Week March 7th - Fat Monday?

Phat Monday if you are a sambaing (sp) Brazilian producer.  Today had the feeling of just being out the gate.  With no Brazilian selling, Centrals arguably done and some talk of a less than stellar Brazil off crop in 2011/2012, maybe 292 near term is cutting a little too conservative.   Open interest seemed to confirm that trade is lifting hedges and fund position is liquidating into it (or taking a breather); arguably a very bullish OI report and Monday's performance seems to confirm that. Furhtermore, I have my close (and then some) above 276.  This should open up 292 + (80/20 odds).

Brazil exports - unofficial Feb exports seem to show the pace steady, leaving less and less coffee in Brazil.

Weekly - love how this last wave taken a perfect 3rd wave feel - vertical and effortless. Not sure when and how the 4th wave will come in, but my guess is it won't have the energy to do too much damage?  30/50 cent correction?

Point and Figure - lets try something a little different.  These graphs take a lot of the noise out, but to be honest, there hasn't been noise since the second move off of 2.00.

Open Interest - Disaggregated producer open interest - futures and options.
looks like a lot of hedge lifting there.

Week Feb 28th -

Still think there is more upside.  As of today, Tuesday, market is selling off and we still haven't closed above 276, but I think if we do, then we target 292 +.
* Fund position while relatively high, has room.
* Historically, roaster position at this time of year, is bullish.
* Things can only go wrong (ie, there will be no good news), so, if there is bad news (frost..for example), it will be explosive.
* Brazil has been exporting at record levels (see below).

(as I write, coffee is now 4 cents off it's lows).

Weekly * still closing below 276.

Funds

Brazil Arabica Exports - * record exports for 2010 and first month of January.  Despite Brazil's record 2010/11 crop, there will be little carryover over.

2010 jan through Dec

2011 jan

Up, up and away

Been a while since last post....which I wish I could erase.  Mkts effortless run continues with (reckless) abandon.  Or, is this the most fundamentally sound bull market ever? One interesting point to note is that the market bounced off what had historically (last 30 years) been a point of resistance; in that, it was the high of 86 and 94. While not documented, my view was that if we broke the 252 fibonacci target, the next target would be 276 (which we did within 10 pts). Next target, if mkt follows through, is 292. This week was the most bullish weekly performance since Dec/10. Driven obviously a bit by price fixing before first notice day, but I think complacent funds are now hoping back on.

Long term perspective
* A close above 276.00 should open up next tgt box and upper trend line.
* From elliot wave perspective, this is still the extended 3rd wave of a 5th.  Expectation then is that, even if this is an intermediate high, there is still more upside eventually.

Roaster position as per Futures and Options COT report.
* Disaggregated open interest for Roasters
* Grey - Nov-Mar, higher demand
* Obs: steep drop off of OI is obviously option related.
1) could be an exorbitant amt of long calls/short puts with  low deltas expiring (1 week before)
2) faulty data * if the option were in the money, there would be less of a drop off.  Deltas 1 week before expiration would have been low enough that the net position should not have moved, unless there were lots and lots of options.  ?? still not clear to me yet.
* Take home: historically (last 5 years) high roaster position at this time of year has marked at least a period of price stability if not, further upward movement.

GCA stocks - stocks have moved up recently, but looking at the historical monthly movements, that trend is likely to nipped in the bud shortly. Feb and March should be months in which stocks increase.  Jan in both last year and this year was below norm. Last year, Feb was dramatically below average (actually a decline).  I think it is very unlikely what we will see stocks increasing, especially given Brazil's off year coming up (despite being a very strong off year).

Conclusion:  Tough to buy now, but this mkt has more upside (4?? maybe). 3, a given.  3 a given without a meaningful correction?  Seemed so unlikely, but maybe this market is that bullish.

Week 24th of Jan - Dumb money dominates

Open interest report showed several bearish factors.
* small spec at highest net long position since 2007.
* roasters had increased their buying pre-226 fall; ie, they bot a lot more than the report is showing.
* All indicators pointing down.
OI reports are terrible for targeting price, but great at showing immanent change. And I think that's what it is showing. Any upside movement is going to find resistance at 245.50 (several fibonacci targets) or current high of 244.50.
So, I continue to be bearish but respect the fact that 228 gave out and the market recovered.

