Floyd Upperman & Associates
Daily Evening HOTpage Report
11/16/04
(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.

I am going to provide a VERY thorough review tonight for all you visitors (including the RJO and FastBreak visitors). The purpose of this review is provide you information concerning another market I am looking at right now (for a trade like the crude and natural gas which I noted was setup for shorting on 10/27). Or the coffee I had been bullish for 2 weeks coming into Monday's explosive move higher. This additional market I am talking about now is still setting up however but should be monitored closely buy buying opportunities. This is cotton (CT).

I want to provide a very thorough review providing samples of the graphs and unique data in cotton (which is available in 45 markets to all members) to help provide further insight and illustration of our unique methods, data and proprietary COT derived statistical analysis. Keep in mind that this site is the only site in the world providing this level and sophistication of COT analysis. No other site or service in the world is providing access to the COT derived information and UCL/LCL studies I have developed.

You've had a chance to sample some of my charts and graphs, and you've seen the sophistication. If you are truly ready to begin your education, I am willing to help guide and assist you. If you want to join today I recommend you make a one year commitment to your education and with that 1-year membership commitment you will receive your choice of the 1999 or 2003 workshop video (12 hours) with a special option to purchase the other at half off ($200) during your first year.

Stock indices, S&P500 and Russell   - Pull-back time, this is nothing more right now than that. Overall I remain bullish equities via the Q4 rally which we expected, and if you are not long and looking to get long (particularly equities, such as LTD), my recommendation is to use the pull-backs to add or establish new long positions as overall I still believe we are going higher.

Tomorrows market:   We could see "turn around Tuesday" action tomorrow, which would mean a rally following today's minor decline. Notice we also remain above the 18dma's across the board in the indices.

Coffee (KC) - Pretty decent size pull-back today.   We are still holding the 18dma and last Wednesday's low is holding too. These factors still support the market going forward.   Short-term, clearly the market has its work cut out for it now on the upside, no question about that. If prices do manage to climb further from here short-term (particularly if we take out Monday's high) this of course would be bullish obviously. Short-term, I am not sure if it will go straight up however (which is what it would need to do to exceed yesterday's high short-term basically). Right now it appears more likely that this market will pause and catch its breath before it makes the next move (up or down).

As you know I have been bullish coffee for the last few weeks as the structure has been increasingly bullish. Overall nothing has changed with that except for the fact that the market is now faced with a more difficult road immediately ahead following Monday's explosive move higher. Typically at this type of juncture the market pauses and pulls back briefly (which is what began occurring today).

Overall the price structure does remain positive as the moving averages are pointing up and the closing price is well above them. We also closed 89.70 today which is decent given the fact that just recently we were trading in the 70's in coffee. However, over the last couple weeks this market (coffee) has finished higher 9 out of the last 11 days of trading, thus a pull-back is certainly in the cards short-term, and it begun in my opinion today.

Cotton (CT)- This market is looking more interesting in here and holding fairly well. However, we still need to see more strength in it, at least enough strength to get us over the 18dma (which has happened yet). The last up trend over the 18dma occurred immediately following the August FP, which by the way was a very nice FP.

Notice today this market was unable to close above the 18dma. Generally when a market is turning up (from a weaker period) the 18dma will act as a magnet and will attract the closing price to it initially, and prices will eventually exceed it when the trend is up. Today the 18dma repelled the closing price, which is not bullish. In addition today's close occurred well off the high. Again also, be sure to take note of the position of the 18dma in relation to today's high and closing price. At one point during the day this market was well above its 18dma intra-day. However, it was unable to stay above the 18dma. Selling pressure won in a sense and pushed prices lower by the close. And remember the close is ALWAYS the most important price of the day. Thus, until buying pressure can over-power selling, this market will remain in its current trend (downward). Near-term the weak trend has leveled out by the way, allowing for a "W" to form. This is what I am watching now. Notice for instance the FP that occurred back in August striking the LOW. The market immediately bottomed and turned higher following that daily FP. A formation like that or similar would be an ideal buy in this market at this point with the current "W" formation taking shape on our weekly price graph. Lets look at that too now.

As promised below is the UCL/LCL graph for Cotton. If this does not show you the power of the IMPA, which you must understand is completely derived from data totally unrelated to price (absolutely amazing and truly powerful) then nothing probably ever will and in this case you might simply be better off trading with the common tools (stochastic, fig jib, and so forth). I don't use any of that stuff myself and I don't know of anyone successful that does. Why would you want to look at that when we have REAL data that provided absolutely amazing results. Lets look.

One of the first signs that intra-day buying is beginning to over-powering selling is a close over the 18dma (and a close on or near the high, which I'll get to next in the "Additional 18dma criteria).

