Floyd Upperman & Associates
Daily Evening HOTpage Report
11/01/04
(ALERT! Due to a flaw in the software, the above date stamp may be reported incorrectly in older
reports (pre 2000). The actual date of the report always corresponds to the file-date-name
displayed on the report page which you click on to pull up the report)

Please remember that commodity trading is risky and past performance in no guarantee of future results. There are no promises or guarantees made in this report whatsoever. In addition, futures trading is not suitable for everyone. The information provided herein are the opinions of the author. While every effort is made to ensure the integrity and accuracy of the data, no promises or guarantees are made.

"It is more likely the truth will be discovered by few than by many"
Rene Descartes

"Advances are made by answering questions.
Discoveries are made by questioning answers."
Bernard Haisch

From the Desk of Floyd W. Upperman Jr.
My new email address is floyd@upperman.com.

The U.S. election is of course tomorrow and this one as I am sure you already know is being called "to close to call". The fact that this appears to be such a tight race is likely to cause some people to be even more indecisive! Thus more voters than usual may not make up their minds until they enter the polling booth tomorrow! And that number could be high as this country is full of procrastinators! Consider for example the number of people that wait until the last minute to turn in their tax returns on April 15th! Thus, even though its a tight race now, it might not end as tight as the 2000 election, I don't know however of course. Nevertheless I do know that the campaigning is going on right up to the last minute on this one! Overall this will be a good test for the polls (to see how accurate the polls are at anticipating these things). I'll be watching to see which ones were most accurate.

Equities will have one less unknown variable to contend with once the results are in and we have a confirmed winner! This should be positive for the market overall going forward (remainder of Q4). The next important piece of information comes later this week via the employment report Friday (October jobs number). If the election goes smoothly (no problems with deciding who the winner is) and Friday's data surprises on the upside (180K+ more jobs) the market will be in a good position to continue with this move higher. We may in fact move higher for the rest of November and into December (a traditional Q4 rally) if Friday's employment data is supportive and the election goes smoothly (regardless of who the winner is). If the employment data surprises on the downside (less than 100k) then we may have a tougher time rallying through Q4. I'll be watching this one closely!

Friday's employment Report Forecast:

Nonfarm payrolls Consensus Forecast for Oct 2004 are 160,000.
The Range is 85,000 to 225,000.
* 180k and higher will be supportive for the market in my opinion.

No plungers today as the markets are quieting down somewhat ahead of the election. Lets review the recent plunger formations however! We can start with the energy complex!

The energy markets continued lower again today following the recent reverse plungers in these markets! Crude oil (CL) closed lower today to the tune of $1630 per contract. I discussed this market and Natural Gas (NG) specifically in my 10/27 report (that's the day we had the slew of plungers, which I noted to be a crucial day across the board in the markets).

The 10/27 automated plunger report identified the reverse plungers in crude oil (CL) and natural gas (NG) and both have been profitable. The plunger report provided an excellent range of prices for the entry and an excellent stop (which remains in place) in both markets. Both markets continued lower following these plungers again today, however crude of course closed off the most (which is profits for those short). What is also noteworthy is that these reverse plungers called this tops in crude and natural gas for now (the 10/27 highs remain the top for now). This further illustrates the significance of these plungers (which we have been tracking and trading for years now). However, obviously the plungers and our automated plunger reports are simply one of many tools in our trading toolbox!

I also mentioned if energies did top out in here it would be supportive for equities as they may then turn back up and could rally via a Q4 rally. And that's what has happened basically. I might also mention however earlier in the year we talked about the potential for a Q4 rally this year. Now it all appears to be coming together and indeed may have already begun.

11/01/04 - The energy markets finished sharply lower with the stock indices finishing higher (Dow, S&P, ES, ND and RL all finished higher). The Russell led the pack once again as has been the case in recent weeks. Why does the Russell continue to lead the pack higher? Because it remains an IMPA buy, fully setup. Some of you are of course long as well. Here's (below) is the core UCL/LCL graph from October 19th for you to review (the one I included in the Plunger Manual). And nothing has changed here! This market remains an IMPA buy ! Here's the graph!

* The UCL/LCL studies and graphs are available in all 45 markets we track and trade to members by clicking on "c" under the commodity name from the main daily graphs page. Further detailed analysis is available via In-depth 1 and In-depth 2. This includes our Fund UFL/LFL graphs and our separate commercial producer and commercial consumer studies (available to members in all 45 markets we track and trade).

