To become a successful trader, one must possess (among other things) two important attributes: patience and discipline. In this, my fourth week of writing this column, I do not have a fresh futures market that I want to trade. And I won't force the issue of finding a market with trading possibilities when I don't see any. So, I'll wait. Maybe something will turn up next week--or maybe not.
In my past three weekly columns, I discussed playing the long side of wheat, the U.S. dollar index and U.S. Treasury bonds. My opinion on those markets has not changed. (By the way, I'll also not hesitate to go short any markets, should the opportunity arise.)
However, I do have a couple markets on my "radar screen." But they are not yet giving me the signals I need to see to trade them.
Lumber futures and N.Y. cocoa futures are both in longer-term downtrends that have taken prices to significantly lower levels.
Cocoa futures are at 20-plus year lows and lumber futures are hovering around five-year lows. At some point in the future, both of these markets will likely be buying opportunities.
However, those of you who know me know that I preach about not being a bottom-picker or a top-picker. So, what I want to see from both of these markets, before I play the long side, is an end to the downtrends and some signal of market strength.
A likely scenario for both lumber and cocoa would be for the downtrends to end and for prices to trade sideways for a period of time, followed by a move higher. Then, once a key resistance level is soundly penetrated on the upside, or some kind of an upside breakout occurs, I'll likely want to establish a long position.
I'll keep you informed on both of these markets, including letting you know if any signals of strength occur, once the downtrends are completed.
But again, I'm going to be patient and let these markets come around to my trading requirements. I won't chase them.
That's it for this week.
As always, I enjoy hearing from you. Drop me an email with your questions or comments.
Jim Wyckoff (jwyckoff@futuresource.com)
