N.Y. Gold: The yellow metal has sprung to life the past couple weeks. Last week, the June contract flirted with the psychologically important $300 resistance level, hitting a high of $298.60 before prices backed off. This is the biggest ruckus the bulls have caused in many months—and it may not be over. Just because prices have backed well off last week's highs, that does not mean the bulls have spent all their energy. The fact that prices backed off and then consolidated around the $280 level is a good sign for the bulls. If prices would back off sharply and fall back toward the $270 level (basis June), that could mean the bulls have had their brief shining moment and it's now past. A look at the weekly continuation chart for nearby gold futures, shown here, points out the big and potentially bullish falling wedge pattern that I have pointed out before. That chart pattern certainly favors the bulls' case. For the gold market to get re-ignited, bulls need to push prices above this week's high of $288.50 (basis June) and then see a close above the important $300 level. My bias is that will be a tough chore. But if bulls can get a couple closes in a row above the $300 level, they could be off to the races.

U.S. T-Bonds: In the last newsletter I showed you a bearish weekly chart for U.S. T-bonds. The daily bar chart for June T-bond futures is also bearish. A look at the monthly continuation chart for nearby U.S. T-bond futures also has turned more negative. Just recently, prices have broken below an accelerating trendline from a longer-term trendline seen on the chart. Prices dropped right down into the support zone seen on the chart, and so far that support zone has held price declines in check. If nearby futures prices drop down below that support zone, which means a move below the 98 21/32 area, that's an ominous sign for the bond market bulls. If prices can recover and move out of the support zone, then the bulls have an argument that the lows may be in place. Despite some conflicting fundamental news in the bond market that has perplexed some market watchers, the technicals have been negative in bonds for some time, and are getting more negative.

S&P 500: The past couple weeks have been good for stock index futures bulls. Basis the daily chart for nearby June futures, prices broke out above a congestion area and have been able to hold most of their recent gains. A look at the weekly chart for nearby S&P 500 futures shows a technical picture that should also please the bulls. Note that a five-month-old downtrend line has recently been penetrated on the upside and negated. Furthermore, see that a V-Bottom reversal has played out on the weekly chart. My bias is still that while the bottoms are likely in place in the U.S. stock indexes, there will be no breath-taking rallies and trader euphoria like we witnessed in 1999 and early 2000. Instead, we will likely see more traditional up-moves from a bottoming process. That means a slower grind higher with some fits and starts along the way.

British Pound: The choppy trade continues in sterling. This may be the "basing" at lower price levels that needs to occur before any uptrend can develop. If prices can punch up above the 1.4490 level, basis June futures, it would be considered a bullish upside "breakout" from the recent congestion area. If prices fall below the early April low around 1.4100 (which happened Thursday), and then see good follow-through selling the next session, then the door is open to much steeper losses. The pound was not that far above recent historic lows and I do not think there is much more downside.

U.S. Dollar Index: Prices just keep heading north. This week, the nearby June futures pushed to a new multi-month high. The daily chart certainly paints a bullish picture for the dollar index, especially since this week saw prices push above the April highs. A look at the weekly continuation chart for nearby dollar index futures shows an accelerating 2.5-year-old uptrend line is in place. But there is one more hurdle on the upside, basis the weekly chart, for the dollar index bulls: resistance at last fall's high of 118.90. Prices came close to that level Thursday. Commodities bulls don't want to see the dollar appreciate dramatically because it tends to reduce export competitiveness of U.S.-produced products, including grains, cotton, livestock and other goods.

CRB Index: Traders like to watch the CRB index because this commodities barometer can foretell the trends that occur in the specific commodities markets, such as the grains, energies and livestock. The daily CRB cash index shows prices are in a fledgling uptrend and that a four-month-old downtrend line was recently negated. That's positive news for those looking for bottoms in many of the commodities. One signal that many of the commodities markets could be coming back to life in a more rapid fashion would be if the recent high above 219 is taken out on the upside. If that recent high cannot be taken out, odds are not high that we'll see any solid rallies in the commodities in the coming weeks and months. Do note that the Moving Average Convergence Divergence (MACD) indicator, seen at the bottom of the chart, has just recently moved into a bullish mode.

