LUMBER - Might Be A Run To The Downside

Stopped out of the long position in Lumber today at break-even.

It appears it is a good thing we had the stop in as the price action looks as though it might try and test the lows in the low 230's. I even had a passing thought of going short in here.
I didn't however as it does not coincide with the commercial traders positions.

Equity Update - Rally Continues

It is starting to look more and more like equities will rally to the 1484-1489 area basis the S&P 500 before the re-test of the lows begins.

I had really anticipated this rally process to take a bit longer and also not be so one sided in the trend, but as is always the case... THE MARKET IS ALWAYS RIGHT!

During the re-test of the lows we will finish up removing the hedges from our core positions.

I will also put together the buy list to execute on the Test.

Short Term Trade - Stopped Out Even

The short term sell that was put in place seemed to go our way almost at once and actually had I stepped the stop down it actually would have garnered a profit, but I didn't so it broke even.

I cannot really complain about it though as once more a stop loss placement has saved money.

This is exactly why it is imperative to use stop loss orders and especially in short time frame trading. Trading without stops short term is very near suicide!

Short Term Trade - Sell Short

This looks like a good place to see the strength and go short.

Use a tight stop!

TNH - Opportunity Knocks Once More

Terra Nitrogen has some incredible Long Term prospects and it will offer yet another opportunity to get on board before the real fireworks start.

EQUITY MARKET COMMENT - Make Up My Mind Already!

WHICH SIDE OF MY MOUTH AM I GOING TO TALK OUT OF TONIGHT!

Well, both actually! : )

After I had posted today's equity market comment I ran into something rather interesting with the short term model that has been so accurate, but was off the mark the last couple of days.

It actually is telling us two things and both at opposite ends of the spectrum.
One side is calling for lower prices tomorrow and the other side is calling for a subdued rally tomorrow. I say a subdued rally based on all the volatility we have had over the last 3 weeks.

Here is the Meat and Potatoes of this whole snafu.... It simply does not matter which scenario plays out as we can work it to our advantage either way.

This is what I mean.... Should the market have a decent rally of say 6-9 S&P points then it becomes a very low risk short position and we already know that the market should move lower before it rallies in earnest, so should it move sharply lower then we can go long and/or cover more of our hedges.

So in a matter of speaking, this confusion and double speak can be used to the advantage.

Commodities Update

Sugar - Remain on the sidelines. Looking for a place to go long October Sugar.

Lumber - Very close to our break even stop, but still holding onto the Long position. Look to roll out to the November Contract on any rally from here.

Soybeans - Move stop to 8.50 even to lock in profit. Beans should work lower from here and if they don't we want to look to capture some of the profit we have on the books.

Corn - Hold the Long Term Short Position

Crude Oil - Still on the sidelines as we were looking for a spot to get short. This opportunity may have come and gone, but no bother, the markets are full of opportunity. I continue to look for lower crude prices.

U.S. Dollar Index - Continue to sit on the sidelines for more downside pressure in which we can establish a long position. I think the U.S. Dollar is going to be the surprise of 2007!

COTTON - Long Trade

Cotton came very close to stopping us out today, but did not hit our stop.

Keep the stop in place and tight as this market needs to continue to prove itself.
Remember also that this is a very aggressive trade.

EQUITY MARKET COMMENT

While the equity markets seem to be drifting away from our short term model that has worked so well, they currently look a bit weak.

I would look for the market to work lower to the support levels of 1423, 1413 and 1403.
The time frame for these prices remains at 8/30/07. As usual however, if the price objectives are met before this date then we still have the all clear to enter back into our short term Long and Call positions.

So currently I would continue to recommend caution in the equity markets.

Cotton - BUY

Cotton is looking good for the start of its move back above the most recent highs.

I will be keeping a close stop as it is make or break time.

Blackstone - Offers Some Great Value

I did not like Blackstone at the IPO, but it is offering some great value in here.

Look to purchase on a test of the most recent lows.

Equity Market Comment

While I had expected a little harder day down in the S&P 500 today, the structure continues to follow the short term model.

The model continues to call for Tuesday to be a big down day and should set the low for the next couple of weeks.

