Good evening everyone,

We have a decent number of official IMPA selections via tonight's IMPA update!  This update was delayed by the government due to the 4th of July holiday last week.  Lets get started with our review tonight. This is going to be a very special and lengthy review.  I am going to write this report in a special format tonight (due to the delay in receiving the IMPA data this week as well as to take the opportunity to further assist those new with our system and proprietary data and also to address the uniqueness of our overall approach to the markets!  We have a very unique and effective approach to futures trading.   As I've said many times before, there is no other system quite like this in the world, and such thorough trading systems are typically not available as this one is (for any individual trader that wishes to learn).  

The IMPA data is updated weekly.   Review of auto-pilot should be routine!
By simply glancing over tonight's "Auto-pilot" report (which is the first thing I look at when the IMPA data is updated),  I can see we have a total of 12 markets that need to be investigated further for potential IMPA position trades.  The total number of official selections is 13,  but that includes the FF (Fed Funds).  I do not recommend trading FF because this market is very thinly traded.  I include this market in our family of markets because it is useful for tracking interest rates. We also have a few members that specialize in trading the FF, and in that case, trading FF is deemed ok,  but in extremely thin markets, its important you specialize in trading that particular market as the fills, quotes and orders require special care (specialized for the unique conditions of that thin market).  I want to review some of the basics of our systems and data tonight to ensure everyone is able to investigate and track these selections independently for potential trading opportunities. This is very important. 

Using Auto-Pilot!
Our one page "Auto-pilot" report is basically the output of a proprietary computer program that analyzes the net-commercial positions in each market.  The report shows us which markets have penetration in either the LCL or UCL areas.  Penetration in the UCL causes a "Buy Trigger" and penetration in the LCL causes a "Sell trigger to occur.  This helps us pin-point the markets we want to ensure are investigated for potential position trades.  This analysis is of course done on a weekly basis.  Once we have the list of markets to investigate,  our on-going analysis of these markets continues into the new week.  Each Friday,  the IMPA is updated with the latest government data.  This data is actually compiled on Tuesday's.  The government compiles the data on Tuesday's and releases it to the public on Friday's. This is why you will see the previous Tuesday's date reflected on the IMPA charts, and in the auto-pilot report.  Occasionally, in the thin markets, the trading activity will be so small that the government does not update the data in that market for that particular week (e.g. this week GI, TB).  When this happens, the dates on the IMPA graphs for these markets and in auto-pilot will reflect the last Tuesday the data was actually compiled on and released (thus, this is our last IMPA data point we have for those particular markets).  You will also see signs of this in our open interest graphs.  The green dots represent the actual open interest figures on the Tuesday the raw data is compiled on.  If the government does not release the data (due to a lack of market activity),  there will not be a green dot on the daily open interest graph for that particular week.    

I also recommend we review each UCL/LCL graph for each market (regardless of the auto-pilot status).  This certainly does not have to be done as the first part of your analysis,  but it is important and should be done on a weekly basis in order to understand the net-commercial change in all the markets we track on a week to week basis.  Now if you do not have time for that,  you can simply go right to the "auto-pilot" report and then zero in on the "triggered markets" for further analysis. The triggered markets (bull and bear) are always our best position trading candidates based on our IMPA position trading system.

Interpretation of Auto-Pilot  ("Buy triggers" and "Sell triggers")
Penetration of the UCL is bullish and falls under the "Buy_trigger" column as a Bull_1, Bull_2 or Bull_3.  I often get asked about the significance of a Bull_1 versus a Bull_3 or a Bear_1 versus a Bear_3.  As far as the official selections go,  there is no difference.  Bull_1 - Bull_3 and Bear_1 - Bear_3 are all official IMPA trigger selections.  However, the purpose of adding these numbers is to help us quickly understand the depth of penetration (without actually pulling up the UCL/LCL graph).  Thus,  the number attached to "Bull" or "Bear" is for our own information only, and may not have any baring on the overall significance of the official selection.  However, it is important we evaluate each official selection (Bull or Bear) further to determine if the selection is of a record size!  I have found this to be very revealing and you clearly want to know when the net-commercial position is a record size (an extreme position)!  To do this analysis, simply pull up the "hist" graph (under the IMPA graphs) and verify whether or not the net-commercial position is of record size.  FYI - My original intention with the bull / bear numbering system on auto-pilot  was to highlight or separate the potential record size positions (automatically).  However, the current program does not accomplish this and must not be relied upon.  The way the current program is written,  it is possible a Bull_1 could be a record size net-commercial position!  Therefore, we must examine each official bull or bear selection manually via the 'hist' graph.  Eventually I'll fully integrate this into auto-pilot, so we will know right away, but for now we must investigate further to find out if the bull or bear selection is of record size, or if it reaches or exceeds the ELCL or EUCL area,  which would represent a much more rare extreme condition!  Extreme conditions are key!

