The Reuters Jeffries Commodity Channel Index is holding the high side of its trading range waiting for something to happen. Coffee has broken out to the upside. Cocoa and Cotton sit smack dab in the middle of five month old trading ranges and Sugar has rallied to resistance. Though not much to get excited over, it’s not unusual for sideways market action to dominate midsummer markets. Let’s move in for closer examination.
Coffee 07/23/2010
Life Time Trading Range 41.50 Cents - $337.50 per Pound
Trades on The ICE 2:30 AM – 1 PM CDT
The coming large Coffee supply resulting from the 2010-11 harvest was beginning to weigh on Coffee prices. The short term supply tightness that had been supportive to Coffee prices looked to be losing its grasp. These two factors had been exerting equal, but opposing forces on Coffee prices. As the Brazilian harvest approaches additional pressure on Coffee’s price will be realized. A lack of cold weather and favorable weather forecasts going forward for the Brazilian Coffee growing areas should assist greatly in bringing in the expected bin buster of a harvest.
Vietnamese growing areas have been hit hard by rains of late. There are concerns that the quality of their Coffee crop has been adversely affected. Coffee prices rallied sharply this week; reaching their highest level since 1998. The market has broken out to the upside of the textbook like up flag formation that I have been pointing out since June. If I am reading this correctly, strength should continue and Coffee prices should head for 2.00 plus per pound and complete the up flag.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Well it finally happened. Not only breaking out of the up flag that had been forming for eight weeks, Coffee futures made contract highs this week. I’d brought this bullish development to your attention for quite some time. Coffee prices will more than likely reach $2.00 lb or more before it’s over.
The stochastic is about to issue a buy signal. The R.S.I. stands at 74.45, sharply higher than last week’s reading of 69.58. The M.A.C.D. histogram stands at 4.24 higher than last week’s reading of 4.22. The bull has awakened.
Do not trade without the use of protective strategies such as stops and or options.
Cocoa 07/23/2010
Life Time Trading Range $444 – $5379 per Tonne
Trades on The ICE 3 AM – 1 PM CDT
Wet weather is once again wreaking havoc in the West African Cocoa growing areas. Not only affecting production, the transportation network has been adversely affected as well. You can’t get Cocoa beans to port for export on washed out roads. The Cocoa crops quality has also suffered. Moisture content in the Cocoa beans is as high as fifty percent. Moisture brings disease and Cocoa farmers are dealing with Black Pod and Swollen Shoot diseases once again. Even though problems in the supply chain are of great importance, the macroeconomic picture is not bright. Cocoa industry officials are quite concerned that demand will slacken if the economic picture does not begin showing improvement.
Ivory Coast Cocoa quality is subpar. It has taken a big hit from the many rainy, sunless days experienced during its growth cycle. Quantity arriving at ports for export has been disappointing as well. The Ag Minister has said that the Ivory Coast will be concentrating more on improving quality than on gross Cocoa exports in the future. Production and quality are somewhat better in Brazil. Cocoa arrivals at ports for export from Bahia and other Brazilian growing areas increased almost 3,000 bags in the week ended July 25.
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: Cocoa has been strong this week. In a reversal of the prior week’s action the market is above the center band of the Bollinger study and 9 bar moving average. The stochastic is about to issue a buy signal. The R.S.I. stands at bullish 52.00, higher than last week’s indication of 48.25. The M.A.C.D. histogram stands at 19.40 and higher than last week’s indication of 16.83. Cocoa continues to be trapped within a trading range. I will continue to remain on the sidelines.
Do not trade without the use of protective strategies such as stops and or options.