This could be a great short term trading week as today was a good one.

I still am of the opinion that the Low is in place for equities and after a retest of these lows it should be off to the races. I don't see a 1987 scenario as I am starting to hear more and more of, but I am keeping my eyes and ears open just in case this scenario begins to show some validity.

Targets for Short Term Trade

The chart below should give some grest ideas as to when to get out of your short term long positions.

Watch the 50% and 62% areas very closely.

Short Term Trade - Long

Downside target achieved.

Go long with a stop just below the most recent lows at 1430.61.
1429.80 would be a good stop point.

Take profits on any sharp rally! This is going to be a hit and run trade.

Short Term Trade Opportunity

While today and Tuesday should prove to be sharply lower, there still will remain short term opportunities.

One such opportunity seems to be emerging.

Weekend Equity Market Comment

A wild week in the equity markets would be putting it mildly, but behind what seemed to be chaos and lack of order, there emerged a bottom.

I do not think this will be a V bottom however and quite honestly I think most of the initial thrust off the lows was completed on Friday. There may be some slight follow through on Monday and actually that would be very healthy, but I really think that this week is going to be a very volatile week.

Take a look at the short term equity model forecast for what the week might hold in the cards.
This model is only a guide and should be used as such, but it has been very good to me lately and I have no reason to doubt it.

Until we hash out this entire bottoming process I am going to keep my intermediate term outlook as Neutral. Long Term will remain Bullish and Short Term as of now is leaning towards bearish.

This bottoming process should give us all plenty of time to slowly remove our hedged equity positions and begin to start the selective process of what to purchase next, as I really do think that once this bottoming process is in the next leg up could be a barn burner!

Commodity Update

SUGAR - Looking for a place to get back on the long side. Our first attempt was met with a stop out and a loss of $275 per contract.

LUMBER - Came very close to our sell stop, but did not make it. We remain long from 274.

COTTON - Continue to look for a final rally to new highs in cotton to put a low risk short sale into place. On the aggressive short term front look to go long right in here for the final thrust up. The final downside target was 56.93 and it touched 56.95 on Friday. I am not going to quibble about 2 ticks!

SOYBEANS - Short from 8.70 1/4, Stop at break-even. Remain short.

CORN - Hold Long Term Short Position

CRUDE OIL - Stopped out of the short Friday for a loss of $312. We will be looking for yet another opportunity to sell short.

U.S. Dollar Index - Pull back we have been looking for may have begun on Friday. Look to buy the weakness. Targets for position initiation will be posted Monday.

HOGS - Hogs remain on the watch list, but nothing yet to make us jump in.

Short Term Trading Model Forecast 8-20 thru 9/5

The short term trading model has been extremely accurate over the last 45 days or so, almost in an uncanny manner.

I developed this model over two years ago and just really brought it online this year. The most recent 45 days have been the best performance it has achieved since the creation.

With how hot the model has been I have to continue to listen to what it says and continue to confirm it with other fundamental and technical tools.

The following is the forecast from the model from this Monday all the way to Sept 5th.

8/20,8/21 - Down with a 50% retrace of the rally from the most recent lows.
8/22 - Rally with a Reversal, close very close to unchanged.
8/23 - Strong rally putting in the highest point for this forecast period.
8/24-8/28 Choppy with a Downward Bias.
8/29 - Hard Down day with a Test of the lows made on 8/21
8/30-9/5 - Strong Rally of 5% or more and putting in the final high before the retest of the Intermediate Term low 0f 8/16.

Please remember that this is only a guideline and the direction of the model is more important than the values that are created. If this model remains as accurate as it has been then it will give some great insight into the short term direction of the market.

Short Term Trading Model - Sell Calls and Longs Today By The Close

The short term trading model calls for today to be the high of this first ultra short term leg up.

Therefore, I would suggest taking profits on any short term long positions and call options by the close of today. The call options have some great profits so it will not be very hard to let them go.

The model calls for the high today and a sharp 2 day sell off going into next Tuesday that will put the market into a short term trading range until the end of August.

