Fundamental (fun da' men tal) analysis: noun. 1. Occurs when mainstream financial experts take a certain news item and spin it tighter than Charlotte's web in order to fit price action that has long since been underway.
Well, that's my definition, not the one from Investopedia. See if I can get you to agree with me.
On December 7, 2009 Orange Juice futures soared to their loftiest level in 16 months. And, according to the usual sources, the single-largest bullish factor behind OJ's rally is the latest U.S. Department of Agriculture crop production report. Released in mid-October, the USDA projected a 16% drop in production from last season.
Here, the following headlines in wake of the data set the tone:
- "OJ prices surge as orange output may tumble." (Bloomberg)
- "Orange Juice sees biggest weekly gain in two months on speculation Florida crop could drop." (Associated Press)
- "Bullish Florida Estimate Rallies Market... The USDA report was certainly a bullish surprise. We haven't seen a number like that in a while. This changes the dynamic of the market completely. If you want to trade something from the long side, OJ just gave you a reason." (Wall Street Journal)
One problem: Florida's orange juice market did "see a number like" the 2009 figure not too long ago; in 2008 to be exact. In last year's harvest, Florida output declined 12%, while commercial citrus acreage plunged to its lowest level since records began in 1966. YET -- 2008 saw orange juice futures sink more than 50% to a four-year low.
Not to mention the other glaring omission from the 2009 bullish O.J. headlines: the 16% drop in Florida's crop production came alongside a 7-month backlog of orange juice in storage. In reality, the drop in output doesn't come close to erasing the oversupply of inventory. (Sarasota Herald-Tribune)
Now, while the usual experts try to force news items into price action that is long since underway -- EWI's chief commodity near-term service Daily Futures Junctures uses objective analysis to determine where prices could be in the future.
In the December 9 DFJ publication, we present six labeled price charts of Orange Juice that reveal the picture of the market's dominant wave structure. In the words of Daily Futures Junctures: "The upcoming near-term [move] should set the stage" for a powerful event.