Week March 28th - Double bottom or H&S?

Let's start where Wednesday's update left off and look at a few possibilities. Thursday's morning break of the 268.20 led to a near vertical fall to test 260 and then retraced the whole move in a similar fashion.  Obviously 260 is now very significant and the move off suggesting a test of the new range highs (280/285).  Will it? I do not believe that the move from 297 to 260 was the full correction.  I still find open interest a little bearish but becoming less so with the fund longs getting less and less net short. Still, few new shorts and thus no conviction to the downside.  If the mkt breaks 270 tomorrow, I would be looking for another attempt up.

Conclusion: still looking for more downside, but expect this bounce to develop a little more. 276.60 or 281.20/285.


60 Min - if the assumption is that the move from 290 to 260 was impulsive, then thus correction looks text book ABC (3-3-5) correction.  This would target between 281.20 and ard 285. If ends up being a running flat, then it would not make it past 276.60.  Either way, better to be flat and looking for what then next move is.

Daily - shows nicely the bearish signals (engulfing pattern) with fall to 260 and now the bullish hammer off the test of 260.  However, we did test the 10 day MovAve on Friday and came off. Basically, if we can't take 281.20, we are going lower than 250.

Point and Figure - break of 45 degree line would open up the possibility of hitting 283 target and consistent with the Elliot ABC count discussed above.

Commercial Net (open interest) - surprisingly, still lots of selling to do. If market does fall, expect to see this go back to 2008 net position and set up another bull run.

Supply and Demand - my own Supply and Demand showing a deficit for 2011/2012.

Euro - still held back by trend line and retracement at 143.

Week March 21st (Wednesday upate)

Looks like you could add to a short with a break below 268.20 and lower the stop to 275.40.  A break above 275.40 would target 290 and might make a new short term long interesting.  Still, pattern is bearish.

60 Minute - never call a H&S before it happens...but it is tempting.

Point and Figure - triple bottom sell set up. Targets 250. None of the upside targets were met = bearish.

Week March 21st (Monday update): Bull resumed?

So far the rally off 260 has hit what could we be considered good "bounce" targets (281.20 was previous support and a 1.38 multiple of first bounce).  So, is it a bounce, or a bull resumed?  Last week I thought we would try for 280; mission accomplished, Sr Arbusto. Therefore, I'd be a seller with a stop at today's high and would have sold 280 gladly. Again, trading against trend, but tight stop with good downside potential. Open interest mixed but more supportive of bear argument, than bull. Still, any move to the downside should be viewed as corrective and eventually we will see a new high.

We will probably have a lot of people talking about the new head and shoulders pattern forming, again (remember all the talk at 200).  There is the potential, but far from any sell signal as of yet.

In conclusion:  we got where I thought we would and I think we could see further downside.  All bets off/postponed with a close above 282.

Weekly - bearish shooting star in effect and slow stochastic offering sell signal.

Fund - substantial long liquidation with little increase in shorts.  So, no short cover and ammo to sell and those that didn't get out probably thinking twice about it now and likely to take advantage of this bounce.

Indicator turning up but not yet accelerating.  Still, it is bearish.

60 minute - rally looks corrective on little volume.  Possible H&S pattern forming.

Euro (weekly) - at critical point.  needs to be held back by 143 level. A break of that changes the scenario substantially = bullish/ supportive of commodities.

Week March 14th - Targets reached

Targets reached...and then some, but the 292 + target met all criteria for an intermediate top and has since plummeted.   What would be some good targets on the down side?
If this was the end of the 3rd wave, then a 38 % retracement would be 215.35 and a 50 % would be 195.05.  Seems substantial, but in %, its only a 27 %.   What is the likelihood that we get there?  100 % of some period !! , but in the next 3 months or so, I'd say there is a 50 % chance and increasing by the day.  Is it a sell now?  I'd be looking to the intraday charts to guide that.  Intraday, this has the look of a 5 wave move down.  So in the short-term, we should see some retracement. I would have liked to see this try for 257 first, but if it doesn't, then I could see it try at 280 again.
Once the panic settles, there is still the massive bull trend.
Bull arguments:
1) Bull trend is still intact.
2) Fundamental picture hasn't changed.  Brazil exports hint at little carry over.
3) Fund position is not over extended by any strech and much less so now.

Bear arguments:
1) Hit the upper channel line on 10 year weekly chart.
2) Hit the 292 + target
3) Daily key reversal
4) Weekly bearish shooting star with follow through this week.
5) SP500 looks like it topped earlier and commodities followed shortly.
6) Risk aversion
7) Slow Stochastic now hooking and suggesting sell signal for this weeks close.
...etc.

Bear arguments dominate for time being.

Weekly - nice bounce off upper channel line and very bearish shooting star candle with follow through.

Point and Figure - Broke through all support.

OI Indicators - indicator needs to accelerate, but it is pointing to more downside.

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.