Clip from last week's Discussion:
Folks again the plungers are very hot right now and we noted that this was likely to occur several weeks ago when the plungers began occurring more frequently (in larger numbers). Whenever you see this (an increasingly large number of plungers, exceeding for example 8, 9 or 10 in one day) its often a very important (subtle) indication that a larger shift (across the board) in the markets may be taking place. In this case as we have discussed, this may very well be the end of the energy rally for 2004 (the highs may already be struck in other words) and we may see equities rally further. They could (again could) rally to NEW highs on the year during November and December! That's what I was looking for back in Q2 for example (looking for a potential Q4 rally that took us to new highs on the year) and that is looking relatively good in here now in my opinion. I mentioned a couple stocks (including the QQQ) at the bottom of this report by the way. If the market does well these next 2 months (last part of 2004) and maybe into Q1, these stocks mentioned below should do well also.

Stock indices, S&P500 and Russell   - The S&P closed up again today as did the Russell (again the Russell leading the indices higher).

Tomorrows market:    Obviously we have the election tomorrow and again Friday's employment data as well. Overall however, I remain positive towards the market at this time.

Lean Hogs - This market closed higher again today following Friday's 2nd consecutive day of closing above the 18dma. This illustrates the importance of this indicator as well. This is also what causes the color change on the daily trend/swing price graph. Two consecutive closes above the 18dma causes the color on our daily trend/swing price graph to change from green to blue. Blue= "Trending higher", Red="trending lower" and; Green= "Potential trend transition". The trend did go into transition late last week in hogs and now appears to be back up. We discussed this in Sunday's report. Right now I obviously am no longer short or bearish for the time being.   Here's today's updated color coded trend/swing graph for lean hogs (LH) below.   The trend is back up again following Friday's 2nd close above the 18dma (thus turning the price bars blue).

Natural Gas - This market continues lower for now following the 10/27 Reverse Plunger and last week's weekly RP as well.

Coffee (KC) - I reviewed the recent plunger formations here in coffee in detail in recent reports as well and again I really recommend you review these very important discussions. Why? Because I discussed the rules regarding overlapping plungers which I haven't really talked a lot about (although they are covered basically in the plunger manual, but you have to think about it).

Swing Trades (For Advanced Traders)
- Swing Approach "A" - The standard trend approach. My favorite.
- Swing Approach "B" - The standard counter-trend approach.

Gold (GC) - Gold prices remain above their18dma. Note that this market has held the 18dma very well recently (which is not unusual for gold however). The reason for this is because of the many technical based systems trading gold and many of them use the 18dma. Some of these include the larger trading funds as well (tracked on our site under "IMPA In-depth 2 analysis". We have graphs with indicators that track the fund behavior from week to week. The funds are the TREND makers as their trading (as a group) basically FUELS the trends. Gold is a popular market with the FUNDS and other traders and the 18dma is also a very popular moving average (ma). Hence the 18dma performs very well in gold (a self-fulfilling prophesy in a sense). Lets look at the daily chart together.

* The most recent RP in gold continues to hold (the RP high has not been exceeded as you can see above). Until we close above this area I will look for prices to move lower (short-term).

Furthermore, on a longer-term basis Gold is currently an IMPA sell selection! It is not fully setup yet, and won't be fully setup until we close under the 18dma for 2 consecutive days (final component for an IMPA sell setup). However, I am looking at this market now via a potential early entry on our "M" pattern formation in conjunction with the recent RP as noted above (which provides a lower risk logical stop via our "early entry" strategy). I talk about this in detail in the 2003 Workshop video (a 12 hour workshop video where I explain all the latest strategies incorporated since the original 1999 Workshop video). You can still order both (for now but we may not offer the 1999 much longer) online via our secure server by clicking - Secure Server list of Video products and other FUA products.

FYI While supply lasts - If you signup for a yearly membership you can receive the above June 2003 12 hour workshop video absolutely FREE (while current supplies last). Click here to take advantage of this while supplies last (if out of the DVD version of the new 2003 workshop video you will still be able to get the VHS version of our 1999 12 hour workshop video free with all 1 year memberships as well).

The early entry's typically provide less monetary risk because of the closer proximity of the stop (closer to the entry). That's the main advantage. Since its an early entry its "logical" for the stop to be much closer than it would be if the market had already reversed. The disadvantage is that they are not as reliable as an entry into an existing new trend. The most reliable entry is always to enter with the trend (which includes buying or selling on stops, going with the flow of the market). Another one of my favorite methods for entering with a new trend (on an IMPA or COT derived setup, both are the same and basically mean we have UCL or LCL penetration) is to enter on a correction to or through the 18dma (intra-day) after the new trend has already been established. Soon after a new trend is established it almost always goes through a short-term correction (pull-back or bounce) to test the bottom or top (at the turn) and that usually involves 18dma penetration. The stop in this case is generally a little wider than an early entry stop.

