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S-T Mo Failure Stems Coffee Drubbing, Upside Potential Indeterminable

Posted 01/08/2019 7:40AM CT | RJO Market Insights

Coffee Mar '19 240 Min Chart

For the first time since introducing a bearish count in 23-Oct’s Technical Blog following that day’s bearish divergence in momentum that threatened Sep-Oct’s spike, the market has recovered above a prior corrective high that confirms a bullish divergence in momentum and stems the slide.  The 240-min chart above shows this morning’s recovery above our short-term risk parameter defined by 13-Dec’s 104.35 minor corrective high,  This mo failure defines 19-Dec’s 98.60 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

While this bullish divergence in momentum, in fact, breaks the downtrend from 19-Oct’s 125.50 high, the market’s upside potential is indeterminable.  On the bearish side, Oct-Dec’s decline is so extensive that the past couple weeks’ recovery easily fits within the bounds of a mere (4th-Wave) correction ahead of an eventual resumption of this slide.  On the bullish side the market’s recent proximity to and rejection (thus far at least) of the extreme lower recesses of the past quarter’s range warns of potentially sharp gains similar to Sep-Oct’s spasm.

The intermediate-term fact of the matter however is that this bullish divergence in momentum exposes at least the intermediate-term trend as up, and a countering bearish divergence in momentum is required to threaten a bullish count and resurrect a bearish one.  A relapse below 19-Dec’s 98.60 low and new short-term but key risk parameter will decide the issue.  Until such behavior threatens this rebound, there’s no way to know the market won’t again shock traders by simply “taking off” as it did starting on 28-Sep.

Coffee Daily Chart

 

Coffee Weekly Chart

The weekly chart above shows historically bearish sentiment levels that would reinforce the prospects for upside vulnerability while the monthly log chart below shows the historical importance of the general 100-area.  As long as the 100-area holds, the extent of rebounds should not be underestimated.  A break below it exposes a chasm with dire bearish consequences.  But we can only address such a major bearish count if/when the market relapses to test that hurdle.

In sum and as a result of today’s bullish divergence in momentum, traders are advised to move to a neutral-to-cautiously-bullish policy from 104.50 OB with a failure below 98.60 required to negate this call and warrant its cover.  In lieu of such weakness further and possibly accelerated gains should not surprise.

Coffee Monthly Chart

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