In a lot of ways, fundamental analysis is that old, 1969 Dodge Charger you just can't seem to let go of. Some days, you take its cover off and start it up, engine purring smooth like it was brand new.
Other days, it just sits there dead as a dodo. That being so, it's the last thing you want to depend on in the race toward a near-term opportunity in the world's leading financial markets.
Case in point: Back in early-mid 2008, Coffee prices were hovering near their highest level in 10 years. And, according to the mainstream experts, a perfect "bullish storm" of outside data would boost java even higher. Here, the following news items from the time say a mouthful:
- "A rally in energy prices led to aggressive speculative buying of Arabica futures. Investors bought commodities as safeguards against inflation. It's the latest craze." (AP)
- "Coffee inventories in Brazil, the world's largest grower, stand at a 50-year low…Stockpiles are low and might be drawn down further if production fails to keep pace with demand. Coffee prices in NY will likely top the 10-year high…" (Bloomberg)
- "A storm of speculation is driving global coffee prices to sky high. The green bean is now on a bull run." (Times of India)
Yet -- after rebounding from a steep February-May sell off, coffee prices resumed their southern descent in late June, and didn't stop until six months later.
As for catching the larger part of coffee's freefall BEFORE it began, the July 2008 Monthly Futures Junctureshas the honor. In that publication, Elliott Wave International's chief commodity expert Jeffrey Kennedy presented an exclusive, four-page "Feature" on Coffee's imminent slide and wrote:
"Three simple concepts allow us to identify the June peak as a tradable top and to expect a sell off to ultimately below the May low. Yes, we know that the May advance in coffee will be more than fully retraced in the weeks ahead. But we also know to expect the June selloff to persist near 111, which is the point of equality between waves c and a."
The 40% plus sell off to a 26-month low in December 2008 speaks for itself.
Flash ahead: In the
January 29Daily Futures Junctures, Jeffrey Kennedy puts his best near-term analysis forward and shows where coffee price could be in the coming days. Also featured: cotton.