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Volume 5, No. 1   June 2009


Do you want to trade like a professional?

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Insider Intelligence is a Do It Yourself Market Service. We do not manage any accounts.

This site advises trading in commodity future contracts in the S&P E-Minis, US T-Bonds, the DX dollar contract, metals, ags & the softs.

DISCLAIMER: We are not investment advisors. Day trading involves high risks. Always analyze the level of risk you are assuming. Past performance is just past performance and it doesn't mean that it can neccesarily be replicated in the future.

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Key index: L = long; S = sold; SS = short; C = covered.

Contract symbols -- USM: June Long bond; DXM: June dollars; CLM: June NYMEX oil; GCM: June COMEX gold; SBN: July NYBOT sugar; LBN: July CME lumber; OJN: July NYBOT orange juice; WN: July CBOT wheat; CTN: July NYBOT cotton; CCN: July NYBOT cocoa; KCN: July NYBOT coffee; HGN: July COMEX copper; SIN: July COMEX silver

Month symbols -- January: F, February: B, March: H, April: J, May: K, June: M, July: N, August: Q, September: U, October: V, November: X, December: Z


TRADING MISTAKES YOU SHOULD AVOID, i.e. Don't Trade Until You're Ready.

These are the common mistakes we hear about on Insider Intelligence. com, mistakes which can lead people to burn themselves out.

1. First, you've got to treat your trading like a business because that's what it is -- a business. You have to devote time to it like you are running a business. You have to have it set up as a business entity, like some sort of trading corporation, so that you can deduct all of your losses, for example, and you can deduct related expenses. Most people don't do this and they wind up with big losses that they can't use. Or they have expenses, such as - fee services- or various computer-related costs that are deductible, which they don't deduct.

Treat it like a business. Set it up like a business.

2. Don't start trading until you are completely set up to trade. By "set up," I mean this mechanically. You don't start trading until you have your account open, until you have your computer quote screen set up the right way, until you have real-time streaming quotes, and until you have some sort of technical package that is a chart/graph type package, that is apropos to day trading.

You don't need to spend that much money. So many people do this, because the electronic IB's (Introducing Brokers) try to peddle a lot of expensive technical software packages that day traders, frankly, don't need. These programs have too much. In other words, day traders, by and large, do not need RSIs, 14-day Relative Strength Indicators, or moving-average convergence/divergence information, or histograms. That software gets very expensive very quickly, and day traders really don't need it

3. No matter how much money you start with, don't start trading multiple lots or multiple contracts right away. Because if you start trading 5 lots, which is what I oftentimes do, and you have to average out, then you've got to put on potentially another 5. And suddenly you've got your entire account committed to one position. Then your account could become illiquid very, very quickly. And you risk a sizable loss from which you cannot recover if you don't know how to trade.

Start out with one-position lots only, in what you're trading. Don't try to load up with lots to make the so-called big hit. That's not what this business is about. This business is about accumulating small profits. Incrementally and consistently over time.

Also, if you do not understand Economics 101, or if you don't know anything about the markets, be they commodity markets, equity, debt markets, etc., you should establish, and all brokerage firms offer this when you open an account, a paper-trading program, initially, where you can 'trade on paper.' That is, you're entering the same trades, the same account, it's just not real and you're not losing your 'real' money.

You can open what's called a paper-trading account to try to get some practice, and to try to get some feel of the markets. Because, in the last analysis, that's what day trading is about, the ability to 'feel the tape.' This is something that takes a lifetime to learn. It cannot be taught to you by any book. You can't do it or understand it overnight unless you've been involved in the markets all of your life.

4. Another pitfall is not understanding that there are costs involved. For instance, people seem to think that you open up a brokerage account and the broker you're doing business with is going to provide you with everything as part of a service for doing business with them, free of charge. Not so.

For instance, to get streaming real-time quotes in all markets in all sessions, you've got to pay the exchange fees, about $400/month. And there are, in fact, a variety of costs.

For some reason, people are not aware that there are costs associated with trading commodity futures. In order to day trade, you have to have real-time streaming quotes. You have to have a level-one trade platform, a rather sophisticated trade platform with a lot of ancillary services, most of which are for a fee. And you may be subscribed to one or more trading publications or advisory services, etc. But you've got to expect that your trading costs could likely be as much as $2,000/month. You're running a business. And that's how it should be set up.

This is why the 90% 9-week fraction exists in this industry. That is, that 90% of all new people coming into it will lose money. And, indeed, every new $10,000 account turns over in 9 weeks.

In conclusion, with the big hit comes the big risk. People have to understand that People must understand that, in the commodity futures trading business, success is measured by consistency over time.

Would be traders must learn the markets. People tell me -- Al, how can you possibly know all this? Or they say, It can't be as complex as that. Because you don't make it sound complex. I said, you know, there was a quote in Commodity Futures magazine -- statistical analysis proved that successfully trading commodity futures over a long term was more complex than brain surgery. And it is.

