Week Oct 11th - Tuesday

Well...back to the drawing boards? Maybe.  Stops taken out at 182.95 and 185.00 (most of the volume was concentrated here) in a very thin market due mainly to Brazil being a 4 day weekend/holiday and thus no selling pressure.  Open interest also suggested that there were more shorts that could be forced to cover - easy targets in a thin market. Still, this only changes my probabilities for the market breaking 200 this year vs next.  I'd put them at 60,30,10 (Range between 150/195, above 200 and below 150, respectively). I still feel that we will see substantial selling pressure as the market approaches the 198.65 high and that, again, funds have gotten "top heavy". As I mentioned in the last post, the move off the high has seemed very corrective in nature.  So, why wouldn't I argue for a buy if I thought it was corrective?  Basically, for the likely, anticipated selling and the fact that it would have to be very, very bullish.  The very, very bullish argument would call this the beginning of a wave 3 pointing to an initial target of 220/225.  While I do see us there next year, I do not see us there now.  Therefor, I still think we will consolidate in the wide range and that you can step in on the short side with a small position.  Or be patient and look to buy lower, or if it is truly bullish now, then buy a break above the high.

Attached is the 60 minute graph again.  It is pointing to at least further gains tomorrow. It bounced of the 62 % retracement (green bar at todays high), but it has momentum and a short term bullish 5 wave pattern unfolding pointing to at least 190 again.

Will be interesting tomorrow as Brazilians return to work to see if they start out selling.  Given that they have sold well and are well capitalized, my guess they will take a wait and see approach - should provide for some more upside.

60 min:

Week Oct 11th

General:Last week's recommendation to sell into any rally would have worked, but I admit, I was not expecting Friday's counter rally above 180. Still, the down trend (correction) remains in place and today's fall off helps, but does not guarantee further decline. To clean up the overall picture I have attached a point of figure chart.  The choppy action off the high strengthens the correction argument.  The fact that it has held the 45 degree downtrend line helps. The second leg of the correction is an exact 1:1 multiple of the first leg (tgt was 171.60).  The entire move is contained by the channel line (see 60 minute chart).  Barring a close above 186.5, I would expect further declines of the next few weeks. Expectation is that we are range bound between 150 and 195 for some time ( I know, lots of room for error..but I do think it will touch those points).  How certain? 70 % range bound, 10 % we break above 200 this year and 20 % we break below 150.  Long term, expecting to see substantial new highs next year.

Trade:  Sell any rally with a stop above Friday's high (182.95). Or more aggressive, 186.50.   However, I would still be looking to buy this below 170.

Key technicals: Broken uptrend, Weekly sell on the slow stochastic.  Daily slow stochastic, however, nearly issuing a sell ...nearly.

Outside Mkts:  Real below 1.67 and pushing towards 1.66 - bullish/supportive coffee.  Commodities in general rallying. US dollar weak in general allowing for more risk-trade.

Open interest: generally bearish, despite large fund liquidation.

Point and figure chart: Critical point - trapped between several support and resistance areas.

.
.
.
60 Min - uptrend broken and unable to re-enter, as of yet.

.
.
.
Fund net Open Interest position: they spent a long time without increasing their position.  I think fatigue set in and we will see further liquidation.

 ..
..
.
.

Open interest - one of my crazier proprietary graphs, but it tends to capture general moves.  Pointing down for the time being.