So what does a Bull_1 or Bull_3 (and Bear_1 or Bear 3) tell us? 
A Bull_1 indicates the net-commercial position is either right on or close enough to the UCL to warrant an official IMPA buy selection.  A Bull_2 indicates the net-commercial position is right on or slightly exceeding the UCL.  A Bull_3 indicates the net-commercial position has completely penetrated the UCL and is located somewhere beyond the UCL,  which could be as far as the EUCL!  In the case of a Bear selection, everything is the same of course, except in the BEAR trigger selection we are measuring the level of penetration at or beyond the LCL!  In all official trigger selections,  the fundamental conditions are deemed to be right for a significant reversal in price to occur given the technical conditions support the IMPA trigger (buy or sell selection).  In other words,  the market has to be moving in the direction of the IMPA selection to complete the setup.  This would indicate the trend is changing.  A changing trend under supporting IMPA conditions commonly results in the emergence of a significant new trend.  A real powerful example is last years extreme sell selection in the Nasdaq (April 2000 IMPA update) and extreme IMPA sell selections in the S&P,  and Russell 2000!  Our system pinpointed the end of the bull run in stocks with amazing accuracy (which has been fully documented in real-time via my reports).  There are of course many many other examples documented in my reports as well. 

Once we have the official buy or sell selection,  then what do we look for next?
There are several things we look for next.  All are basically price derived from this point on.  Essentially, we use the price information from this point on via a wide array of indicators to measure and/or evaluate the current price conditions to determine whether or not the technical conditions (based on price & price structure) support the official IMPA trigger selection, and thus complete the position trading setup.  At that time, a call for action (trading plan) is appropriate.  

One of the first things we look for is diverging RSI (using our proprietary weighted RSI).  In the case of a Bull selection, diverging RSI (upward) when price is either flat or falling indicates the up-days (days that close higher) are stronger than the down-days (days that close lower).  In the case of a Bear selection, we want RSI to be diverging lower with price flat or moving upward.  Once we have confirmed RSI divergence, we wait for the price to confirm the two (trigger selection and RSI divergence).  This could be a pass through the 18dma,  or several passes through the 18dma, or a channel breakout (one of my preferred methods).  A channel breakout can be measured as a breakout above or below the x day high or low (commonly 10 - 12 day high / low) or a trend-line channel breakout using the highs and lows to draw in a channel (which should be done using our charts.  I have written instructions on how to do this using PAINT.  You can access those via our secure site.  You can also wait until the 10dma passes through the 18dma.   We can also decide to wait for both moving averages to point upward (for a bull selection) or downward (for a bearish selection) if we deem necessary.  Each situation always requires decisions and judgment calls, that is the nature of the markets.  They do not follow a clean clear path.  In addition to these "technical" signals, we can also look for price patterns, such as the outside day pattern, or the "W" and "M" pattern to confirm the bottoming or topping process is underway.   There is a wide array of other patterns that can be considered or weighed in as part of the individual (price) analysis as well.  Again, remember, at this point we are looking at price derived indicators and data (with the exception of occasionally looking at changes in open interest and/or volume).  In addition to all this,  we now also can evaluate our new swing indicators (STB's) on the weekly price graph (most important for the STB) and then also on our daily Trend graph. I believe these may prove to be very useful at this point in the position trading analysis of price. You certainly can include or monitor the new daily Trend graph for the appropriate color changes!  In the case of a Bull selection,  we would want to see the Red change to Green and then the Green change to blue!  

All these indicators can be monitored, but its not required we monitor or wait for all of them!!  Again, each selection is going to be unique as far as the turn in trend goes (ending of one trend and beginning of the new trend).  One thing we can rely on with great confidence, is that as long as the IMPA conditions remain bullish or bearish,  a change in trend (probably significant) will occur! Our only official (price) requirement is we wait for diverging RSI and for prices to respond (by moving in the direction of the IMPA trigger selection)!   It is up to each of us (as individual traders) to decide or determine how much price response is needed before we establish our position.     