But a brain surgeon makes it sound simple if they've been doing it for 30 years. It's the same with trading commodity futures.

What I'm saying also is I've noticed that people get very enamored of trading manuals and books on technical trading, on fundamental trades, or the books that you see on the infomercials: How to learn trading commodities in 3 easy steps for $69.95. There is no such thing.

There is no easy way. You can't open your account from your La Z Boy and say, Oh, well, Al, with my $35,000 account, I want to make my $20,000 a week too. It isn't like that.

Victims of the Kowboy Ken Trading System Scam all across the country must learn that you cannot learn to trade commodities in 3 Easy Steps -- because it is the most complex thing you can imagine.

A few words to the wise guy: Day trading takes hard work and commitment.

FOMC Pronouncements Roil Markets
BY AL MARTIN

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(6-28-09) Markets were roiled across the board by the FOMC statement on Wednesday (June 24), which contained nothing of what the markets were looking for. No exit strategy and no increase in the quantitative easing program was announced. The only thing they did was not use the word "deflation" anymore, which is in fact the word they probably should be using, particularly if they’re going to print a lot more money. The FOMC statement cracked the equities and the commodities.

| More... | Posted on Jun 28, 09 | 7:03 pm |





Bond Rally Gives Up the Ghost Late Week,
As Coming Week's Treasury Calendar Looms
BY AL MARTIN

(6-21-09) This week there will be auctions for $104 Billion of fresh Treasury paper, a record one-week calendar. Therefore, look to short the Treasuries late week. As we said last week, that was THE trade.

When the Sep. long bond contract started to run out of gas at the 116.24 area in Thursday's over-night trade, that was the time to sell them because you knew that the bonds had to come down, i.e. give up the ghost, going into this week's heavy calendar offerings. Indeed that trade produced a 80 tick profit.

On Friday, we saw the bonds bid back up a little and that's because they dropped them more than they should have in Thursday's session, but those who missed the trade should be a seller of the Sep. bonds come Sunday night at 115.00.

| More... | Posted on Jun 21, 09 | 4:12 pm |





Short Dollar/ Long Commodity Trade Begins to Unwind
BY AL MARTIN

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(6-14-09) Last week, on CNBC and Bloomberg, we heard unprecedented coverage of the unwinding of the short dollar – long commodity trade with many of the Financial Media Shills actually suggesting that equities should be sold short, commodities should be sold short and the Dollar should be bought. In fact the markets are already ahead of them…

| More... | Posted on Jun 14, 09 | 3:16 pm |





Market Sends Signals: Time To Withdraw Fiscal Stimulus Spending
BY AL MARTIN

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(6-7-09) Once again we saw the long Bonds come under pressure late week. We were sellers of the USU contract above par 14 in Thursday's trade -- and simply hung on to them. We see the bonds traded down to 113-1/4 in Friday's trade. Although the bonds are cheap, it is obvious that they are going lower, coming into next week's heavy Treasury auction calendar.

| More... | Posted on Jun 07, 09 | 4:28 pm |





Late Week Volatility Across the Boards (As Promised)
BY AL MARTIN

(5-31-09) On Friday morning in our special note, we had warned of potentially excessive and severe volatility in Friday's session -- during the so-called Last Day of May Trade phenomenon. We warned that the Shills would keep their powder dry until the end of the day and try to drive equity prices higher, which is precisely what happened in the final five minutes of trade. We also warned early on of a potential short squeeze coming in the Treasury Long Bond contracts, which is precisely what happened, in that Thursday night's pronouncements by the Fed that made the Fed seem incompetent were actually a positive for the Bonds, when the Fed said it would not attempt to target rates. We had been warning that the Bonds were deeply oversold, and this oversold condition is now being rectified.

| More... | Posted on May 31, 09 | 4:28 pm |





Natural Market Relationships Continue to Break Down
BY AL MARTIN

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The following is a FREE Sample Column of Al Martin's prescient market recommendations published every week. When you subscribe now, you will have Real Insider Intelligence. Please use the SUBSCRIBE Button above...

(5-24-09) We have seen the Obama/ Biden Regime’s fiscal stimulus program continue to cause a break in the natural sympathetic/antithetic relationships between the Big Four Pillars, i.e. Bonds, Dollars, Gold and Equities. This has become strictly a day traders’ market. We now have so many professional traders out of the markets that volume and liquidity is diminishing and the market is simply becoming the domain of the Colored Light People (CLPs, pronounced CLIPS, i.e. those who buy when the light goes green and those who sell when the light goes red.)

The only thing we can say is that the Treasury Bonds are now severely oversold. Classically in a falling GDP/ consumption environment, interest rates should not be rising. This concept that supply alone can cause interest rates to rise has no validity in economic history.

In fact, a 3-1/2% yield on a 10-year instrument is a helluva good return in a deflationary environment. We are not frightened of the bond calendar next week and indeed are expecting the auctions to go pretty well, particularly at the long end. Therefore we continue to believe that the June Long Bond contract is cheap.

