Soybeans: New-crop November soybeans this week scored an upside "breakout" from a congestion or basing area that had kept prices in a trading range for about two and one-half months. This upside breakout was a very encouraging sign for market bulls, and does suggest there is more rally potential in the near- to intermediate term. Many times a bullish technical development will precede a bullish fundamental development in futures markets. I am long November beans from $4.46 with a protective sell stop at $4.28. I am not yet a roaring bull in soybeans, however. This was just the first technical piece of a bullish technical and fundamental scenario that needs to develop to send prices sharply higher. Another fundamental piece of the bullish scenario is recent increasing demand by end-users for soybean products--especially meal. However, the biggest piece of a strong bull-market scenario has to be less-than-ideal--and even adverse--growing weather for soybeans in the U.S. Midwest. So far in the young growing season, weather has been less than ideal--it's been cool and wet, which has hampered planting and emergence. Now that the charts have turned friendlier toward soybeans, my near-term goal in this trade is just to remain in the market and be in position for any strong upside moves--and have prices remain firm enough in the near term so that I don't get stopped out. It would not surprise me to see the funds make another run at the market from the short side next week. My conservative trading philosophy won't allow me to ride a market down very long.

Lean Hogs: The August contract has seen a dramatic rally the past couple weeks. In very short order a weeks-old downtrend was reversed and prices rocketed north. The big rally in the cattle market helped pull the hog market higher. And part of the reason for the dramatic rally in cattle was the erroneous under-reporting of boxed beef prices by the USDA. The Slow Stochastics indicator at the bottom of the chart does show August hogs are short-term overbought, but would-be top-pickers don't want to stand in front of a steaming locomotive. However, my bias is that these recent sharp gains do need to be consolidated in the form of some corrective sideways trading in the coming sessions. See support and resistance levels on the chart.

Coffee: We are in the frost season in the coffee-growing regions of South America, and this will likely keep selling interest tempered, especially with prices presently at historically low levels. Coffee bulls have been "chomping at the bit" to get some decent rally started. But the bears have not been obligatory. It's my very strong bias that coffee will make a strong rebound from these depressed price levels. But, as we all know, the key factor in trading futures is timing. You can be right on the market trend, but if you are off just slightly in your timing of position entry, it's still a losing trade. Let's take a look at the longer-term monthly chart for nearby New York coffee futures. See the big falling wedge pattern. These formations are usually bullish. But again, the challenge is timing. This market could languish at depressed levels for weeks or even months, before any substantial rally surfaces. Here is what the monthly coffee chart is telling me: This market is setting up for at least a modest rally (and maybe more than that) in the not-too-distant future. But again, the "not-too-distant future" from a longer-term chart perspective doesn't help much on the trade-timing front. Thus, what we'll need to do is watch the daily chart closely for any breakouts or other chart patterns that suggest a change in trend--knowing that the monthly chart is already providing some signals of a change in trend.

Orange Juice: I haven't featured O.J. in the newsletter for a while, and I know I have customers that follow this market. Bulls had a nice push higher going on until this week's big downside gap threw cold water on it. A downside gap was also created on the weekly continuation chart for nearby O.J. futures. Still, the choppy uptrend line seen on the daily bar chart remains intact. Bulls are working on filling the aforementioned gap on the daily chart, but have not done so yet. That's their first objective. I do think the downside is limited from here, and suspect that prices will trade in a sideways and choppy fashion over the near term.

N.Y. Silver: The gold market is the "big brother" of the precious metals complex, and silver does not get the attention that gold receives. Silver bears are in the driver's seat at present. Technically, there is just not much out there for the bulls to grasp. A look at the longer-term monthly chart for nearby silver futures shows prices in a steep three-year-old downtrend. There is a support zone just below present price levels. It should be tough for bears to push prices south of this zone. However, if that support zone gets penetrated on the downside, then the door is opened for price declines to the 1991 and 1993 lows that found a bottom just above the $3.50 per ounce level. When a trader thinks a market is longer-term oversold and due for an upside rally, it's always prudent to take a look at the longer-term charts for perspective. In the case of silver, yes, prices are in a longer-term downtrend and arguably oversold at present. However, history shows 75 cents more on the downside before prices reach recent historic lows.

Unleaded Gasoline: Despite the peak driving season in the U.S. just getting under way, unleaded gasoline futures appear to have put in a market top. The July contract has formed a rare and bearish broadening formation on the daily bar chart. Furthermore, prices this week pushed below a six-month-old uptrend line, also seen on the chart. Look for this market to remain volatile. I would not be surprised to see an upside bounce in the near term, as the market is presently short-term oversold from a technical perspective.