From the end of August we should look for another sharp leg up in the market that terminates on Sept 5. This should be the final top before the market begins a test of its most recent lows.

Remember that this model is only a guideline and the market always has the final word, but this short term model has simply been to accurate to not heed its advice!

Ultra Short Term S&P 500 Trend

Should see a sharp move up to new highs for this move in order to keep the ultra short term trend healthy.

Look to 1453 for resistance.

Short term traders should exit their positions upon a move to a new high as this would most likely complete the first ultra short term leg up.

Commodity Update

SUGAR - Stopped out of the long position at 9.20 Loss of $275 per contract

LUMBER - Steep decline in Lumber today and takes the price to only 50 cents from our break even stop at 2.74

COTTON - Stopped out of the Aggressive Long position at 59 even. Loss of $1100 per contract and exactly why this was an aggressive trade. We continue to look for a final rally to new highs in order to put a low risk short into play.

SOYBEANS - Huge decline in the beans today. We are short from 8.70 1/4. Move the stop to break even.

CORN - Remain short off the long term sell signal.

CRUDE OIL - New Sell Signal today, Short from 71 even with a close 50 cent stop.

Bottom In Place - Begin To Cover Your Hedges

The market made our target low today and had a great rally off the lows.

The price aspect of the correction has been achieved and I began to unwind my hedge position
today.

Aggressive traders are sitting on some nice profits from the intra day buy signal today and I really thing tomorrow should bring the same.

I am going to try and time the lifting of my entire hedge position to coincide with the high probability test of the most recent lows. While I do not expect the test to make it all the way back down I really do not see a V bottom and actually a longer bottom would be more healthy.

The most worrisome aspect of this decline to me was the reluctance of bullish sentiment to deteriorate. This fact was really starting to worry me as it was showing that many were simply taking the decline in stride.

The sentiment this week however finally took its dive and now sits at its lowest bullish sentiment level since 2003! This hurdle has been cleared.

S&P 500 Downside Targets Satisfied

The ultimate downside target for the S&P 500 has been achieved today.

While there is never any guarantee that the market will not go lower, very aggressive traders can go long here for a potential huge reversal on the day.

Please keep in mind that this is a very aggressive play, but by managing the trade with a close sell stop the risk can be very limited and the reward will be huge.

There also are a few stocks in the core portfolio that I will begin to remove the hedge from as well.

TNH - Ready For Purchase

TNH has reached its downside target, however given the nature of the market, I am only going
to put together half of my line.

IRIS - Opportunity Knocks

This one has quite a good record following the Three White Soldiers Pattern and a MACD crossing below zero.

Has at least a 20% return potential and in a very short time frame as well.

The chart says it all!

New S&P 500 Downside Target

While the 1387-1375 area is still important, I did get a new downside target that outweighs
the earlier targets.

Keep you eye on 1391-1392 on the Cash S&P 500.

Either way you slice it, we are very near a bottom and could get there before the August 24th time frame. August 24th in this case may end up being a test of the lows which I do anticipate once the bottom is put into place.

Similar to Summer 2006? It Seems So!!

The uncanny similarities of the Summer 2006 correction continue.

Below is the Put/Call ratio with the green circles showing now and the Summer 2006 correction.

Terra Nitorgen - Near Buy Zone

Back near the buy zone again.

Needs another push to new lows will initiate a Buy Watch.
Look for $66-$68 for an entry.

Commodities Update

LUMBER - Long from 274. Tighten up the stop to break even!

SUGAR - Long from 9.45. Looking for a sharp rally. Keep a close stop.

COTTON - Aggressive Long from 61.20 Risk all the way to 59. Main Trade will be a Short from a new high.

SOYBEANS - Short from 8.70 1/4

CORN - Long Term Short in place

We will be looking to go long the U.S. Dollar on a pullback.

Equity Comment

Today could not have planned out any better with the initial strength followed by a slight meltdown.

The market is starting to show early signs of attempting to put a bottom in, but it is very early in this process and lower prices are still in the cards. With this in mind, the hedge we put into place in June should still be in place.

The Low Target Area remains the 1387-1375 level on the S&P 500.

