Week Nov 22nd - Tuesday update

12 Cent fall from Sunday - I'm right?  10 cent rise from today's low - Im wrong ? Answer, both are wrong.  The pattern off of the 213 high was a perfect ABC, 1:1 correction (Today's low was an exact 1 multiple of the first leg). Unfortunately, it still leaves open the upside.  But, I have not changed my odds on a new high:  still 30%. All bets off with a close above 216.  If this plays out as a correction with further downside, market should not get too into the 216 area.

Tradeflow: Looking for that 216 level.   Still recommend the short call vs the 190/180 puts spread.

Euro below 133.36 should strengthen the downside argument.

Week Nov 22nd - "...real money is made by the waitin' and not the tradin'..."

Mkt held the 212 area on both Thursday and Friday, but given strong Euro and SP500 futures, would expect to break that tomorrow morning, generating some more short covering; however, not too much since the fund short position is at near historic lows (short 3,808 as per Friday's disaggregated OI report).

Still, in general, I am sticking with the short-term bear opinion; 30 % chance we see a new high this year.  If we get in corrective mode soon, I expect we can surprise on the downside - 170 to 160 even. 60 cents from high and yet still 30 cents above this years early range.

Trade: still the H11 190/180 put spread financed by the H11 270 call.  Patience on this one is generating 1 to 2 cents premium.

Bull argument:
* Trend is up
* Buckets of money have/had been pouring into commodities.
* We have basically held the 198.65 level - leaves open another wave up.
* Fund net position is not too exaggerated - at 29,878.  2008 high was near 55 k.
* Washed shortage being aggravated by weather problems in CentAm and Asia.
* ICE stocks dropping at big clips.
* Elliot Wave showing big upside over next year and half.
* Who will aggressively sell this?

Bear
* Trend is up, but we are well oversold at 13 year highs.
* Daily and Weekly slow stochastic sells - Weekly showing negative divergence.
* Candles: Weekly still with bearish shooting star and daily still with three black crows.
* Mkt has hit all bull targets and now seems to pointing towards corrective targets.
* Elliot Wave suggesting we need a corrective 4th wave.
* Definitive shortage, but we should see more selling pressure coming in next weeks/months as more production comes to market. (Brazil probably ard 60 % sold).
* Open Interest indicators pointing down.
* OI has dropped nearly 20 k in 8 trading days.
* Who will buy this? Little short covering from funds left, roasters were forced to buy into FND.

Graphs
Tradeflow - if this rally is corrective, then it should not get beyond the high and may only point as high as 216

60 Min - don't want to see a new high, but if we do, I don't expect it above 226. So far, these targets have worked well; strengthens the long term bull argument, but also makes a short-term swing play down interesting.

Weekly - still looking for the question mark, but long term is up - big new highs next year.

Proprietary - getting the big reversal I was looking for.  Looking for confirmation this week.

Proprietary - confirming downside.

Week Nov 15th - Thursday Update

As expected in Sunday's post, Mkt has had its gasp up into exactly 212.00.  Last gasp? Not sure.  Yesterday I thought there was a 20 % chance for a new high this year.  Today, I still see it only as 30 % - basically due to the generally positive sentiment.  Still, The move off of the high as a nice 5 wave decline with an ending diagonal finishing just above the 198.65 break out a few weeks ago (bullish).  The rest of the move has been another 5 wave move up - which makes me think there may still be some more upside in the next few weeks.  But, again,  I still do not see a new high.

Still like the put spread combo with short calls; 270 call vs 190/180 put spread.

Tradflow - finished right at the 211.95/ resistance and near the 62 % retracement.
The fall was more impulsive than this rise and more volume with the decline.
OI has fallen from 150 k to 130 k in 7 trading days.
Weekly and daily slow stochastic sell signals.

.... let's see tomorrow's OI report.

Week Nov 15th - OI update

Mkt did put in a nice performance today as expected, but needed/needs to get through 209.00 (vs H11).

Delayed open interest report was a little mixed for me.  While it may support a little upside in the short-term, I am expecting a sell off shortly. Report vs last Tuesday (Dec @ 217.05) vs. today at 206 is hard to compare.   I am expecting Friday's to look much more bearish. Some of my indicators are moving into extreme over-bought readings (these take a while to develop and why I like them - less whipsaw).

I would recommend initiating a short position if you have not already.  Given the volatility, some combination of short calls, long puts would be a low risk strategy. Again, the 270/190/180, short call vs put spread might be interesting.  As mentioned yesterday, I still expect one last gasp up this week; so there may be another good opportunity tomorrow or Wednesday.

