Coffee Prices on the Brink of a Major Rally - November 2017

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The above chart is a 5 year chart of coffee futures prices, covering the last couple bear market lows and some intervening bullish phases.

Currently prices are retesting a spike low which occurred in June of 2017.  And of note, there is now record net short positioning in the large speculators even as price is stabilizing at a higher bottom than the June low.

This indicates that there is a tremendous amount of short covering possible to be unleashed on a price advance.  The last 2 major bullish phases were 50% and 100% roughly in a year or less after comparable positioning among the major market players.

Not shown on the chart above is that "managed money" category of the positions is record net short basically equaling the level of the June low, at which point a 2 month 30% price rise occurred.

It certainly seems possible that price action will become "sloppy" before a rally occurs. 

But to me it makes sense to take every "buy" signal generated in a daily or weekly time frame from here forward.  And don't underestimate the potential price rise that could occur over the next several months.  From the visible data of the past major rallies, a 30-100% rally over the next 6 months would be reasonable.

I have eyes on purchasing JO, which is an ETN to participate in this potential move.

Pete

High Risk In Stocks Over the Next 2-4 Weeks

The current push to new highs on Friday in the SPY, has created a signal in my analysis which is infrequent and has lead to about a 3 times greater MAX loss than MAX gain over the next 2-4 weeks over the last 22 years of SPY data (this is all I have for testing purposes).

Without getting into the details of what the signal is, it is basically picking up a time when prices are making new highs, but with increasing signs of "fear" in the markets over the short and intermediate term.  So the way I have it flagged, it is saying that the fear over the last 5 days is higher than the fear over the last 3 months on average.  AND the average fear for the last 3 months has turned higher.

After reviewing previous instances in detail, it seems that SPY has high risk of declining to at least 254.00, but very possibly closer to 248.00 or beyond within the next 3 weeks.

Pete

Social Media Stocks At Intermediate Top 10-24-17

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The chart above is a weekly chart of the SOCL etf.  It shows a weekly bearish engulfing pattern last week.  That is a top reversal candlestick.  Also the RSI below the chart shows that price has been in a drawn out bearish divergence for a couple months.

To me this appears to be a classic topping look.  So from my perspective, the stage is set for a multi week decline for the first time this year.

There has been no 1 month+ correction since the 2016 election in November.  So after a year of a leg up with no correction in the markets, the time and price advance is certainly ripe for a top.

Since some of the big name companies are in the SOCL etf, I view this as a barometer of leading stocks and this indicates a topping formation in aggregate.

Also, the Mclellan Oscillator has been negative since Oct 12 even as prices have pushed to new highs.  This suggests that breadth is very thin, and indexes are only pushing higher on relatively few issues.  This forebodes a more sizeable correction to occur in my opinion.