In just over a week, coffee prices have gone from a fresh high to a three-week low. As for why -- that depends on who you ask. According to the mainstream experts, two main factors are behind coffee's shift from hot to cold:
- A strengthening greenback: "Coffee Pressured By A Firmer U.S. Dollar." (AP)
- A bearish supply report: The International Coffee Organization estimated that the 2009/10 Vietnamese crop could be at a deficit.
Problem: Both of the above factors showed up on the scene AFTER coffee's downtrend got underway -- on October 19. That's like walking up to a person on the street who is sopping wet and saying: "Don't forget to carry an umbrella today because it's supposed to rain."
As for seeing the potential for coffee's downturn before it unfolded -- here, the October 16 Daily Futures Junctures "Weekly Wrap-up" comes into play. In that publication, EWI's chief commodity analyst Jeffrey Kennedy presented the following close-up of coffee that showed prices at or near the end of a multi-month long double zigzag formation. (Some Elliott wave labels have been removed for this publication)
A double zigzag is simply a combination of two regular zigzags (corrective, three-wave Elliott wave patterns labeled ABC) connected by a wave labeled "X". The most invaluable thing to know about double zigzags is that the second ABC leg is often equal to the first ABC. As you can see from the chart, in coffee on October 19 the area of equality came out to 145.15 -- at which point, a powerful third wave decline was expected to set coffee prices on a downward course.
And -- that's exactly what happened. Coffee prices topped within ticks of Jeffrey's target at $1.4540 AND turned down.
Now, the October 28 Daily Futures Junctures (DFJ, for short) revisits the market to reveal where coffee prices could go next. In DFJ's own words: Once the immediate move is complete, prices will change "a whole bunch, and real fast."
Believe it or not, that's just one-third of the story. The October 28 Daily Futures Junctures also presents multiple price charts, in-depth analysis, and live video commentary on the near-term trend changes in store for soybeans AND sugar.