General Observations / Updates:    

American Petroleum Institute data are due out after 1600 ET Tuesday

Market Observations:

Key government reports/data/info for next week and beyond:

Forecasts for upcoming economic data  
(NA = not available, R = revised, A = Previous year). 

   Time                                 --Forecast--
Date    ET     Indicators             Median   Low   High   Previous   Actual
07/26 :0830: Q2 ECI                  :   NA    NA    NA :   1.1 :
07/26 :0830:  ECI Annual             :   NA    NA    NA :   4.1 :

LT = Last Trading day.   FN = First Notice day    LTO = Last Trading Day for Options   
OE = Options Expiration

Monday - July 9th
Export Inspections
Crop progress

Tuesday - 10th
Wholesale trade
API Energy Stats!

Wednesday - 11th
Crop production
WASDE
World AG production

Thursday- 12th
Weekly Unemployment claims - 7:30am CDT

Friday- 13th
Advanced Retail Sales
Producer Price Index (PPI)

UCL/LCL official triggers (buy & sell selections):

Current Short Positions 

Sep Kansas Wheat - Some members are still short KW.  We discussed the week to week change yesterday.  This market closed down 2.5 today,  thus making the shorts a profit of $125.00 per contract on the day.   Stay with it.  

August GC (Gold) -  This market closed up .40 on the day,  thus taking back $40 from the shorts.  Overall, I remain bearish gold and we see the IMPA remains bearish as well. 

Many have already locked in 50% profits of roughly $1000 per contract.  Some locked in less recently, and others locked in more in past weeks.  This market remains a sell selection,  but I still do not want to see the 280 area penetrated.  A close over 280 could change the trend short-term (back up).  A close under 266 would solidify a downward trend.  We punched through this area today, hitting a low of 265.90!!  Now we will either likely bounce from here (short-term) or slide down quickly. 

August [HU] Unleaded Gas -  Wow,  this has been splendid really. We closed down $306.60 today, making the shorts another $306.60 in profit.  What is interesting now is that this market is now an official buy selection!  Thus, we could stop and reverse this position!  This is what I would try to do here.  We have done this before (I remember doing it in copper live via hotpage trades).  But essentially, what we would look to do is ride this market back up (via our buy selection) once stopped out of our shorts.  Thus, we would buy back out shorts (when stopped out) and also buy a position long in the market (in an attempt to capture a move back up)!!  If you take a look at the data (via our UCL/LCL graphs), we can see that we have had both buy and sell selections in this market that have been very rewarding for us.  Lets review that graph quickly this evening. 

Best Sell Selections setting up (in order):

Stock Indices - These remain in downward trends and boy have they been making profits for those short via our sell selections which have been in place for many weeks.  In addition, our technical indicators have been bearish as well.  The trends are down.   I am looking for lower prices over all (still) and feel that bounces ought to be sold (until these IMPA conditions dictate otherwise).  Remember, you can typically make more money shorting a market than going long.   Why?  Markets tend to fall faster than they rise.  * FYI - The Russell is really extreme, but keep in mind the Russell 2000 futures are thin and this market recently went through a rebalancing (some stocks were pulled out of the index and replaced with other stocks).

DX - This is very close to a record size net-short position.  I'll have more commentary on this market in the days and weeks that follow.  Tonight I am going to list it as one of the best sell selections for the remainder of the week,  but I would not be a seller quite yet.  I'll track this daily and announce when I believe the trend to be reversing.   We have met both the #1 criteria and #2 criteria, and that is penetration through the LCL (triggering the sell selection) and we have RSI divergence in place (our #2 criteria).  Now we need to wait for prices to respond.  the trend still remains up at this juncture and that must be respected.  

GC (Gold) -  This market remains an official IMPA sell selection.  The IMPA data remains bearish and the price has been slumping lower.  We took out 266 today and barely managed to close above it!  This market likely has more room to fall. 

ED -  Everyone has been waiting for this one.  The IMPA conditions remain very bearish,  but the technicals aren't fully supporting this yet.  However,  it did look like they were getting ready to confirm the sell selection, and we do remain under the key 18dma.  Also, our moving averages have crossed (the 10dma crossed under the 18dma).  This is supportive of a trend reversal,  so we still may be in the midst of that, but its unclear at this juncture.  Overall, at this point in time, the current upward trend still remains intact.  In fact, the trend may be renewing itself (to the upside).  I can't tell for sure, but since the damage to the upward trend has been minimal,  I believe its probable that the upward trend will reassert itself at least once more (or at least that appears to be what the market is trying to do).  For now,  if not short already, I would continue to wait for more weakness.  If you did get short recently,  that is ok,  you took action and the conditions certainly did begin to look interesting (and they still do).  However, we need to see more weakness at this critical juncture.  If you are short, your stops should be roughly 9640. 

