T-bonds and T-notes may be set up for a short sale. Here's why:

T-bonds have made lower weekly highs for seven out of the last eight weeks and lower weekly lows for seven consecutive weeks. The 9-day Moving Average has closed below the 18-day Moving Average every day for over a month and a half. This market already broke a major monthly Fibonacci .382 support level (as measured between the 1994 low of 79-21 and the 2003 all-time high of 124-10) and may not find technical support again until the 2004 low of 103-02 or a major monthly Fibonacci .618 retracement at 102-16 (as measured between the 2000 low of 89-01 and the 2003 all-time high of 124-10).

T-notes have made lower weekly highs for fifteen out of the last sixteen weeks and lower weekly lows for six out of the last seven weeks. The 9-day Moving Average has closed below the 18-day Moving Average every day for over a month and a half. This market plummeted to a four year again on Friday and may not find technical support until the 2002 low of 101-295 or even the major monthly Fibonacci .618 retracement at 100-27 (as measured between the 1994 low of 88-105 and the 2003 all-time high of 121-03).

Both of these bear markets are severely overdone according to the Sentiment Index, the Commitment of Traders data, and the %R overbought/oversold indicator on several different timeframes. This could lead to a market reversal at anytime. However, we will continue to follow the trend as long as it remains intact. Only after a reversal signal occurs will we advocate getting long in these markets.

The interest rate trades are in highly correlated markets. Therefore, we suggest that traders who are doing one contract per trade pick just one of these markets to trade. Traders who are doing multiple contracts should consider spreading the trade out equally into both of these markets instead of putting the entire position on in just one of them. This will allow for some diversification.

Trade Alert - Buy Currencies

The currency markets have made a good bull run over the last few weeks and still look good for trades. The plan is to get long and use tight protective sell stops. The following week we will look to start trailing the protective sell stops just below the previous week's low. If stopped out, be prepared to re-enter. Obviously, the markets could turn at any time, but we are not going to try calling the top. Our interest is in riding the trend until a reversal tells us it is over. Here are the markets we are looking at:

Canadian dollar made a multi-decade high. It has made higher weekly lows and higher weekly highs for five consecutive weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day for over a month.

Australian dollar reached the highest level in a year. It has made higher weekly lows for six consecutive weeks and it has made higher weekly highs for five out of the last six weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day for over a month.

British pound reached the highest level in a year. It has made higher weekly lows for eight out of the last nine weeks and it has made higher weekly highs for five out of the last six weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day for over a month.

Swiss franc hit a one year high. It has made higher weekly lows for six out of the last seven weeks and it has made higher weekly highs for five out of the last six weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day for over a month.

Euro currency is at the highest level since May 2005. It has made higher weekly lows for ten consecutive weeks and it has made higher weekly highs for five out of the last six weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day for over a month.

Japanese yen is at an eight month high. The market has made higher weekly lows and higher weekly highs for four consecutive weeks. The 9-day Moving Average has closed above the 18-day Moving Average every day since mid-April.

US dollar index plummeted to a one year low. It has made lower weekly highs for nine consecutive weeks and lower weekly lows for five out of the last six weeks. The 9-day Moving Average has closed below the 18-day Moving Average every day for over a month.

The currency trades are in highly correlated markets. Therefore, we suggest that traders who are doing one contract per trade pick just one of these markets to trade. Traders who are doing multiple contracts should consider spreading the trade out equally into all seven of these markets instead of putting the entire position on in just one of them. This will allow for some diversification. Call the Trade Desk to discuss which trade may be best for your portfolio.

Trade Alert - Sell Coffee
Coffee may be set up for a short sale. Here's why:

After trading above a three day high on Thursday, coffee reversed and spilled to a new low for the year. This should elect all sorts of sell orders from liquidation orders for bulls who got burned by coffee to trend followers selling it short. This market also broke the major weekly Fibonacci .618 retracement that supported this market in March and April.

If coffee really is going to continue to get "creamed" it should do so in a hurry. Therefore, we are going to play for a quick break and use tight protective stops. We are not intending to stay in the coffee market if it just grinds lower. Failure to break to new lows over the next couple of weeks would inspire us to get out.

Be aware that the risk could be substantially greater due to gap openings or slippage on filled orders. Also, if the position is stopped out, be prepared for a possible order to re-enter the market. We may consider adding to the positions if the markets continue to climb and the protective sell stops are trailed.

Disclaimer: There is risk of loss in all commodity trading. The data contained are believed to be reliable, but have not been independently verified by Pearce Financial. Accordingly, such data cannot be guaranteed as to reliability, accuracy, or completeness, and as such are subject to change without notice. Pearce Financial will not be responsible for any indirect, compensatory, or consequential damages, including loss of profits which may result from reliance on this data. Pearce Financial and/or its Principals and employees may or may not follow strictly any or all of the trading recommendations contained herein. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.

© 2006 Pearce Financial, LLC
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