Commodity Market Update

LUMBER - Outside day today fortells of higher prices. Long from 2.74.


SUGAR - Very quiet day today. Long from 9.45


COTTON - Has risk all the way to 59 before a final rally begins. Aggressive Long from 61.21.
Main position will be taken upon the end of the final push up in prices.


CORN - Stay Short


SOYBEANS - Look like they could really fall out of bed here. Great short candadite.

Equity Market Comment

Intermediate term I continue to look for the market to move lower into its target area.

While the market may chop a bit after the decline today I still do not think the downside is complete.

The market on an ultra short term basis looks to have made a low.

I will be looking to establish more short positions at the green lines on the chart.

Sentiment has moved into an area that is indicative of market lows.

While this is no guarantee that the low is in place, it does begin to say that there is light at the end of the tunnel for this decline.

The AAII, Investors Intell. and Wall Street sentiment indicators need to decline more as these have been a little worrisome with their reluctance to show any fear. This translates into more downside and perhaps in a scary manner in order to strike fear into the hearts of investors.

I continue to look for the S&P 500 to drop below 1400 before the low is put in place and August 24th for the low.

Our hedge remains in tact and will only be released should I see evidence that it is safe to do so.

Short Term Red Flags

The markets have the capability to get real ugly in here, with a potential free fall of 25-30 S&P points. So keep a close eye on everything in here.

Remember also that the blueprint calls for a strong reversal today, so should it get ugly to the downside, odds favor a comeback.

It could get very volatile here. Only very aggressive and nimble traders should be even thinking about buying the potential meltdown that might be right around the corner today.

One Reason To Stay Long Term Bullish

I realize that recently I have sounded like doom and gloom with most of my posts calling for lower prices.

While the intermediate term low has yet to be put into place I thought it important to show the long term health of the market and why there is quite a bit of upside left in it.

The chart below is the S&P 500 Weekly.

• The Blue Line is the Commercial Traders Positions, which is heavily long (BULLISH)


• The Green Line are the commodity fund positions, which are heavily short (BULLISH)


• The Red Line are the small traders positions which are Neutral

The fund traders have been selling like crazy ever since the recovery following the March correction. It is as if they have been waiting for the other shoe to drop and I am certain that the most recent market action has them smiling. Remember though, the Funds are usually wrong at major turning points and this is no exception.

It is important also that you realize the C.O.T. data trumps all other analysis in the S&P 500. This is not true in all the futures markets, but it certainly is true in equities.

Commodities Update - Quick Run Down

SUGAR - Long Executed Today at 9.45

LUMBER - Long From 2.74

COTTON - Aggressive Long From 61.21

CORN - Continue To Hold Short


Please refer to the weekend post on these commodities for the more detailed intermediate term outlook.

USU

I am looking for a further pullback in USU in order to get back in on the long side.

I firmly believe that the low is put in place for the stock on an intermediate term basis, but a retest of the lows cannot be ruled out.

Equity Market Analysis

While todays action was not exactly to the blueprint, it certainly was close enough to count.

If we waited for a direct reproduction I can guarantee that you will never see it. The best we can hope for in analysis such as the blueprint is a general outline and this is what we got.

So from here we can look for the market to make its way lower and put in the intermediate term low and much lower prices. The blueprint calls for a selloff tomorrow followed by a strong recovery going into the close.

Cover Shorts - Sit Out

Looks like the market is going to try and push to new highs for the day, so cover your shorts and sit on the sidelines for another opportune time to sell this rally.

USU - Take the Money and Run

It has been an excellent two days in USU, but I think it might be time to cut and run here.

Although I am not prone to flipping, sometimes it just makes sense and with the volatility we have been seeing, it only makes sense to take profits.

Rally Should Not Hold Together

Could be just about all the rally the market could muster here.

Looking to sell this rally.

Crude Oil - Final Hurrah?

Crude Oil is really starting to look like its time is limited.

There is extreme long positions by the public (bearish) and extreme short positions by the commercial traders (bearish)

The Commodity funds have very large long positions, so once the trend shifts you should see quite a large decline as these funds begin to unwind their longs and establish shorts.

