Here's the short of it: In my experience, most events cited by "fundamental" analysts as the reason for this or that move in the markets have the shelf life of an open container of heavy cream. Just when you think it's safe to pour into your trading "cup," said factor curdles and sours.
Take, for instance, the recent news regarding coffee. On April 21, coffee prices soared past $3 a pound for the first time in 34 years. And, according to the usual sources, the number one reason for coffee's bullish caffeine buzz is...
"Coffee has more than doubled in the past seven months on tight supplies." (CBS News)
Here's the problem: The deficit in coffee supply is only evident today. But back in June 2010 -- with coffee prices scraping the bottom near $1.30/pound -- mainstream analysts presented an equally strong bearish case due to a surplus of coffee supply. Here, the following news items from May-June 2010 say plenty (emphasis added):
- "Coffee falls as investors expect Brazil's harvest to be plentiful, which would increase the supply of the crop." (Business Times)
- "Coffee prices lower as Brazilian output to rise 23%, USDA unit says." (Associated Press)
- "Global coffee production will rise 11% to an all-time record in the year starting July 1. With the upcoming harvest, producers will be selling heavily at these prices and look to hedge. The market is overbought." (Bloomberg)
YET, rather than sell coffee due to a surplus in May-June 2010, as the logic of the "fundamentals" was suggesting, marketgoers began to buy up coffee like it was going out of style.
In the end, a market's external factors come and go. But the one objective measure of market behavior are the Elliott wave pattern in the price charts.
That's why, almost a year ago, in the June 2010 Monthly Futures Junctures 'Featured Market" segment, EWI's chief commodity analyst Jeffery Kennedy foresaw a "large and lasting post-triangle thrust" in coffee "that could easily see prices double from current levels."
Now that prices have fulfilled their bullish Elliott wave script, Jeffrey revisits coffee in the new, April 2011 Monthly Futures Junctures. Here, Jeffrey examines the evidence -- Fibonacci time and price targets, Elliott channels, the London equivalent -- and reveals to you how long coffee's winning streak may go on.