Tradeflow ( H11 )- was expecting us to get into the grey rectangle today.  Tomorrow needs to.

L/S Index - I think the 2008 levels were a bit of an anomaly and that current levels indicate a sell opportunity.

Other index - extreme and hooking back = selling opportunity.

Ratio - would like to see this indicator hooking up too before initiating a short.  However, given market after Tuesday, I expect it will.

Note: GCA Stocks fell 319 k. Should be supportive tomorrow.

Week Nov 15th - "Carrot or three course meal?"

I think many people - myself included - were expecting the funds, after reaching the 218 high, to dangle a "carrot" in front of the roasters; that carrot being a little dip from the high into the 212 area, then yank it away (buy it back up), creating panic buying into FND.  So far, they have given them a three course meal in the form of 3 consecutive down days with Dec settling at 200.45. Still, I think we do get that last dash buying spree, maybe getting us back into the 212 area again, but not too much higher. As noted in Wednesday's update, London was an ugly key with considerable follow through selling after failing to breach the May 2008 support/resistance of 2096. That combined with massive negative sentiment (sugar giving up 23 % at one pt) made in nearly impossible for further advance.  Coffee then broke the 209.25 and fell beneath 200.

Some trade house did a similar trade to the one I recommended last week; sell overhead calls and buy a put spread.  Their strategy was a H11 240 call vs 185/165 put spread.  A bit aggressive for me and I think overshooting the downside. I still like the 280/190/180 combination; low risk/high probability.

As open interest will be published tomorrow, I'll wait to give an opinion with more conviction.

60 min - i've redrawn the channel (previous in blue).
Holding the 198.65 breakout was important.  Still leaves open this last leg up as 3rd wave. I'm not betting on it, but worth noting that once we close within that, the odds increase dramatically that we see a much steeper sell off.

I think if we can get above the 206 area early on, it should provide support for further upside.

Brazil is on holiday tomorrow  and thus removing some selling pressure.  Basically 4 effective days to fix vs Dec and little appetitive to roll to Mar.

Weekly - bearish shooting star candle and slow stochastic showing some divergence in overbought territory.  Last week's high was off the up trend line.
Long term (next 1 to 2 years) is up.
Medium term, still looking to retest 170/180, worst case 150.

Week Nov 8th - Wed Follow up

Well..we have gotten into the rectangle area and hitting extension targets nicely.
If the pattern plays out, we should get to at least 221.50.  key will be if we hold the 209.25 break.
My biggest concern with NY is London's failure to break the 2008 support point (now resistance) at 2096 (continuous chart).  In failing to do so, it also hit perfectly the bull pennant target of 2098.  Furthermore, today put in a near key reversal pattern off of spinning top candle pattern with slow stochastic overbought and hooking down.  London is ugly.

Note: Ice stocks fell twice by more than 25,000 in the last few days.  

60 min - Can't see us too far above 220 in the near term.

Ldn - if that 2098 holds, then that should be it for a while.

Week Nov 8th

Mkt did as probably everyone expected - rallied with dollar weakness (stupid sell off prior to it). I can't really find anything truly standout in the charts other than they point up.  One noteworthy observation (see weekly elliot wave chart) is that Thursdays high came within 50 pts (209.25) of August 97 high.  Above this there are not many technically significant points until the May 97 high of 318.00. Best technical guides going forward will be channels, elliot wave, chart patterns and Fibonacci extensions. As mentioned in the previous week, extensions point to a cluster of targets from 2.12 to 225, the highest cluster in the 224 to 226 area; that would also be within the original channel started off the 140 breakout. Bull flag patterns confirm those fibonacci extensions too. But, we need to break the current high and the August 97 high - very nice technical set up.  Given First Notice Day is coming on the 19th and roasters open interest position is low for the this time of the year, it seems very probable that we get a new high.

Other than being outright long, I think a great trade would be a nice H11 190/180 put spread financed by selling the 280 call. You won't have any weather to get too radical a spike and the market can't go straight up forever.  But, wait on that trade.

Weekly - eventually (next few months), I think we do see that 170 question mark, but for the time being still pointing up. Solid red horizontal line is the 209.75, Aug 97 high.

60 min - taking on a five wave move up - in "elliot" we may be in the 5th of a 3rd of a final 5th ! The final fifth being a big move up to challent the 318 high.  When?  could be a year or two. And the reason I think the put spread could be interesting soon.

Roaster - position actually reduced going into the final two weeks of dec fixations.
Note:  Once fixations end for Dec you will remove a huge amount of the pressure for hedge lifting on exporters and dealers.

Graph x - until this graph turns up decidedly, it still supports upside.

Graph is confirming upside prediction and no divergence yet.