The Softs Pit Review
For the week of October 18th, 2010
For the new trading week, PitGuru Jurgens H. Bauer's talk or analysis on the soft market will take your time today. But, this time means money.
T'was a wild and woolly week in the Softs! Cotton established new all time record high, moving double limit up on Thursday. Then in a key reversal on Friday cotton dropped 10 cents from that new high! Sugar rallied, also registering a new high, then it too dropped. Coffee had an early week low of 176.35 and a high three days later of 190.45. Even OJ prices made surprising moves. So the markets are indeed wild and moving around big. Such price action may be signaling a top, but at the very least shows there will be two sided price action. The highs ought to be difficult areas of resistance.
What to look for? In coffee, KCZ looks to be building an inverted Head and Shoulders pattern that if completed, requiring some sideways to lower work price wise, could portend prices up to my long term objective of $2.08. However, a serious break below 178 could also could threaten 170 and look poor. As much as Cotton's price action on Friday suggests a key reversal top, that market has been building for a sizable correction. The key there is whether long speculators and funds agree and we start to see follow through. Certainly prices have risen far too much far too fast, so a top isn't totally unexpected. The bigger question, is it the end of the move? Stay tuned, stranger things have happened. I can say the strain on traders is obvious and volatility doesn't show the wide spreads between bids and offers that have become common place these days.
In sum, look for defensive action and consider flattening out any existing long positions. Looks like my long cocoa call position is a loser.
I will end my comments here as my daughter-in-law is in labor with my first grandchild, a girl, named Elsie Jane Bauer.
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