S-T Coffee Failure First Step to Reviving 2016 Bull

October 11, 2016 3:31AM CDT

The market's failure yesterday to sustain recent losses below our short-term risk parameter defined by last Wed's 151.15 high not only breaks at least the downtrend from 29-Sep's 154.95 high, but also exposes the broader sell-off attempt from 22-Sep's 160.90 high as a 3-wave affair as labeled in the hourly chart below.  Left unaltered by resumed weakness below Fri's 145.20 low that now becomes our new short-term risk parameter, this 3-wave decline is considered a corrective structure that re-exposes this year's major uptrend that preceded it.

Coffee 60 min

Coffee Daily

Larger-degree strength above our longer-term risk parameter defined by 29-Sep's larger-degree corrective high remains required to CONFIRM Sep-Oct's sell-off attempt as a 3-wave and thus corrective event and resurrect this year's major uptrend.  In lieu of such strength it would be premature to ignore recent threats to this year's bull that we've recently identified and include:

  • a confirmed bearish divergence in daily momentum
  • waning upside momentum on a major WEEKLY scale below
  • an arguably complete 5-wave Elliott sequence from Jan's 111.05 low labeled in the weekly log scale chart below
  • a return to historically frothy bullish sentiment levels and
  • the market's rejection thus far of the area around the (158.23) 50% retrace of 2014 - 16's 225.50 - 111.05 decline.

These factors won't evaporate if the market proves greater strength above our 154.95 key risk parameter, but that strength must be respected as a reinforcing signal or warning of a resumption of this year's major bull just like the late-Aug/early-Sep recovery was ahead of the late-Sep run to new highs.  And the market's definition of a more reliable low, support and risk parameter at 145.20 from which a resumed bullish policy can be objectively rebased and managed provides the comfort and confidence to do so.

These issues considered, shorter-term traders have been advised to neutralize bearish exposure and are next advised to approach setback attempts to the 149.30-area OB as corrective buying opportunities with weakness below 145.20 required to negate this call and resurrect a peak/reversal count that could be major in scope.  Longer-term players are advised to pare bearish exposure to more conservative levels and jettison the position altogether on further proof of strength above 154.95.

Coffee Weekly


< Back to Articles & Videos

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.