Traders who say something can't go higher or lower have little appreciation for the habitual ridiculousness of the markets.

- Drew Klein

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May 29, 2007

From “The Greenrush Capital Report – May 28^th, 2007”

JULY SUGAR (SBN7)
TRADE TO CONSIDER
Futures Trade: Buy SBN7 at 9.08 or better. Aggressive traders should sell SBN7 at 9.46 with a stop reverse at 9.08 or better. Option Alternative: Buy October 9.00 call for 54 pts ($604.80) or better.
Why: NY markets appear to have reached a capitulation phase and a bottom may be forming. London’s August sugar spiked to 5-month highs last week while New York bull spreads exploded higher; the SBN / SBV spread catapulted to just below the zero-line. From 5/16 to 5/25, we saw this spread move from 36 cents under to just 3 cents under. If the spread moves positive in the next few days, we could see increased buying pressure. For the life of me, I don’t know why - fundamentals remain weak and we could still see a push down to 8.25 as July options expire. Look for the market to fill the small gap up to 9.48 on Tuesday, and retrace down to our buy level. Seasonal sugar trades, which have performed well this year, are indicating a strong upward bias over the next 6 weeks. There are several upside gaps that have a chance of being filled should the market run. As usual, expect the unexpected as July options expire on June 8th. Margin (subject to change): Call your broker for margin details.
Desired Risk: Aggressive traders place stops on shorts at 9.61. If we get long at 9.08, exit the trade, market at close, the day after a close below 8.99
Target: 1st target = 10.14 (move stops); 2nd target = 10.96; 3rd target = 11.39 ($2587.20 / contract)

To view the Sugar Chart, go here.

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JUNE AUSTRALIAN DOLLAR (6A M7)
TRADE TO CONSIDER
Futures Trade: Sell Globex Australian Dollar, at 0.8159 STOP.
Why: We continue to focus on the changing trends in the markets, one of which leads us to believe that the US Dollar has reached a short-term bottom. The Greenback bounced to a two-month high last week, alongside compelling Treasury Bond sales and record US equity markets in the past few weeks, lead us to believe that we may be heading back into a rising interest rate environment. This weekend’s COT report showed that Non-Commercial traders reduced long positions in the Aussie Dollar by over 16,000 contracts, while increasing short positions by almost 11,000 contracts. If that’s the case, we should see downside pressure on most of the major currencies. Currencies have a tendency to be fickle, and in our opinion, more prone to false breakout than other sectors. Look for the US Dollar Index to retest 81.98 or so and we’ll watch for how (and if) the trade buys into it. Margin (subject to change): $1,148 / contract.
Desired Risk: Place a stop ON A CLOSING BASIS above 0.8302, risking $1,430 / contract.
Target: 1st target = 0.8035 (move stops); 2nd target = 0.7960; 3rd target = 0.7836 ($3,230 / contract)

To view the Australian Dollar Chart, go here.

AUGUST HOGS OVER AUGUST CATTLE (LHQ7 / LCQ7)
TRADE TO CONSIDER
Futures Spread: Buy August Lean Hogs, Sell August Live Cattle on a CLOSE above -17.40
Why: This is one of our favorite technical formations, and it’s evident from the chart that we may be basing in this 3 cent range. As always, we would like to buy the spread, market on open, the day after a close above our desired entry. Livestock markets were somewhat anemic heading into the Memorial Day holiday weekend, and we expect grocers, traders, packers, and hog / cattle owners to gauge supply needs and re-evaluate their showlists starting Tuesday. Cattle and hogs should be exciting markets to trade this summer, as they should continue to key off the volatility in the grain markets.
Desired Risk: Exit on a close below -18.30, risking $360 per futures spread.
Targets: 1st target = -16.00 (move stops); 2nd target = -15.10; 3rd target = -13.70 ($1,480 / spread)

To view the Hog/Cattle Spread Chart, go here.

Risk Disclosure and Disclaimer:
THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CAN BE SUBSTANTIAL. BEFORE TRADING, YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL POSITION TO DETERMINE IF FUTURES TRADING IS APPROPRIATE. WHEN TRADING FUTURES AND/OR OPTIONS, IT IS POSSIBLE TO LOSE THE FULL BALANCE OF YOUR ACCOUNT. IT IS ALSO POSSIBLE TO LOSE MORE THAN YOUR INITIAL DEPOSIT WHEN TRADING FUTURES AND/OR GRANTING/WRITING OPTIONS. AS A RESULT, SELLING/WRITING "NAKED" OPTIONS EXPOSES THE SELLER/WRITER TO THE POSSIBILITY OF MARGIN CALLS AND VIRTUALLY UNLIMITED RISK. ALL FUNDS COMMITTED SHOULD BE PURELY RISK CAPITAL. PAST PERFORMANCE IS NO ASSURANCE OF FUTURE TRADING RESULTS.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT/LOSSES SIMILAR TO THOSE SHOWN.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS TRANSMISSION. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Drew Klein is a Commodity Trading Advisor and Principal of Greenrush Capital Management LLC, an introducing brokerage outside of Los Angeles, California. Drew has been a member of the National Futures Association in good standing since 2001 and has worked for some of the largest options firms on the West Coast.

Greenrush specializes in managed accounts and full-service retail brokerage for the more sophisticated client. Drew gives his clients the option of working with him either on a commission basis or an incentive basis.

Drew is a member of the Sigma Chi Fraternity, an organization whose trader hall-of-fame includes the legendary Larry Williams and Ed Seykota.

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