Still expect to see 200 before 270.

Roaster OI

Small Spec - net position - few shorts to cover and lots of longs.

60 Min - I really dont think the mkt has the force to breakout of this channel and the topping pattern is a bull horn top.

Indicators - both maxing out....finally !!

Week 10th of Jan - Index week

No real clear signals other than a general sense of weakness.
Intraday the market has closed below and been held back by its short term moving averages and is closing back within the medium term bull channel.  However, it also looks like yet another bull flag or triangle continuation pattern. I'd still be more inclined to sell it, but would have to stop out abv the high on any new shorts or any shorts initiated last week. For the bulls, 230 and 228.65 will have to hold.  If they don't, there should be considerable break down.

Euro's break of the 200 day moving average last week and the index reweighting should keep pressure on the downside. Comparing coffees index open interest to sugar's index open interest would suggest that coffee is behind and will need to sell considerably this week.

Tradeflow - early sign of continuation of the bull trend would be a break above 238.00.  Has a little bit of a blow off feel to it; but that was the 22nd of December and not really valid given holidays.  Decent volume into Friday's sell off.

60 Min - mkt could fall to 200 and still be contained within bull trend.

Elliot - I still like the count; this is the 3rd of wave 5. That should mean that we correct no lower than 150 (not likely that we get even close - but that would be breaking an elliot rule below).  From that correction we get a massive 5th wave up.
Interesting to not that we basically hit at 1.618 extention of wave 1 of 5. Lets say it does that. What are the targets? If 4th wave hits 200, then the 5th of 5th could see 292 or 370.

This indicator is begging for a correction.

Index funds  - have yet to reduce their position.

Week Jan 2nd - Running out of gas

Last post didn't see market above 235 and here we are at 240.
The question for me still remains, who will buy this to take further?
Roasters came in rather desperately last two weeks.
Much of the buying seemed to be from small spec (Open interest and # of small traders).
All this to me smells of an intermediate top.
(see 60 min).  While I am still bearish short-term, 60 min pattern could show further upside if bull pattern breaks above recent highs.

Weekly
* candles are generally bullish and showing continuation.
* Slow stochastic no longer showing divergence, still well overbought (one of the longest periods in overbought territory in 30 years).
* I think a short pattern with March calls might work well.  Sell H11 280 call.

OI Indicators - Should be signaling correction.

60 Min - has this broken out again to the upside?
* hit nicely 1.38 extension.
* however, pattern is always indicating continuation.
* any short would have to be stopped out above recent high.

Week Dec 20th - New Rule 2: 1 Bull pattern in the direction of the trend trumps 2 bear patterns against the trend.

Did I say sell last week?  I think I said, 'sell, sell, sell... with a tight stop'.  With Brazilians doing little selling for tax reasons, funds were able to to elect several buy stops into little resting offers - end result, big week closing at the highs (highest since June 97).

As for this weeks title - bullish wedge pattern proved the correct interpretation. And the moral is, don't trade against the trend.  That fits into rule 1: If it looks like a duck, walks like a duck, and quacks like a duck, it must be a duck.  Still, I would not be buying this now and at this level. If you are wrong, there will be a better sell opportunity, if you are right, there will be a better buy opportunity.

* All weekly bearish candles have been negated.
* Bearish divergence on the weekly Slow Stochastic still active, but one more week like this and that too will be negated.

As I have said all along, I still expect us to see substantial new highs, but I have also been expecting a substantial pull back.  Thus far, not materializing.  Elliot interpretation:  This would be the impulsive 3rd wave (ending soon), then the corrective 4th with a large 5th up sometime in the next year.

Conclusion: I don't see it above 233/235 this year and despite everything, still expect a substantial correction before the big rally next year.

60 Min - reversing bear targets (until the become clear again) and focusing on bullish wedge.  Friday's high hit two nice targets.  Failure to move further could mark that as the intermediate top.  Otherwise, nice targets between 230 and 235.

Weekly - I can't find any period in the last 20 years where the Slow % D line of hte slow stochastic has stayed so consistently above or at the 80 line; not even frost years.

OI graphs - they are marking extremes and indicating at least an intermediate top.

Net funds - still room, but high.  I think the window dressing at the end of the year may have actually been, take the path of least resistance - push it up and book your unrealized profits at substantial new highs.