Now some would say just use a stop to risk X amount of money! Folks that is simply flushing your money down the toilet. The market does not care how much money you want to risk on a trade. You have to find a stop that makes sense. A stop that makes sense to the market, not to your wallet. The stop should serve one purpose. And that is to get you OUT when it is clear you are wrong. The less lag you have before you determine this the better! That's why I use these patterns, they provide the logical point where I know I am wrong. So in a sense, one of the main components of my entry point is the stop! I never enter and pick the stop later and I never place a monetary stop! Monetary stops may get you out when the market simply burps or makes a little noise, or worse, gets you out on stop running! We have the cure for that too (no more intra-day stop running on FUA stops)! See below!

We have completely removed the nagging nuisance of stop running by using the closing price for ALL of our stops. This does not require a stop close only order. We do this by simply waiting until the close and then we simply compare the closing price to our stop. If the closing price exceeds our stop we get out on the next open (within the first 15 minutes of trade). Testing shows that this simple yet affective stop procedure has improved our trading strategies significantly. It basically eliminates the worry of intra-day stop running because we do NOT have resting stops sitting there anymore (which are TARGETS for both floor and off-floor traders ladies and gentlemen, do not kid yourself about that). Secondly, the closing price is the most important price of the day. Intra-day the market can spike up or down on noise or thin trading (when traders are at lunch for example). This noise can result in you being stopped out at the low or high of the day! You don't need that! Again, the closing price is what matters at the end of the day (a spike up or down intra-day is not important, unless you have a resting stop there and it clipped you). Don't make that mistake! I urge you all, if you don't get anything out of these reports at least investigate this stop strategy. It can make a big difference on your month to month and year over year performance in this difficult business. In fact you can read about this stop (very simply strategy to follow) in the paragraph directly below.

ALL Stops:
ALL STOPS on all positions are now STOP-CLOSE-ONLY and have been since I officially updated our procedures in 2001 and 2002. I discuss this in detail in the June 2003 workshop video which I highly recommend to all serious traders using these strategies. To order the DVD version on special for a few more days click here. The new stop-close-only stop method is far superior than our original "resting stop" method. It makes a big difference!

Stop close only manual order. To use the stop close only manually you simply wait until the close to evaluate your stop. If your stop is exceeded on the close you want to exit on the open (within the first 15 min of trade) of the next day session! We have always managed our positions (stops) this way in options and spreads because they trade to thinly for intra-day resting stop orders. Now all positions should be managed this way. If stopped out, we want to be out the next morning (next day-session) and within the first 15 minutes (rule).

Turning bullish some stocks and some of the Techs. I am interested in QQQ, QCOM and LTD (which is not a tech stock, but its a company that is doing well in this environment and may continue to do so, in fact it may soon breakout to a new high).

Be sure to visit the discussion board daily! I am there daily answering questions and assisting members (with position trades and day trades). My presence on the message board overlaps my reporting here this even if you cannot visit the board during the day, you can visit in the evening! You don't have to post a thing as well. You can simply review all the posts that took place during the day (something I recommend). Some days are more active that others of course. I recommend checking in with the board daily!

Our new Stock Market Research Site address is:
This is new and under development
www.equitiesresearch.org

Position Management and Money Management Portion of the System - Remember never to risk more than 10% of your risk capital on any one single trade. We must never adjust the stop to accommodate the 10% risk. The stop needs to be placed strategically based on the market, and the market alone, not what you can afford to lose. I can't stress the importance of this enough. Once the stop point is determined, the risk can be calculated. If the risk is to large, pass on the trade and wait for a lower risk trade.

Our two important Rules: Control risks & manage profits!
Click here for Risk Matrix Click here for 50% rule.

Special backup site - The backup site provides a second source for our charts and graphs as a back up when/if something goes wrong with the main site or main computer driving the data to the main site. The address to the backup site is http://www.cotdata.com. Your discussion board username and password combination is required for access - If you do not have discussion board access, email Floyd for a special username / password combination for the backup site.

* The hotpage does not trade all the setups, only certain ones are taken and they are all for teaching purposes, so I can demonstrate to you (live) how to trade using our system, methods, rules and data. My goal is to teach you how to trade using our strategies, not to trade for you.

"Shun passion, fold the hands of thrift. Sit still, and Truth is near: Suddenly it will uplift your eyelids to the sphere: Wait a little, you shall see the portraiture of things to be."
Ralph Waldo Emerson

"When it comes to success in trading, being right most of the time is not nearly as important as is being procedurally right all of the time! "
Floyd W. Upperman Jr. CTA