Current Long Positions

Feeders - Some members are still long the feeders.  Overall, the trend may be in a transition here (to the downside).  This isn't confirmed on our weekly chart yet,  but our new daily Trend chart indicates the current short-term trend is down.   The weekly chart indicates the intermediate trend remains up,  but we see a potential double-top formation.  If still long, you should only be 50% long with profits already taken on your initial 50% (obviously since this has been a setup for many weeks).  You should be using tight stops on your remaining 50%.  

Best Buy Selections setting up (in order):

Last week I had Cocoa listed as our best buy selection for the week.  Well folks,  that just didn't work out.  The market rolled back over to the downside.  However, the roll has been very orderly. Therefore,  if you did get long,  your risk (or loss) should have been minimal (on a contract basis).  On the week (6/29 - 7/6) cocoa only lost 4 points (or $40 per contract).  However, today it lost 35 points or $350 per contract.  This market is no longer an official buy selection (notice its no longer listed on auto-pilot this week).  We will simply drop it from our best buy selection and move on.

OJ - Well, Orange Juice is back on auto-pilot and back on our best buy list for the week.  We had an official hotpage trade in OJ several weeks ago.  I believe we made a small profit on the initial 50% and broke even or had a small loss on the remaining 50%. You can go back and review that in my reports (as all trades are always documented and preserved in the reports for your review).  The market initially moved higher for us, and then fell back.  

It is interesting again to see this showing up as an official IMPA triggered buy selection.  What may even be more interesting is the fact that this official buy selection is slowly approaching a record size net-commercial long position!  In addition to that,  we see our CP graph (commercial consumers & commercial producers) are both leaning towards (or expecting) higher prices.  How do we know that?  Well, we see the producers (whom are always short) have a very small short position right now (-12493) relative to their recent short positions.  The consumers (whom are always long) have a very large long position right now (+19824) relative to their recent long positions.  You can basically eye-ball this to gauge their bias here.  However, if you want to be more precise, I have already setup proprietary UCL/LCL graphs for the individual commercial consumers and individual commercial producers!  Simply click on "C" for the UCL/LCL graph for the consumer, and click on "P" for the UCL/LCL graph for the producer (complete with our UCL/LCL indicators)!   These are listed under the "Enhanced COT analysis" and can also be accessed from "Premium COT".  I might point out that it is extremely unusual to see both the consumer and producer on the same side of the market (e.g. both penetrating the UCL or close to it, or both penetrating the LCL or close to it)!   In the case of OJ,  this is what we have right now!! This is causing an imbalance.  How?  The producers are unable to supply the demand of the consumers!  Normally, these two are fairly balanced.  The Funds are taking the other side of this (by shorting) therefore providing the extra longs for the consumers.  When this imbalance corrects itself,  the funds will have exited out of their shorts.  Which by the way, the funds are holding pretty close to a record size net-short position!  When they cover (buy back those shorts),  prices will likely rise because buying causes prices to rise. The only question is, when will this begin to unfold.  Thus,  timing is always of key importance!  That is why we have so many different angles for examining price, price structure, price trend and so forth.  Once we know the fundamental conditions warrant a potential significant new trend,  that is the time we must begin focusing on the technicals (price derived indicators, and price structure itself).  

What makes our system unique and what gives us the edge?!?!
The typical off-floor trader is ALWAYS focusing on the price pattern or technicals, with little to no regard for fundamentals.  This is a mistake because the conditions are not always right for a new and significant trend to unfold.  In addition, the typical off-floor trader (90% that consistently lose) focus on news for fundamentals. They basically chase old news (generally reported by futures brokers or news wire brokers) that has long been factored into the markets weeks in advance (before the news is public).  Most of the time, even news that is just released is old news to the markets because the news is likely already factored in (hence, buy the rumor sell the fact).   

However, our method for monitoring and tracking the current market participants, is not news, and is certainly not old information.  The positions held by the funds will be liquidated at some point,  they have to be in order for the funds to turn a profit (they have been short OJ and adding to shorts as prices have fallen).  Folks, I can not stress enough, the significance and importance of knowing the un-liquidated positions in the market and knowing who is holding those positions.  The size of the overall position is of up-most importance as well. The larger the size,  the larger the move that can eventually follow (when the positions are liquidated)!  This is why we wait until a statistically significant size (extreme) position is already in the market before we even begin looking at the technicals.  Personally, I am not that interested in doing a bunch of work for a small move.  I want to catch the large moves via my position trading.  I catch the smaller moves via day-trading the S&P and swing trading other markets. 

