In This Issue

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Trade Recommendation: Seasonal Tendencies

Reports and Expiration Notices

November 29th, 2006 — Issue #355

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* Market data provided by Yahoo! Finance approximately every 15 seconds. This statement is derived from sources believed to be reliable, but it is not guaranteed as to accuracy, nor is it purported to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

Trade Recommendation: Seasonal Tendencies

In this newsletter, we present a trade idea from Moore Research Center. Specifically, the position is a futures spread where you would buy the Mar. Swiss Franc and simultaneously sell the Mar. Canadian Dollar. The table below presents some relevant historic details of this specific seasonal trade, i.e., entry date and price, exit date and price, and the ultimate profit or loss (both in terms of contract price and dollar equity). The chart below the table illustrates the trade’s seasonal patterns and also the current market from a daily perspective. The commentary below the table provides some history of the trade and its current behavior.

Trade ideas and information courtesy of Moore Research. To access a free trial of their member section website and view their seasonal trade recommendations, special research reports, charts and much more visit MRCI.

"Whither thou goest, loonie?"

For this week's trade idea, consider the Canadian dollar (C$), affectionately known as the loonie (after the image of the common loon on the reverse of Canada's dollar coin).

Canada's fiscal year runs April-March. Against the US dollar, the C$ has exhibited the tendency to rise during its first fiscal quarter and into July, correct into August, and then rise again into early November. But then the C$ has tended to underperform the US$ all the way into mid December, with the final plunge especially reliable and the selling associated with expiry of December futures. In fact, MRCI has found that the March Canadian Dollar has closed lower on about December 18 than on about December 6 in 14 of the last 15 years.

But the loonie has exhibited such weakness even more often against other major currencies. Last week's Commentary, for example, discussed how and when it had underperformed the British pound for the last 15 consecutive years. But it has also done so against the Swiss franc. In fact, the Long March Swiss Francs/Short March Canadian Dollars spread has closed more favorably toward francs on about December 20 than on about November 30 for the last 15 consecutive years, with few immodest drawdowns. (Because these CME futures also differ in size, MRCI calculates and plots this spread as the difference in their contract equity values, as expressed in US$. The minimum increment in Sw-francs is worth US$12.50; that in the loonie, US$10.00. Here again, CME offers margin credit of 50% for spreads between these currency futures in a ratio of four C$ versus three francs. The system of fractionalized credits would thus require a minimum of US$1,350 for one contract of Sw-francs and also US$1,123 for one of C$. Brokers are not likely to accept spread orders.)

This year's spread appears to have established its typical early November low in late October near US$11,000. After rising to just above 13,000, it retraced about halfway back before exploding higher. In fact, after the holiday-shortened and admittedly low-volume trade this past Friday, the spread stood poised to challenge its highs for the year just above US$16,000 --- a breakout above which the weekly and monthly charts suggest could open the way to a more significant move. What ho, loonie!

Point of information: The CRB Index closed at a new all-time high a week ago Thursday, but it has yet to follow through. Was that a warning shot across the bow - or a bull trap?

If you have not already done so, you are encouraged to visit spread charts.

(Both for future convenience and for reference to past Commentaries, you can bookmark the WSC Index.)

Please remember: These are NOT trading recommendations. They are intended only as potential ideas based on the market's own performance in the past, but past performance is not necessarily indicative of future results. Futures trading involves substantial risk of loss.

If you have any questions or comments, e-mail me or call me directly at 541-484-7256.

Trade 'em,
Jerry Toepke

Trade ideas and information courtesy of Moore Research. To access a free trial of their member section website and view their seasonal trade recommendations, special research reports, charts and much more visit MRCI.

Seasonal tendencies are a composite of some of the more consistent commodities futures seasonals that have occurred over the past 15 years. There are usually underlying fundamental circumstances that occur annually that tend to cause the futures markets to react in a similar directional manner during a certain calendar period of the 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 utilizing these strategies. No representation is being made that that price patterns will recur in the future. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. Results not adjusted for commission and slippage.

Disclaimer:

Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

Economic Reports and Expiration Notices

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!