Just a quick update on the “C” Market (the coffee commodity futures market) and where I think prices are going now.  Going to be brief, since it’s Father’s Day and Jen is getting Siena ready for bed, but I told Mark Inman I would post something, and you don’t let Mark Inman down.  If you do, he will cross his arms at you and give you that look.

Below is a candlestick chart of the KC,  (specifically KCU1, the Sept. contract) otherwise known as the C.  This brings up an important point.  As a trader, I am looking at the Sept contract because that is the active month where all the volume has jumped to.  This is a problem with charting future contracts, because at any given time there are multiple contracts trading with different expirations and price levels.  I bring this up because some of the price levels I mentioned on my last post might be different by a few pennies, and more importantly, because looking at the July contract paints a slightly different picture.  However, as the Sept. contract is the where the action is at, and what most traders are looking at, that is what I will reference here.

First a quick recap of my last few major calls.  (Sorry, most of these were made on Facebook, where I communicate with my friends in the coffee industry.  As of yet, I do not have an official service or newsletter).  You can see the major calls I made at 1, 2, and 3 were right on the money, either being called to the day or the penny.  4 was a little trickier, as detailed in my last coffee post.  We were looking for a confirmation signal above or below the March high, and we got a failed signal above.  However, as I noted in my FB post, though we did confirm above, I didn’t like it, as we only confirmed above by less than 2 cents.  Sure enough, prices reversed, and 3 days later confirmed below the level, where I declared we had seen the top.  There should even be a 5, since I called the bounce on 6/2.  As I always say, I am amazed myself I have made so many great calls, and I always expect the next one to be wrong.  I am sure it will probably come when I am most confident it won’t, so for now I continue to be somewhat cautious.

So naturally you are reading this not to hear about my last several calls, but where I think we are heading now?  Well, the situation we find ourselves in is very similar to the one we found ourselves in last time, only in reverse.  Rather than going into all the technical reasons why I think we will see a bounce here, the only thing we have to look for come Monday or Tuesday is a (solid) close below the low of Friday (252.15, or $2.5215 a lb). In a nutshell, we are at support that has held before.  While we have already hit this area before, making the third hit less likely to hold, I see several other signs as to why we may trade sideways to higher for now.  So for now that is my bias.  I do not think it will last very long, and my current working theory is we will trade down to the 200 day moving average (in red, around $2.37) before very long, where I expect a reversal.  But that is just a hunch.

And just like last time, a full blown meltdown and crisis looms on the horizon, in which case all bets are off.  Except this time it is the Euro which is threatening to blow up, and give a momentary reprieve to the dollar, putting downward pressure on commodities, especially agriculture.  The threat of a full blown systemic meltdown are very real, the odds of which are vastly underestimated, even after 7 straight weeks of declines in the market.  As always, the views expressed here are my own and offered as such for educational purposes, not as any recommendation to buy or sell anything.  Do your own due diligence.

Feedback is welcome, please post a comment below.  And let me know if I am being too technical or not explaining things very well.  I tried a lot harder this time to talk to a wider audience.

UPDATE 6/20/11: Very interesting action today, as we have now confirmed below the $2.52 level.  No points for me this time, though we are really, really oversold now, and a bounce is definitely overdue.  I think we will see the bounce tomorrow. The difference between bouncing today and tomorrow is huge however.  Note that confirming below does not mean we go straight down, what it means is that the level is now overhead resistance, and and any bounce into it can be sold.  The confirmation can also be negated by a confirmation ABOVE the level, though that is rare, and as we just had that happen, is even less likely.  Therefore the double-top topping pattern we called last time is still in place, and the trend is still down.  The 200 day ma continues to be a magnet, and any pierce will be EXTREME resistance.  Right now commodities are a little mixed (for example one of the things I look at for confirmation, cocoa, just had a reversal day today) and taking their cue from the events in Euroland.  (The Greek “bailouts”/PIIGS downgrades and eventual Euro comeuppance, which will push the dollar up and commodities down, until everyone comes to the realization that QE3 is a certainty).