Anyway, we already see (via the recent pop in OJ prices) that the old trend may indeed be beginning to unravel (as the funds cover shorts).  Therefore,  a new and significant upward trend may emerge!  I could go on and on about the logic here,  it gets complex,  but again this type of analysis (using the IMPA) is about as good as it gets (off floor).   I might also mention that the funds are not in the market(s) to lose money.  They do very well in trending markets.  However, the funds are large and to get large they had to be successful.  That is another angle of this system and data that you want to understand.  The funds are very important,  as their trading activity basically fuels trends!   Remember also, the funds consist of many different individual trading constituents.  They are not one group obviously, but rather many commodity funds exist and funds with interests in commodity contracts exist (especially in the stock indices).  Commodity funds not unlike the mutual funds in stocks.  The major difference is they simply deal in commodities, not stocks. Think about it,  if you knew XYZ mutual fund held the majority of ABC stock and had bought it on a trend upward,  when prices start to fall because ABC was in trouble,  XYZ will want to sell!  They would also need some buyers to sell to wouldn't they?   This is precisely why you never hear sell recommendations in stocks from wall street analyst!  It can't help them one bit to recommend selling a company!  They need buyers.  Buyers to boost the mutual funds stock prices higher, and buyers to buy those stocks when they are falling in price and the mutual funds need to sell!

Commodity funds know when its getting close to the right time to sell (exit).  So there you have it,  this one (OJ) is my best buy selection for the week (and probably for the weeks ahead based on this current data).  Also, the above is my overall review for everyone, and especially for those of you that are new to this unique and proprietary style of futures trading. 

The following thinly traded markets currently do not have the minimum number 
of reportable traders required by the CFTC to publish a bi-weekly COT report. 
YX (New York Stock Index),  TB (U.S. T-Bills), DX (US Dollar Index), 
GI (Goldman Saks Commodity Index)

FYI: The time frame for my Short Term Outlooks are for the next two weeks
        Between this COT reporting period and the next reporting period.

Correlated Stock market Indexes: S&P (SPY),  ES-MINI,  DOW,  NASDAQ (QQQ) & RUSSELL

*  Note:  If you are trading in the ES-MINI, that market is correlated with the regular S&P.  You can use the data from regular S&P to trade the ES-MINI. 

US Stock indices update -  Looking ahead to this week,  lower prices are still possible.

June Nasdaq -  We rolled over (to the downside) recently.

June Dow Jones - The IMPA data has recently and rapidly moved away from the UCL and back towards the LCL!  Its pretty interesting data here. It certainly appears to be bearish at this juncture.

June S&P - I believe this market is going to struggle in here right now, and may struggle for much of July.  Support at 1211 failed recently. 

My official short term outlook for the stock market -  Choppy to lower. 

                      A few words of caution and advice from Floyd...
Note:  Keep in mind folks, and I know I sound like a broken record, but please approach the markets with great caution and respect, especially the S&P.  Even the es-mini contract. There are no guarantees.  This is a very risky business and you each must consider the possibility of losses in each trade you establish.  You must keep your losses confined to the 10% MAX risk rule.  The 10% is the maximum risk.   You don't want to be taking maximum risks on every trade however.  2% - 3% average is excellent and 5% average is decent.   10% is the maximum. There needs to be some discipline and common sense applied.   Risk sparingly.   Trade below your means.  Know your threshold for losses as well as gains. Know yourself !  Don't over trade.   Don't trade to trade. This is a business, treat it as such. If you violate these rules, you could be setting yourself up for trouble.  Please, trade professionally.

This concludes this week's special format of the IMPA report.  Next week I'll return to the normal format.  Tomorrow I'll resume the normal format of the evening report.    

Have a very profitable week!

Very Respectfully,
Floyd

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NO TRADING SYSTEM CAN GUARANTEE PROFITS
No guarantees can be made for success.  Past performance is not a guarantee of future profits. 
Futures trading is NOT my only means of income.  I also invest in stocks, real estate as well as 
generate income from other businesses. I have both winning trades and losing trades. 
I trade professionally, but not daily.  I wait for what I believe to be ideal trading opportunities. 
Very Respectfully,
Floyd W. Upperman Jr.

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