Novice traders look for perfection whereas experienced traders look for performance.

- Joe Kellogg

January 13, 2009

Global Warming - According to the University of Illinois's Arctic Climate Research Center, a large accumulation of arctic sea ice, in the 4th quarter of 2008, has lifted sea ice back to levels not seen since 1979. Interestingly, nearly the same year the notorious April 28, 1975 issue of Newsweek announced the coming ice age.  

March Silver - Last Thursday I wrote, "A steady to lower trade into Tuesday could offer us (a buying) opportunity." Monday's correction pushed the market down to its 20-day average, which should offer support. A steady to lower opening Tuesday would set up a buy signal on a break above 11.32.

February Gold - Last week I'd been saying, "I see Gann support down at $820.00. A dip to that level should offer a buying opportunity." We got that opportunity Monday, as gold fell to $817.10, before settling at $821.40. 

March Canadian Dollar - Ding! Ding! Ding! The latest rally here peaked Thursday at 85.23, just 13 ticks above our upside target of 85.10. Sweet! The market has since corrected, which is swell, 'cause it'll give us an opportunity to re-enter the longs after the dip.

March British Pound - Our upside target is159.40.

March Swiss Franc - Thursday night I wrote, "A bear flag looks to be forming here, just above the 20-day average. A break below 90.00 should kick in the sell programs." The Swiss fell Monday after Standard & Poor's warned it could cut its ratings for Spain. Our downside target is 86.90.

If you cannot view the March Swiss Franc chart, go here.

REVERSAL DATES FOR THE WEEK of January 12th - 16th

MONDAY -- Crude Oil, Euro Currency, Sugar
TUESDAY -- Corn
WEDNESDAY -- Soybeans, Wheat
THURSDAY -- Cattle, Coffee
FRIDAY -- Gold

CURRENT RECOMMENDED POSITION

MARKETS TO WATCH:

1-MARCH COFFEE - Long from 117.25 - Friday's sharp rally triggered the buy signal before closing midrange. Monday's inside day will most likely be a rest day before continuing the upward trend. -- Hold the long position with a protective stop at 112.95.

2-MARCH EUROCURRENCY - The market has formed a three-day reaction swing under the 20-day SMA. This is a bearish TC pattern with the next reversal date due on January 15th. A confirmation of this pattern would trigger a new sell signal and portend a drop to 129.00 on or before the January 15th reversal date.

3-MARCH T-BONDS - A small reaction swing has formed with Thursday's reversal date trading above the previous day's high. This is a bearish continuation pattern and could trigger a sell signal on Friday. -- Sell the T-Bonds at 131-29 stop, with a protective stop at 132-16.

4-FEBRUARY CATTLE - Cattle continue to drift lower after breeching the bearish trigger point (84.90) on Friday. The market should continue lower into the next reversal date due on January 16. The downside objective is the centerline target of 79.25.

5-FEBRUARY GOLD - Monday's sharply lower price action has confirmed the January 7 to January 9 reaction swing, as well as the longer-term TR pattern. The TR pattern suggests lower Gold prices into the next reversal date on January 28 with an initial target price of $775.00. If not currently short, look to sell February Gold at $829.00 or higher, with a protective stop at $845.00.

6-FEBRUARY CRUDE OIL - Crude is at a critical juncture, as it reached the bottom of the buy window on the projected reversal date. Tuesday's trail day will be the deciding indicator as to direction for Crude. A trade above $40.95 would confirm the bullish reversal and the longer-term bullish TR pattern. This would lead to a trend shift and a quick test of the $50.00 level. On the other hand, a trade below $36.95 or a lower close would suggest continued pressure on Crude oil and test of $30.00.

*Due to the volatility of the markets, all trade recommendations are subject to change without notice.

How to use the Reversal Dates

Every good trading signal needs three key elements to be considered a successful signal. Time, Price and Pattern. When these three come together, great things can happen. If you can improve your timing or price entry, it can enhance any trading method. That is what the Reversal Dates can do for you. They will identify when the market should react, and at what price level the market needs to be for this to happen. They will even tell you what the market has to do to confirm the trade. The first thing I do is, identify Time.

TIME
The Reversal Date Indicator consists of three parts. The first is Time. This is identified by the projected Reversal date and will indicate which markets are ready to react and when the reaction should occur. The most common misconception about the Reversal dates is the idea that the market must reverse on every signal date, which is not true. Instead, The Reversal Date itself helps to identify the market's reaction. A high percentage of the time, the market will reverse the current trend, but not always. A smaller percentage of the time, the market will form a "continuation pattern," indicating the market will likely continue in the same direction as the prevailing trend. Often this will occur during a consolidation or after a very small correction.

PRICE
Once the Reversal date has been identified, the next thing to do is monitor the price. If the market is making a new high/low, or if it is trading inside a buy/sell window, then the second component of a trade signal is in place. You now have Time and Price working together. For most traders, that will be enough, but the Reversal Date Indicator takes it one step further.

PATTERN
After extensive research into price patterns, I have identified specific price patterns, which occur during reversal timing. These patterns can be used to confirm the market reversals or market continuations. When, and only when, these three components are all working together, will there be a trade signal generated.

Traders Market Views is a product of Traders Network and all statements herein reflect Traders Network's market research. Traders Network and/or its principals, brokers and employees may or may not have established positions in part or all of the markets herein mentioned. It is possible that some of those positions, if any, are in direct conflict with the market commentary herewith.

THE RISK OF LOSS IN TRADING COMMODITY CONTRACTS CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY 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 PROFITS OR LOSSES.

Joseph Kellogg started in the commodity business as a commercial grain merchandiser and basis trader. He was one of the architects of the Farm Marketing Program (FMP). This marketing plan was designed for agricultural businesses to use with grain options in strategies that could not only hedge their cash crops, but also aid in their marketing. He hosted "Futures Talk," a commodity talk radio program that aired bi-weekly on a Los Angeles radio station. Joseph has also developed many option writing strategies, which can be used with the reversal point method.