our sneak preview via email there may be something that would spark an interest and cause an action that could be missed by waiting.

Now let’s figure some other possibilities using the Fibonacci retracement levels of support. If a position was short from a price of today’s 2160 close basis the October contract and the first fib level of ~1976 was attained, the increase in value would be $2,060.80 (2160 – 1976 = 184 x 11.20). At the next fib retracement level of support, the .500 at the price of ~1817, it would be $3,841.60. Finally at the preferred .618 golden ratio at ~1658 it would be $5,622.40 per contract.

Of course a trader may initiate a short entry at today’s 2160 close of the October sugar and see the suggested stop protection elected at 2490 which would mean $3,696 could be suffered as a loss. This suggested stop protection, however, was originally based on a short entry from 2350 as in the Trade Focus and likely would not be chosen with an entry from the lower entry point of 2160 used in this example. A better risk to reward is typically much more preferred.


If you don’t want to miss something like this and believe it would be of benefit for you to receive the weekly Trade Focus the day it’s written we’ll be happy to add you to the email list. All you need to do is ask.

jmajer@mfglobal.com

312 261-5810
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Dow Jones Correction

Click charts to enlarge

The charts above are daily and weekly bar charts of the cash Dow Jones Industrials with 50 day moving average and fib retracement overlays on the daily and 50 week moving average on the weekly.


We believe that particularly the daily chart illustrates at least a hint of the beginning of a corrective phase. How much of a correction of course is the $64,000 question. But we saw last Friday a new high for this move with a lower close. That is a reversal even though it wasn’t a sweeping reversal event. And there has been some follow through to the downside too which helps add to the correction theory.

The pattern constructed since the day of the high we feel also fits the theory. There has been a one wave down, a pause and another more accelerated down move made. Today’s action has been another pause in the action with a tight range from slightly higher on the day to slightly lower. Tomorrow may be helpful in providing additional clues.

There are also the monthly unemployment figures due Friday morning. With employment such a large factor in the sustainability of economic recovery, the report will most likely be heavily weighted.

Where do we go from here? We see there has been a trend line broken and that the first set of Fibonacci retracements has been penetrated. There is a possibility that a Head and Shoulders top formation could be in the making but we will have to wait and see. Currently the 50 day moving average is approx. 8953 and the next series of noted retracement levels of support are approx.: 9041; 8859; 8677.

The weekly chart displays what could be construed as a Head and Shoulders neckline. It would appear to converge with the uptrend line displayed at approximately 8760. The 50 week moving average as shown on the chart is approximately 8557.

If the market is indeed correcting, the retracement values given along with the moving averages or a return to the neckline all mentioned above, could be price levels the market is seeking.


It may be early in the game but as we all know, it’s the early bird that gets the worm. It may not be unreasonable to expect any or some of these levels to be reached if in fact the market is in corrective mode.

And then again let’s not forget that there is a segment of the trading population that believes that what is about to unfold is more than just a mere correction.

We believe we can help assemble strategies for this and other market opportunities. Let us know if we can be of assistance to you.

jmajer@mfglobal.com

312 261-7380
800 321-5810

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Daily S&P 500

The chart is a daily cash S&P 500. We believe it shows that near term price levels of importance to the bulls have begun to be breached. It appears the next key level is the August 17 low 97851 basis the cash. Underneath that there will be the .500 Fibonacci at approx. 95440 and the .618 at approx. 93436.

There are some soothsayers saying that the end of the “BEAR MARKET RALLY” is upon us. We always urge market participants to be prepared for anything. We reiterate that to everyone now. Be prepared ahead of time for not just what can go wrong (stop protection for example) but also a plan and strategy to take advantage of the next opportunity whichever direction it may take.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.