Once again, I sit down to talk with Jeffrey Kennedy, editor of Elliott Wave International's Futures Junctures Service, where subscribers get news of daily and other opportunities in almost two dozen futures markets.
Vadim Pokhlebkin: Jeffrey, last Friday, October 31, Bloomberg.com reported that, "Commodities had the biggest monthly drop since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials." The CRB index, which includes 19 commodities, fell 23% in October, with "Crude oil…set for a record monthly drop, copper its biggest retreat in two decades and gold its worst performance in 25 years." What do you make of that?
Jeffrey Kennedy: Well, as bad as it sounds, bear markets are not "bad" – they are a natural part of the market cycle; you can think of it as summer and winter, if it helps. Markets very rarely move in a straight line, and not for too long even when that happens. The good news is, even bear markets bring opportunities to speculators who are in the know. Not to brag, but the readers of my Monthly Futures Junctures, for example, were prepared for the recent setbacks: in the October issue, I presented 24 charts of the major commodities calling for their declines to continue. And most of those declines were 3d waves, too.
VP: Yes, I remember seeing that. Third waves, huh. That certainly explains why October was the worst month on record for so many of those markets – because third waves, according to the Elliott Wave Principle, are the strongest and fastest within the 5-wave impulsive sequence, aren't they.
JK: Exactly.
VP: OK, but those familiar with the Wave Principle also know that after a 3d wave, there always comes a correction in wave 4 – in this case, a rebound. When should we be expecting it, and how big will it be?
JK: I'm working on that right now. The new issue of my Monthly Futures Junctures comes out next Friday, the 14th. The market should give us some good clues by then about the longer-term wave patterns in commodities.
VP: And short-term?
JK: Well, short-term things are a little choppy. In Tuesday's and Wednesday's Daily Futures Junctures (Nov. 4 and 5; both online now. – Ed.), for example, I examine the wave structures of a handful of markets: Coffee, Cocoa, Sugar, Soybeans, Soybean Meal, Soybean Oil, Corn and Wheat; yes, it's been a busy week. And the message from all of them is the same: The recent rebounds are likely just countertrend moves, as I show in this 90-minute chart of Coffee:
What I find interesting is that while the Elliott wave structures in all these markets are different – a Running Triangle in Coffee; an Expanded Flat in Sugar and Corn; a Diagonal Triangle in Soybeans – their message is the same: Once the rebounds are complete, these markets should continue to fall.
VP: …
JK: And to anticipate your next question – "how far?" – I give the near-term price targets in yesterday's and today's Daily Futures Junctures. (Nov. 4 and 5 issues; online now. – Ed.) But as for the latest longer-term targets, like I said, we'll have to wait till next Friday to finalize those.
VP: Thanks, Jeffrey.
JK: My pleasure!