Additional criteria (18dma and more):
In recent years I have moved away from using intra-day prices (intra-day resting stops for example) focusing on the closing prices instead. My studies show the close is always the most important price of the day. And the 18dma is one of the most sensitive moving averages (and popular). Usually I don't like popular methods or measurements (I often fade them) but in the case of the 18dma and closing prices in this case I want to be focused on what everyone else is focusing on. One reason is because this is how many systems and traders define the trend short-term. Its quite ok to be on the same page and in fact its helpful to be on the same page as the majority regarding the current trend of the market. This helps us anticipate market behavior. In fact market studies show a difference in the behavior of the market based on the position of the closing price relative to the 18dma. That's why I added the color coding on our trend/swing graphs as well and several indicators we use include an 18dma in the formula. Its an important reference point, and its a neutral one that everyone can use and benefit from (openly).

The current closing price in relation to the 18dma is used to help identify and quantify the near-term trend. That's why we track it on our daily activity report for example with a "+" and "-" following the closing prices on this one page report. A plus (+) indicates the most recent closing price is above the 18dma. A minus (-) indicates the market most recently closed below the 18dma.

The 18dma is also part of our trading requirements (criteria). When trading the IMPA system for example (which simply means using our core UCL/LCL indicators to identify a selected market for a potential position trade). The IMPA selection is unique in that it is NOT a price derived measurement. Its more of a FUNDAMENTAL derived indication. It tends to be this way because the core UCL/LCL indicators are derived from the overall (net) commercial producer and commercial consumer bias. These are the two experts in the fundamentals in the markets they do business in. For instance take Crude oil. A large commercial producer (a company that pumps crude from the ground) is going to hire people and pay them substantial amounts of money to study the price fundamentals in the crude market. The large commercial producer will then tailor their business in futures based on the knowledge they have acquired in the industry. Likewise a large commercial consumer of crude oil, who's business doesn't necessarily evolve around the product per sae, but they may require a steady on-going supply to stay in business. They may purchase huge sums to you and I (billions of dollars). They will pay experts and leverage their knowledge as well to make the best decisions for their business when it comes to financing their raw commodity needs. This will include using futures to lock in prices for future needs. They will buy when their experts inform them the price is low. The balance between these two entities (commercial producers and commercial consumers) is very important. Each market is different however and markets change over time. We study these market participants for the fundamentals instead of chasing down all the fundamental data and filling up our computer hard-drives with all the economic data, production data, consumption data, demographic studies and all the data that goes into the study of the fundamentals in just one market. I do focus some on this data, but primarily in just two markets. Soybeans and Equities. It would be virtually impossible to do these studies in 45 markets! However, by tracking the commercial participants and monitoring their behavior and the balance between the commercial producers and commercial consumers, as well as noting the position of the "balancers', who are the funds, we are able to gain substantial fundamental insight, which often provides us with a bullish or bearish outlook when all the technical indicators say otherwise (sometimes those are the best situations).

In addition to the fundamentals we must use technical indicators and strategies too. That's where the 18dma comes into play. Technical analysis is required because fundamentals do not provide reference points to help us understand when we are right or wrong! They don't provide stops or area's for profit taking. In addition, if the fundaments are bullish a market that is priced at $10, and if that market drops to $5 for example while the fundamentals remain exactly the same, when or where do we draw the line and say we were wrong? Or maybe we are not wrong, but its simply "not time" yet and the market is therefore not "fully setup". And that's precisely what the technicals provide for us - The timing! Hence why we can't rush to buy or sell a market just because the IMPA is selected (triggered for a buy or a sell). The timing must also be right. The perceived fundamentals can become and remain bullish or bearish for some time before price reacts. And fundamentals can change over a short or long period of time too! Thus a bullish supply situation can "fade" and become neutral or the fundamental situation might even turn bearish before prices ever had a chance to react to the bullish situation!

I have setup specific "criteria" for the IMPA trades. The first is the selection itself. The data clearly demonstrates a UCL/LCL selected market has a higher probability of sustaining a major market turn (a probable ending of a significant old trend) than a market which does not have unusual or statistically significant commercial positioning. Take for instance the 2003 October IMPA SELL in cotton. I mention that one because the graphs are all here in this report for you. That IMPA Sell selection indicated a significant top might be at hand. However, this wasn't confirmed until price began to respond. And then before the turn took place we had several bearish technical formations (patterns and formations) that occurred at the onset of the turn. Thus, the indicators provide different levels of timing, and all are important pieces of the puzzle. They each provide some unique piece of information that the other measures do not provide. The IMPA UCL/LCL trigger is the fundamental piece of the puzzle, and because of that it tends to be early. The larger commercial producers and consumers use the futures markets to prepare for the future (needed supply and so forth). The major moving average cross-over is the final confirmation (10-day crossing through the 18dma) which always tends to be late. In between these two we have all the other technical measures and indicators. The most important intermediate indication that the trend is changing is the price behavior around the 18dma. Lets look at that now.

