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For over 50 years coffee bull markets have consisted of one explosive rally, in most cases short in time, before falling back to earth. Never has a bull market consolidated after a sharp rally and been able to have a second leg up. Never has a 10 week / 40 week bearish cross occurred that has not confirmed the end of the bull market. So where are we today? We have had a powerful leg up, we are now 7 months in a consolidation or top building, the 10 week and 40 week are almost equal in the 222-224 range and no bear cross has occurred and prices are trading in the 236 range.
Fundamentally the USDA will announce tomorrow that the world coffee market is almost in balance with world robusta production covering the Arabica deficit. On the other hand Brazil will have produced over 2 years approximately 20 mln bags less of arabica than it normally would have with normal crop conditions.
Both bulls and bears have evidence to support their positions. In the end the market will decide all we can do is look for clues. I will be paying particular attention to 219 on the downside, 245 and new highs on the upside,
I will include a chart of the historic run in the 70s and the 2011 bull run. Pay attention to the differences.
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