Is it possible to get an applet to read a text file on a client machine?

Title Description:

A background process on the client's desktop is generating numbers and writing
these to a text file. I want an applet to display different colours based
on these numbers. This text file will be updated on a per second basis and
the applet must respond in real time to these updates. For purposes of demonstration,
I am the user. Do I need to grant the applet any extra privileges to read
from the text file and how do I do this as the applet programmer?

o If it is not possible to read from a text file, is there any other way
I can send the applet these numbers, for example as parameters to some function?

Alternative 1:
I want to have access to mouse co-ordinates both within and outside of the
applet. I have been using the mouseDragged method. Once a drag is performed
inside the applet the applet can continue to read co-ordinates of the motion
outside the canvas frame provided the mouse button remains depressed. I
want to be able to do this without enforcing drag. Is it possible to write
a method that
Mouse motion within the browser affects a small coloured window that is a
second applet. The applet receiving the co-ordinates from the mouse motion
will appear as a second window within the browser changing colour based on
these co-ordinates. My aim is to have the applet registering motions should
have as little graphic impact on the html page as possible, in other words,
the users should be unaware of its presence.

Alternative 2:
Is it possible to create a transparent applet that can sit over the html
page so that all mouse movements are contained within the applet canvas -
but the applet has no graphic impact on the page?

Alternative 3:
If it is not possible to read from the file on a client machine, can I get
the client to send a text file to the server and get the server to process
the numbers and sent them back to the client for display in an applet on
the client machine?

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For the same coloured screen I need to write a second similar program that
changes colour based on network traffic or cpu load instead of mouse motion.
What java API would I need to use for this? Or what is the best way to
begin to approach this? P.S. I am using windows 98 for my clients and server.

Many Thanks,
Charlie Flynn.