January 10, 2006



















Name: Scott Hoffman
Company: Daniels Trading
Years Trading: 19
Favorite Band: The Rolling Stones

Swing Trader's Insight Update

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Swing Trader's Insight Update

S&Ps: S&Ps built on the gains they started at the end of 2005-it looks like the Santa Claus rally came a bit late this year. The notable feature for Spoos last week was Friday's break above the old contract high at 1284.70. Thursday's narrow range day setup, combined with a close just under the old contract high, set the stage for Friday's breakout higher. Look for stocks to head higher this week as the market draws strength from the friendly payroll numbers last week. Resistance is at 1297, then pivot and psychological resistance at 1300. Downside support is 1290, then the breakout area at 1285.


Dow: Friday saw the Dow futures break above trendline resistance around 10970 and finally rally over 11000. The bullish MACD crossover should support higher prices; look for support at the old breakout. With the Dow making 4 year highs, it doesn't make sense to pick arbitrary objectives. Let the market tell you when the rally is over.


Treasury Bonds: After a sideways trading affair for most of last week, Friday saw bonds unable to break the weekly high and then test an up trendline on the close (see chart). I sold bonds Monday morning-I liked both the break of the trendline and the impending bearish MACD crossover. I have downside objectives at last week's low of 113-25, then 113-08, which is a 50% retracement of the December rally.


Yen: The yen capitalized on last Tuesday's bullish trendline break with a strong rally. The fact that the Yen found support at the 40 day moving average set the stage for last week's rally. Friday's further advance was set up by the narrow range days on Wednesday and Thursday, which left the Yen poised for a directional move on Friday. With the breakout above the December high, look for more upside, with objectives at 9000, then the 200 day moving average around 9150.



EuroFX:
As with the Yen, the Euro found support around the 40 day moving average then staged a strong rally early last week as traders returned from the holiday. Friday's trade reached good resistance at 122.00, and Monday's selloff and trendline break may set the stage for a bit more correction-look for 120.50 and 120.00 as objectives for the correction.
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British Pound: The Pound rallied with the other majors last week, breaking above December's down trendline. The narrow range/inside day combination we saw on Thursday left the Pound in a good position for a breakout move on Friday, and we bought that breakout after the payrolls report. The Pound saw good strength all day Friday; we took profits late in the day in anticipation of a correction on Monday. I'm currently flat, but would be looking to reenter this market from the long side.


Gold: Gold started out the year with a bang, with a breakout of a small flag pattern last Tuesday. We bought gold on Monday as it rallied into new contract highs-in a strong market; you want to find places to enter pauses in a market before its dominant trend reasserts itself. I don't have an upside objective for this trade, but gold could see psychological resistance around $550.


Silver: Silver had a choppy week last week, as Thursday saw a sharp break under the recent up trendline, only to stage a good recovery on Friday and Monday. Monday's trade finally tested the contract high at 928.50. The recent action in silver is a good example of why you should pick the market that is the strongest in the sector, rather than buying a weaker related market because you think it's going to "catch up", which I why I bought gold instead of silver. In my experience, I've often seen that strong markets stay strong and lagging markets continue to lag, so it's preferable to "ride the stronger horse".

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Sugar: Last Thursday saw a break above double top/contract high resistance at 1495, only to see it close back below that breakout point. Friday's inside/narrow range day left sugar ready for a breakout move on Monday; I sold sugar on the open Monday as it broke to the downside. My downside objective for this trade is at the 40 day moving average (currently 1424), with only a close back over the double top at 1495 negating the bearish trend.

Crude Oil: Crude saw a strong advance last week, which was kicked off by Monday's move above trendline resistance (see chart). Friday's rally was a good example of a breakout of a flag formation; it's one of my favorite patterns to look for. This was a trade you needed to be quick to take profits on.


Live Cattle: April Cattle are forming a triangle, I've got this market on my "watch list" for early this week, as I'd expect to see follow-through from a breakout of this formation. Momentum (the bottom panel of the chart) has pulled back to zero, reinforcing the idea that there's a directional move coming.


Lean Hogs: Monday's inside/narrow range day pattern set the stage for a breakout move today; a breakout should lead to a test of the double bottom around 6375 or a test of trendline resistance at 6515. This is another market on my "watch list".




Soybeans: The expected resumption of farmer selling took a few days to get started, but the inability of soybeans to clear resistance at the 200 day moving average last week led to a good selloff on Thursday. I sold March Beans on Friday as the market broke under the December up trendline, which coincided with a bearish MACD crossover.
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I covered my shorts Monday morning as prices stabilized around the 40 day moving average (around 595). Longer term, I'm looking at Monday's trade as a breakaway gap, and would look to get short again on a bounce.


Soymeal: Soymeal preceded soybeans lower last week. I got short soymeal last Thursday as meal breached December's up trendline. I covered this trade on Friday as I was interested in selling beans and didn't want to be overloaded in one sector. Meal did see downside follow-through on Monday, and the move under the 40 day moving average should lead to more downside action.


Wheat: As with the soybeans, wheat flirted with the 40 day moving average last week, but was unable to climb over it. Last Thursday saw a breach of strong trendline support, and this break saw good follow-through selling on Friday and Monday. Monday saw the market stabilize around the 40 day moving average at 324, but the bearish MACD crossover should lead to further price declines.

The information in this article includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Now You Can Learn Swing Trading Techniques in Just Days with Personal Help from a Trading Pro.

Here's your chance to discover swing trading strategies and methods with complimentary personal training from swing trading instructor Scott Hoffman, a commodity trading advisor with 19 years of experience in the futures industry. You will also receive a complimentary trial subscription to "Swing Trader's Insight". Sign up today for immediate acceptance and instant access to your complimentary swing trading course and trial subscription, including all the tools, information, education and daily e-mail reports to assist you in improving your trading skills and make you more aware of market opportunities.


About Today's Author

Scott Hoffman is a Senior Broker and CTA with Daniels Trading. After graduating from the University of Chicago in 1986 with a degree in Economics, Scott worked on the floor of the Chicago Mercantile Exchange. Following his time at the CME, Scott went to work off the floor, serving as the personal broker to a former chairman of the Chicago Board of Trade. Here Scott learned the trading and brokering business, a process that he continues to expand and refine.

Scott is the publisher of Swing Trader's Insight, a comprehensive swing trading advisory service covering all of the major futures markets. In addition to a nightly newsletter, Swing Trader's Insight provides in-depth client education complete with specific trade recommendations and market analysis, including an S&P Morning Insight commentary, Midday Updates and Trade Management Updates. Although Scott specializes in swing trading, he has 19 years of brokerage experience that is available to all of his clients, regardless of their individual trading styles.

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