In recent years I revealed the 2-day 18dma rule. This requires 2 consecutive closes (2 in a row) above the 18dma to fulfill our 18dma requirement (criteria) for a completed IMPA setup (instead of having just 1 close above the 18dma). In addition to this, we can add further criteria regarding the 2nd close through the 18dma. And this is what I often require myself (I recommend you leave it optional however because it isn't always necessary). Basically you can add the requirement that the 2nd close above the 18dma be a higher close than the 1st. This increases reliability (at a cost which I'll get to). Furthermore you may also require the 2nd close above the 18dma contain a higher high than the first. This additional criteria can increase the reliability of an IMPA setup (or swing trade for that matter) at the cost of missing some entry's. That will always happen sometimes when you are requiring report. Its simply a matter of adding more requirements and they won't always be satisfied. The market may not meet the additional criteria yet may also move anyway, causing one to miss the trade.

FYI - Of course everything is the same for selling (I am just talking about buying here because of cotton). The difference in selling is simply the obvious, you may require the close to be lower than the 2nd close or the 2nd close to contain a lower low than the 1st close below the 18dma.

We used to only require one day above or below the 18dma, and before that I would even enter intra-day on an intra-day move above or below the 18dma. Over the years I have refined our entry and position management methods while our core methods dealing with the setups have remained the same. Notice today for example the cotton (CT) market did push above the 18dma briefly intra-day. However, it would not have served us well to have gotten long on the brief inter-day slice through the 18dma since the market pulled back substantially by the close and failed to close above the 18dma. This is a very good example of why we modified our technique here, focusing on closing prices. In recent years I have refined everything towards closing prices instead of intra-day. This has improved the overall performance of the system and strategies in back-testing and in real-trading performance.

Another entry technique which I've been discussing in detail in recent years (and perfecting) is using the patterns and structures. However, the base (the core setup) remains the same via the UCL/LCL measurements. Once that single trigger is active all these other technical and pattern elements can be applied. The patterns ( FP for example) provide an early type of entry via the logical stop. The stop is usually in closer proximity to the entry than say an entry following 2 closes above or below the 18dma. However, another method I've talked about in pretty good detail is entering on the bounce or pull-back following the 2-day 18dma close. This often (not always), but when it does it provides another lower risk entry because the logical stop tends to be closer. One thing I never do or even discuss, is entering at the market and risking "x" amount because that's all I want or would recommend risking. When you trade like that you are simply gambling. Notice that's never been my approach.

Remember also, the IMPA UCL/LCL indicators are leading indicators. The moving averages on the other hand are lagging. That's why these two work so well together. The lead of the IMPA combined with the LAG of a moving averages provides a very useful real-time market assessment.

I also posted a reply today on the message board regarding cotton. Ken O. mentioned Cotton on the board and the fact that it is an IMPA buy selection (setting up). I provided my view and opinion while answering his post today. I recommend you review that as well.

Markets SETUP or setting up for Long positions:

The Russell and the Nasdaq are IMPA buy setups. These two markets have been moving up with the Russell leading the way higher. The Russell has been an IMPA buy setup for some time now as is the Nasdaq as well. Both finished amid minor pull backs today and overall I remain bullish both!

Markets SETUP or setting up for Short Positions:

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

Gold (GC) - Up slightly today as the closing price remains above the 18dma. Short-term I have been looking for Gold prices to decline briefly, they really haven't however. Longer-term I continue to hold bullion of course but that's another strategy altogether however (part of my diversification strategy).

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. You do not have to place the order as "Stop close only" in order to use the closing price for your stop. What I recommend is that you simply wait until the close to evaluate your stop. If y our stop is exceeded on the close (based on the official closing price as reports on our graphs) then we simply exit on the open of the next day session (within the first 15 min of trade)! 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. Again, if stopped out, you want to be out the next morning (next day-session) and within the first 15 minutes.

I remain bullish some stocks which are QQQ and LTD (the Limited is based in Ohio).

FYI - If you did buy LTD recently, if your brokerage firm contacts you with an offer to buy them back for as much as $29 a share, for now I recommend holding onto them. I believe this stock is on its way to $30 and higher. I believe this is a decent longer-term buy and hold (probably will do very well over the next 5+ years provided there are no huge negative disasters). If you want to take profits I recommend it at $30 or higher (initial profits if long in here from $22 to 25).

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