Cotton 07/23/2010
Life Time Trading Range $26.84 – $117.20 per Pound
Trades on The ICE 8 PM – 1:30 PM CDT (Next Day)
Cotton growers planted near eleven million acres this growing season. The weather in the growing areas has been stellar. Above normal rainfall, sunshine and hot temperatures have produced a Cotton crop that is far more mature than is usual for this time of year. Kind of makes you feel warm and fuzzy doesn’t it? Well it shouldn’t! This situation brings with it a myriad of challenges; expensive ones at that. Insect pests have established themselves much earlier in the growing season and disease probability has increased. Weeds are a problem as they have had great growing weather as well. What should a grower do in this situation? Spend the money for insecticides and herbicides? Kick back and hope that the damage is minimal? Not only are these pests cause for concern but exports have not been up to snuff of late. If this trend continues, Cotton growers are in for a rude awakening!
U.S. Upland Cotton sales for the week ending July 22, 2010 were 600 bales for delivery in 2009-10. A marketing year low!
I include the following because it is most important. Everyone in the Cotton industry is interested in Allenberg and their take on the Cotton market.
According to Joe Nicosia, president and CEO of Allenberg Cotton Co. (And a subsidiary of Louis Dreyfus and Company). A big U.S. Cotton crop could be a much needed salve for U.S. Cotton producers and consumers around the world. “We’re going to need the cotton,” said Nicosia, speaking at the Cotton Roundtable in New York City. “Earlier estimates of U.S. production at 15 to 16 million bales would have been a disaster for customers and consumers.” Nicosia projects U.S. cotton production at 19.2 million bales on 10.9 million planted acres in 2010, based on the potential for a record Texas crop and good growing conditions so far across the rest of the Cotton Belt. Nicosia says that from now until the world new crop starts coming out of fields, the United States “faces very limited competition for export sales. Literally, every country in the world is sold out. So we’re going to continue to be able to build an export base and put on a great deal of sales.”
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: This week, Cotton has managed to move above the 9 bar moving average and the center band of the Bollinger study. The stochastic is in buy mode, but the formation indicates choppy, sideways trade. The R.S.I. stands at a bullish 55.08, higher than last week’s indication of 53.96. The M.A.C.D. histogram at -0.61 is microscopically better than last week’s reading of -0.79.This choppy sideways market action has me retiring to the sidelines awaiting development of opportunity.
Do not trade without the use of protective strategies such as stops and or options.
Sugar 07/23/2010
Life Time Trading Range 2.30 Cents – 66.00 Cents per Pound
Trades on The ICE 2:30 AM – 1 PM CDT
After spending back to back crop years in supply deficit status, expectations are for a five million tonne surplus of Sugar this season. The monsoon in India has improved and is benefitting the Sugar crop. This season’s Indian Sugar harvest is projected to be twenty six million tonnes and consumption pegged at twenty three million tonnes. Brazilian Sugar production is more than thirty percent above last year’s production at this time and expectations are for a record Sugar crop this year.
A backlog of vessels remain at anchor waiting to be loaded with Sugar at Brazilian ports. This continues to support Brazilian cash Sugar prices but this is old news and not as supportive as it once was. India’s’ Mawana Sugars L.T.D. has cancelled an import deal for 30,000 tonnes of Sugar. This is the second time they have done so! Many Sugar mills in India have been renegotiating or cancelling import contracts for Sugar. These people know exactly what they are doing. With Sugar prices down 40 percent on the year, who can blame them?
Technical Analysis is a methodology. The information below is not to be taken as trading advice or as a recommendation to buy or sell any commodity future or option. It may or may not agree with the fundamental analysis that appears above.
Weekly Technical Indications: This week Sugar has moved above the top band of the Bollinger study. This is indicative of an overbought market. The 9 bar moving average remains above the 100 bar (Weekly) moving average and the stochastic is about to issue a buy signal. It would be unwise to buy Sugar at this price level without strict money management safeguards in place. The R.S.I. is higher and stands at 55.78 versus last week’s reading of 51.31. The M.A.C.D. histogram stands at +.84 versus +.71 last week. A bullish, but overbought scenario.
Do not trade without the use of protective strategies such as stops and or options.
