Financial markets are not one-way streets. Prices do not move north or south in a single direction. Quite the opposite: they have more switchbacks than a Swiss alp. The trick is in knowing when to make abrupt turns BEFORE they arise.
For that, fundamental analysis often falls short. Case in point: The sudden, mid-October u-turn in Sugar prices from up to down. As the following news items from October 15-16 reveal, the market's drop was nowhere in the mainstream's sights:
- "Sugar prices jumped 5% amidst demand and mounting worries about tight supplies... " (Reuters)
- "Sugar has very strong fundamentals that are here to stay for more than a few months. The crush of... top producer Brazil has been affected by wet weather and is even more a driving force in the market." (Forbes)
- "Sugar Prices Expected To Rise... as India's demand for the commodity in the last season was the highest it has ever been." (Weekend Post)
Yet -- one day later, sugar prices soured in powerful sell off to a two-week low.
Now for seeing the downtrend in sugar BEFORE it arrived -- the October 16 Daily Futures Junctures Weekly Wrap-Up presented this bearish close-up of prices at an important peak. (Some Elliott wave labels have been removed for this article.)
For those new to our pages, the a-b-c pattern illustrated in the chart is a classic zigzag: a simple three-wave move in which the top of wave B is noticeably lower than the start of wave A. Also true to zigzags: wave C is often equal in distance to wave A. As you can see from the labeling on the chart, that scenario had been met. The zigzag was complete, and the next big move was DOWN.
Now, one week of decline later, the question remains: Will sugar prices start to sweeten again?
Well, few can answer that with more precision and objectivity than Futures Junctures Service. Right now, the October 21 Daily Futures Junctures covers the short side of sugar's price action, while the October Monthly Futures Junctures (MFJ, for short) takes the market's long side.
In the October MFJ, editor Jeffrey Kennedy presents a riveting study of the last FOUR major peaks in sugar's price history and comes to a strong conclusion about whether the summer spike to a 30-year high is set to continue.