The Dollar contract came under pressure which is becoming increasingly a loss-of-confidence trade. However we have reached major Fibonacci Wave completion numbers in both the Pound and the Euro. The same numbers were reached in the DXY contract on Friday’s low. We would look for short-covering lifts in the Dollar index.

The Oil, Gold and most of the fungibles continue to respond to strictly equity-led markets, despite continued deterioration in supply/ demand fundamentals. Oil is now $30 overbought, yet will continue to move higher -- as long as equity markets move higher.

The June Gold contract did pick up late week finally on the back of Dollar weakness. However Dollar weakness alone would suggest that the price of the contract should be $150 higher. Therefore there is some reality in the Gold in terms of falling commercial and industrial demand.

Indeed, commercial and industrial demand for gold has fallen to levels not seen since the Great Depression of the 1930s. Investment demand alone cannot sustain apickup in thegold without a commensurate rise in inflation. Although we have been trading Gold on the long side, late week on the break-out above $940, the previous recovery high, we would be cautious up here at the $960 level.

Sugar, Orange Juice, Lumber, Cocoa, Coffee and Cotton are all in similar “unnatural” situations where supply/demand imbalances continue to grow, yet prices continue to rally as the speculative bubble increases.

Sugar should not be concerned about so-called reduction in new harvest Indian crop. In fact India is going to look at 43-44 million tons. There is some selling coming in to Orange Juice, and there was an effort to break down the sell-stops in the July contract below 89 cents on Friday

The shill in the Lumber continues to be unsustainable. The CLPs who had bought the Lumber in the 180s and better are now holding a loss. They are now upside-down in the Lumber, as Lumber appears to begin to trade back to reality a little bit.

The Grains continue to be in a world of their own, although we would note that the July Beans closed on their lows Friday and looked weak all session. With South-of-the-Border Nations unable to sell cash Beans at $9.66 or $2 lower than the July closing and with global demand for grains falling, as was noted by China, Brazil, India, Russia, and Australia last week and old-crop inventories, although declining, still ample, we still continue to scalp the Grains on the short side on rallies.

The Copper which picked up a little Friday is still under-performing and therein lies one of the keys. Look at the Copper, which despite the shill has been unable to lift back to the previous highs. The industrial metals continue to be under pressure, since they are the most difficult to shill in a falling-economic growth environment. We continue liking to short the Copper on rallies, and in fact we did short the July Copper at 210 in Friday’s trade.

Coffee continues to be in La La Land. We did take on a spec short at 1.37 in the July contract, looking for 4 cents out of the position.

July Cocoa continues to simply hang on through the action of the rest of the boards, but wants to look lower to retest the 2200 area.

The Cotton shill is increasingly being broken under the weight of surplus inventories globally. Note that the Cotton has been unable to pick up again while other commodities have been able to do so. We continue to look to sell the Cotton on a retest of the 60 cent area, as we have done before.

| | Posted on May 28, 09 | 9:26 am |





'Sell in May and Go Away' — Don't Discount Old Adages…
BY AL MARTIN


| More... | Posted on May 17, 09 | 7:02 pm |





Preview for the Coming Week
BY AL MARTIN

(5-10-09) Both equities and futures markets continue to reach levels of historic over-valuation never before seen -- far beyond what underlying supply/demand equations of fungibles justify. This again has left the June Long Bond contract cheap. We have traded the Bond contract more than a dozen times since Thursday night on 8-point scalps from the long side. With no supply in the coming week, there will be little upside resistance in the bonds. We expect the June Long Bond contract to trade back to 123 soon.

| More... | Posted on May 10, 09 | 3:58 pm |





Both Record Overbought and Oversold Readings Reached Across the Boards
BY AL MARTIN

(5-3-09) The June Long Bond contract fell back again late week, as both the 10 and 30 year issues breached the 3% and 4% yield levels respectively, bringing in fresh stop-loss selling from the pits. However we would note that the professional short interest in the June Long Bond contract has reached levels only seen once before in December 1982.

Indeed the Bonds are now dynamically oversold and with the Fed signaling that it will defend yields on the long end, we like the buy on dip trade in the June Long Bond contracts even more than usual.

| More... | Posted on May 03, 09 | 12:24 pm |





Technicals Move Equities from "Extremely Overbought" to "Dangerously Overbought"
BY AL MARTIN

(4-26-09) As we expected, the June Long Bond contract actually traded rather well throughout the week with no supply to speak of and continuing good demand in the corporate-muni calendars throughout the week. Friday's draw-down in the June contract was expected, given next week's supply. However, we feel that the Treasury Bonds have reached a level where good demand is going to be seen. We like trading the contract from the long side at current levels.

| More... | Posted on Apr 26, 09 | 12:09 pm |





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Al Martin is an independent financial, economic and political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC.

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