Wake Up, Make Money

• November 7, 2001
• Marc Dupee

When a market is on a roll — and you have a method
that allows you to take advantage of momentum dynamics — it becomes
irrational to not take the trade.

T-bonds
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They have been on the Momentum-5
List stretching back to September, but have been on the list more
consistently since October. An Off The Blocks long is simple: for contracts
on TradingMarket’s Momentum-5 or New 10-Day High lists, the strategy goes
long the breakout of the opening five-minute bar. If a momentum market gaps
down, no position is initiated until it trades above the high of the last
hour of trading from the previous session. The protective stop is placed two
to three ticks beneath the opening range.

If you woke up every morning since Oct. 1 and
traded Dec. T-bonds
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would have ended the day in the plus column over 85% of the time. Most
recently, an Off The Blocks
long entry has worked in seven out of the past eight sessions (or kept you
from entering on down days).

Bonds responded in part to the Fed’s 10th interest
rate cut yesterday, which slashed the federal funds target rate by half a
percent to 2.00%, a 40-year low. Long bonds are also in rally mode due to
the announcement last week that the Department of Treasury would stop
issuing the 30-year securities. Basis Dec closed up 1 5/32 at 111 16/32.

Will the Fed continue slashing rates to stimulate the
economy? The December
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pricing in about a 50-50 chance of an additional .25% rate cut to 1.75% by
Christmas. That there are few signs of inflation — in fact, signs of deflation,
particularly on the wages front — makes it possible for the Fed to continue
cutting rates to stimulate the economy and for bond traders to bid up the
price of the long bond, the most inflation-sensitive debt futures.

Stock indexes traded to a new two-month high in the
first half of the session before pulling back for a slight loss.

January 2002 soybeans
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soybean oil
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traveled to the bottom of a consolidation range/handle of a low-level cup
and handle, but returned today to close above yesterday’s open to retain the
upside view highlighted in the Nightly Futures Report. Jan. beans rallied 5
1/4 to 441 1/4, parsing a nearly 10-cent gain.

Bean oil became the focus of the complex yesterday as
a proxy for bean demand from China. In overnight trading, traders watched
the Malaysian palm oil futures market, a substitute for bean oil, and
followed it as a proxy today. Today’s action in bean oil, up on higher
prices in Malaysia, is again spilling over into soybeans. So far the action
is strong and suggests beans will continue trading into the overhead gap.
China will become a member of the World Trade Organization this month (WTO),
meaning the world’s most populous country could increase its demand of any
number of products or commodities as it enters the globe’s biggest trading
alliance.

December lean hogs
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the session after a near limit-down move yesterday. The 50.500 level held as initial
support before the contract broke down out of an intraday descending
triangle below this area.
But this area proved to be the Maginot Line for the day as hogs broke back
above this level which now suggests the market will hold above 50.500 for
the next few sessions.

December cocoa
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support and not closing a gap in the 973 area last week, a constructive
development. Cocoa closed up nearly 5%, or 49, at 1039.

TradingMarket’s
CEO Larry Connors mentioned cotton in his new weekly piece on the
markets. December cotton
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on the

New 10-Day Highs List and also exploded nearly 5%, or 1.42, to 32.23, off its
15-year low. Cotton is another example of a New 10-Day High momentum market
that made good on an Off The Blocks long setup today.

The New York Board
of Trade announced new trading hours for its softs commodities contracts
traded at its Queens, New York, facility effective Nov. 12.