Sugar - Get Ready To Pull The Trigger

I have been waiting for the 9.46 to 9.21 level on sugar to establish a long position and we are very close to that right now.

The potential rally off this swing low is going to speaks volumes about the intermediate term health of this market.

Keep a close eye on this one!

Lumber - Ready to Move Higher

Lumber has been a little slower to react then I had thought, but it appears to me that it will make its move very soon.

We are long from 274.

Cotton - Aggressive Short Term Play

We continue to wait for the final push up to new highs in cotton to put a low risk short position in place.

Those of a more aggressive nature can buy long in here for the last gasp up in price.
Cotton has reached a point of strong support and should begin the final rally from here.

I stress the long side as an aggressive trade and to make sure you keep a close sell stop in place.

Corn - Decline to Continue

Corn looks very weak in here and a resumption of the decline seems eminent.

Keep your short positions in place with a protective buy stop at 3.46 1/2.

SPX Blueprint - More In Depth

Here is a close up of the blueprint I had spoken of earlier.

This calls for an early rally on Monday which should complete that up leg.

Look for strong resistance at 1467, 1472 and 1475. 1472-1475 being the most logical.

From there you can see that the clear direction is down.

August 24th remains the most logical day for the low.

Terra Nitrogen TNH

TNH is currently near and at the buy area, however the stock looks like it wants to make one more push lower so look to purchase at the lower end of the buy zone @ $66 or so.

Potential Blueprint For The Rest of August?

Just to many similarities to ignore.

Sentiment - Low Still Not In Place

I continue to stress the fact that this corrective phase in the market is not over and there is still quite a bit of potential downside left.

The above chart helps to support just this as these sentiment indicators need to get much lower before a low of substance can be called.

Final Hour Rally?

Look for the market to have a pretty sizeable rally in the last hour here.

Of course, the buy side is off limits right now, but there certainly is no rule against
shorting strength and it has been very profitable!

Cover Your Speculative Shorts and Puts

Looks like we are entering an area of stabilization so it is a good place to cover your shorts and sell your puts.

It simply remains to risky to trade anything for a rally so we will just stand aside for now.

The main hedge we have had in place remains in tact as this only looks like a potential for a short term bounce.

Commodities Outlook

Corn remains in a bear market.
Shorting all strength continues to be the best action.

Copper remains in a secular bull market and needs to complete its current pullback before
the purchase can be exercised.

I continue to look for cotton to have one more move to a new high above 63.

When 63 or above is obtained it should be set up for a short sale.

Sugar is getting quite close to its area of purchase.

Keep close tabs on this one as it has some serious upside potential.

Lumber has not broken down and that is a good thing. While the advance has and continues to take a while to get going, I still remain bullish.

A close below 265 will cause me some concern, but right now all systems look go!

S&P 500 Price and Time Model

The Probability Model suggests that the following scenario could occur.

A Short term low at 1449.
Rally to 1476.50
Final Collapse to 1387 for the end of the correction.

The time model continues to suggest the date of August 23 to August 24 for the ultimate low.

Remember that these models are for guidance only and nothing is ever etched in stone.

However, it does appear to me that the final low is NOT in place yet and while there has been some short term fear created, we have yet to see the wide spread despair that comes with major lows.

A Bit Early On USEC Corp - Opportunity Continues to Knock

Correction Continues

The last leg down seems to be upon us as the characteristics of the decline today is indicative of such an event.

I don't see this being a straight shot down to our final bottom, but you have to be prepared for anything.

The hedge remains in place and targets for the final low are as follows:
1428-1423
1388-1380
1348

All targets are basis the S&P 500 and the highlighted target holds the most weight.

With much of the talk of a panic today, it could very possible be a set up for a rally tomorrow or Monday. This rally should be sold if it presents itself.

Short S&P 500 - Aggressive

After some stabilization in here at 10:07, the S&P 500
looks like it wants to make another large move down.

A short trade in here should carry a very tight stop of no more
than 1480.22.

Equities Weakness

This entire rally continues to exhibit signs of weakness.

There simply is no participation on the upside and this tells us that there should be one more push lower.