Soybeans: My opinion on the soybean market has not changed. My strong bias is that a significant weather scare will have to occur in the U.S. Midwest in the coming weeks to ignite any kind of a solid rally in the soy complex and grains. The high carryover stocks situation and the record planted bean acres in the U.S. are very bearish fundamentals that are overhanging this market. But here's what traders have to keep in mind: First, near-term supplies of soybeans are tight at present, as farmers are tight-fisted at the current price levels. Second, demand for soybeans is also good right now. Finally, more years than not we do have some degree of a weather scare develop in the grain markets during the growing season. They key will be what "degree" of weather scare may we see this year. Just in the past few weeks, we've seen the grains pop on what I have termed "mini weather scares." The fact that prices are so depressed heading into the growing season means that any potentially adverse weather patterns that do develop in the Midwest this summer will have that much more upside influence on prices. Technically, the soybeans are faring well in the face of deteriorating corn and wheat markets. The daily charts show some slight signs that are a bit encouraging for the bulls. A look at the weekly continuation chart for nearby soybean futures, shown here, also reveals a picture that is not bearish. Prices just recently broke above and negated a four-month-old downtrend line. I already own a call option in July beans, but time is running out on that particular option. As we head into June and if there are no adverse weather patterns developing, then history suggests the next important timeframe for the grain markets is the trading period right after the Fourth of July holiday. My friend and respected analyst Glen Ring says that after July 12, odds of strong summertime rallies in grains decrease markedly. In sum, I'm still watching the bean market very closely. I will be extra aggressive about trying to spot any developing trend.

Cattle: This is a good market to point out to you how a longer-term perspective in markets is so important. By looking at the daily bar chart for August live cattle futures, one could surmise that the big gains recently are a strong bull move that has pushed prices above some key resistance areas. While that may be the case, the longer-term weekly continuation chart for nearby live cattle futures does not suggest such a bullish scenario. In fact, the weekly chart suggests that the recent pop in live cattle futures is nothing more than an overdue upside correction in a bear market. Note how a V-Top reversal occurred on the weekly chart and that prices have dropped sharply since around early March. See also at the bottom of the weekly chart how the popular Moving Average Convergence Divergence (MACD) indicator has moved into a bearish mode. See support and resistance levels on the chart.

N.Y. Cocoa: The July contract is in a four-week-old price uptrend, as seen on the daily bar chart. While bulls have the near-term edge, they need to push prices north very soon in order to keep the uptrend line intact. The bulls won't gain much more confidence until they can move prices above the May high of $1,109 per metric ton. Note that the Moving Average Convergence Divergence (MACD) indicator is in a bullish mode at present, but just barely. This week's choppier price action does favor the bears' cause just a bit.

A popular question I get from traders is: "Should I add futures contracts to my existing market position? That's a broad question and there is no single right answer. So, let's break down the question into some scenarios.

First, if your trading plan calls for the "scaling in" to a trading position, then adding to an existing position would be prudent. For example, let's say a trader plans on entering a long soybean trade with three contracts. His first "leg" into the trade may be at $4.40, and the second "leg" at $4.60 and his third "leg" of the trade would be at the $4.80 level. Thus, if the market action plays out the way the trader expected in his initial trading plan, he would be adding to his existing position twice. Again, this trader is adhering to his initial trading plan, which is prudent.

Let's look at another scenario: A trader enters a long soybean futures trade at $4.40, and he has an upside objective of $4.80. That is his initial trading plan. However, when prices hit $4.80, the general feeling among the "soybean marketplace" is that prices will track still higher—possibly much higher. The trader decides that instead of either placing a very tight trailing sell stop or exiting the trade (as was his original plan), he will add a couple more contracts to his already-profitable position—even though he did not have this idea in his original plan of trading action.

This is not a prudent way to trade. Reason: The trader got caught up in the emotion of a bullish run in the soybean market. He got greedy. Emotions can destroy a trader. This is why trading plans should be strictly followed. Don't let the heightened emotions of being "in the market" influence your trading decisions. The one emotion that can quickly take a person out of the fascinating business of trading futures is greed.

In the last trading scenario, the trader who wanted to add to an already-profitable position was exhibiting greed. It was not enough for him that he could pull a $2,000 profit out of a single-contract trade (as expected in his original trading plan). He wanted more. It's this kind of rationale that many times leads to trading ruin.

One more factor to consider when adding contracts to an existing position—even to a profitable one—is that a move against you is now multiplied by the amount of contracts you just added. While this is likely readily apparent to most traders, what is sometimes missed is the rapidity at which profits can evaporate when more contracts are added to an existing profitable trading position and the market then moves only modestly against you. You may lose all of your original profit—and then some—including getting a margin call.

Finally, many prudent traders of multiple contracts in one position will actually trade fewer contracts as their profits accrue. For example, let's say the soybean trader who had three "lots" (contracts) in the example above continues to accrue profits as prices rise above $5.00. He may then start to "scale out" of his winning trade by selling one lot at $5.10, and then one at $5.20, and then maybe he'll let the final lot "ride" with a tight trailing protective sell stop.

That's it for this time. Next time, we'll examine another important trading issue on your road to more successful trading.

Disclaimer: There is a risk of financial loss in futures and options trading. Futures trading is neither easy nor an easy way to make money. It takes hard work to have success. Please use sound money management when trading futures. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell futures or options. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed. Readers are solely responsible for how they use the information in this newsletter.