Japanese Yen: There is a slight glimmer of hope for the Japanese yen bulls. Prices are slowly working their way north in a gentle uptrending channel on the daily bar chart, basis June futures, that has been in place since early April. While rallies have not been dramatic, that's actually a positive sign for the bulls. Steady up-moves suggest more of the same in the near future. The specter of a steep sell off is always possible, but it has not occurred yet. Prices in late May did move up out of a congestion area on the daily bar chart, but there has not been the solid follow-through buying strength to qualify this upmove as a bullish upside "breakout," which is one of my favorite trading set-ups. Note also that the popular Moving Average Convergence Divergence (MACD) indicator has also recently moved into a bullish mode, after trading in bearish territory for several months. The weekly chart for nearby Japanese yen futures does show that prices bounced up from some stiff resistance located around the .8000 area earlier this spring.

Euro Currency: The past few weeks have seen the bears really push this market hard to the downside. Just recently, prices scored a fresh for-the-move low. There just is not much in the way of positive technical news for this currency. On the weekly chart, the longer-term downtrend in prices is very apparent. The bulls could hold out hope that prices will bounce off the support level of .8245 and then rebound strongly, to form a big double-bottom reversal pattern on the weekly chart. But for now, that's very wishful thinking. On the daily chart, also seen here, see how prices are at the bottom of a five-month-old downtrending channel.

T-Bonds: The recent rebound in the bond market had given the bulls some breathing room, but today (Thursday) they were dealt a setback with the "outside day" down on the daily bar chart and the potential for a key reversal down if there is follow-through selling on Friday. Note the double-bottom reversal that has played out on the daily bar chart, basis September futures. Also, prices poked up above and negated a longer-term downtrend line. The bears can still argue that this latest bounce is just a correction in a bear market. Here's what the bulls need to do just to get back on a level playing field with the bears: Push prices back above the 102 even resistance level. Bulls should not be disappointed to settle for some sideways trading action over the near term. But if prices start to slide lower and drop back below par (100 even), a push to fresh for-the-move lows is likely.

S&P 500: This major stock index has turned into a quiet market of late. A nice rally in April and the first half of May has been followed by some sideways and choppy trading, basis the September futures. While the bulls have certainly made headway since the lows scored in late March and early April, they are still on shaky ground. The longer prices trade quietly and sideways, the more confidence the bulls get that lows will not be revisited. But if they have any hopes of a return to the heady bullish days of two years ago, my bias is they will be sorely disappointed. In the coming weeks and months, my bias is that the U.S. stock indexes will spend more time chopping in a sideways pattern, with solid trends difficult to discern.

How many times do you read the news wires or read my Daily Markets Update and hear about the commodity funds (or just the "funds") doing this or doing that in the market? And it seems like these big bullies are always on the opposite side of the market than the smaller speculator. To the less-experienced traders the "funds" may seem like the CIA or the Mafia: a powerful and secretive force that has a reach far and wide.

In this feature, I'll try to present a clearer picture of the funds, and maybe dispel some myths regarding them. Just what are the "funds?" They can come in several forms, but usually it's a large pool of investor money (funds) that is managed by a single entity, such as a Commodity Pool Operator (CPO) or Commodity Trading Advisor (CTA). The CPO or CTA then trades futures contracts with the goal of gaining the best annual return on that money possible--better than any other funds or "managed accounts."

Most wealthy investors do not put a big portion of their investment portfolio into futures trading. But some may put 10% or less of their portfolios into managed futures trading accounts. Still, given that it's usually the wealthier investors (and not the smaller investors) that put a small percentage of their portfolio in the futures market, even that small percentage coming from many wealthy investors into commodity pools can add up to a lot of speculative cash pouring into the futures markets. Thus, the "funds" can and do have the weight to move markets.

Generally speaking, the commodity fund operators are trend-following traders who use a shorter-term timeframe to trade futures. Many tend to use moving averages as a major trading tool, or some type of mechanical trading system. Either way, these traders rely on technical analysis for the vast majority of their trading decisions.

The funds like to see a market start to "lean" one way, and then pile on positions in favor of the way the market is leaning. This is why markets tend to become overbought and oversold, on a technical basis. The fund buying or selling causes markets to over-react, or become over-extended.

Probably the one commodity group where the funds have the most notoriety is the grains complex. The grains provide an excellent medium for the funds because of the liquidity (high volume and open interest). Given that the funds usually take big positions, it would not make sense for them to dabble in futures markets where the liquidity is thin, such as lumber or platinum. Also, the higher-liquidity markets allow the funds to get into and out of positions more discreetly.

Even with the big pools of cash that the commodity funds possess, they can't stand up to the "big brother" of futures markets: the commercials (the hedgers). The major food processors such as Cargill or Pillsbury have the huge clout and very deep pockets to keep the funds honest and keep futures markets fairly priced at most times. But still, the funds have enough power to more than jiggle markets once in a while. Here's an analogy: The funds are like a fly and the commercials like a horse: A biting fly can still make a horse wince.

That's it for now. Next time we'll tackle another important issue on your road to trading success.

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.