PFGBEST Softs Comment

CHICAGO - Nov 16/09 - SNS -- Following is the orange juice, cotton and coffee comment from PFGBEST Research.

The Soft Spot(3)

The Soft Spot

Robin's Rant

What goes up ' well you know the rest. We have some very interesting technical developments to analyze this week. Let's revisit the massive de-leveraging break of 2008-2009. The Reuters Jeffries Commodity Channel (Old CRB) Index has been stalled at the 38.2% Fibonacci retracement of that break for more than a month now. The Dow Jones has completed a 50% retracement of same. These two examples indicate that long positions should have stringent risk management plans in place. Yes, I know we always should but there are those of us, myself included that sometimes play the 'I will watch it for a while' game. Don't ' not now!  Those of you that have ridden a roller coaster know that clink ' clink ' clink sound of the chain pulling the coaster to the top of the hill. You also know that moment of silence as the coaster disengages from the chain prior to racing down that first hill. It's my contention that quite a large number of markets have entered that moment of silence!

 I can provide you with charts illustrating the above market situations. Just drop me a line and I will get them to you.  

If you require clarification of anything presented here or just want to talk about the markets feel free to give me a call. (800) 611-6974  

Coffee 11/12/2009

Life Time Trading Range 41.50 Cents  - $337.50 per Pound

Trades on The ICE 2:30 AM ' 1 PM CDT

There's a leak in the boat!!! Coffee has given in to bearish fundamentals. The Vietnamese harvest is now underway in earnest and  the bumper crop of Brazilian Arabica due next summer is pressuring coffee prices.

Presently the supply of high grade coffee is tight. Talk of increased coffee purchases by the Brazilian government for storage and a Broca worm infestation in Columbia. This market is reacting negatively to bullish news. This is not good news for coffee bulls as it has failed to create the support needed to stabilize coffee prices. Thursday, as I write this, the market had been down as much as 1400 points to 130.00 from its recent high of 144.00. The breakout to the downside has been confirmed.

On a weekly basis, from a technical standpoint, I deduce that a line has been drawn in the sand. The center band, or 20 day moving average of the Bollinger Band study, is presently at 128.28. Parabolic support comes in at 130.00. The 9 bar moving average rests just above at 133.97. December coffee settled at 130.10. What comes next should be extremely interesting.

Do not trade without protective strategies such as stops and or options.

Cocoa 11/12/2009

Life Time Trading Range $444 ' $5379 per Tonne

Trades on The ICE 3 AM ' 1 PM CDT

Cocoa broke down to the 30.00 area this week and Wednesday snapped back smartly from the oversold condition created by the initial break. Buying interest increased with Cocoa trading at mid October prices. The U.S. dollar was also a factor in Wednesdays rally as it made new lows for the move down. London cocoa prices surged higher as the British Pound worked lower. On the macroeconomic, China reported an increase in industrial output. With gold and so many other markets showing strength one could find no reasons to sell cocoa ' so why not buy it?

So, was cocoa making new highs? No, it was not. What it was doing was correcting from an oversold condition. There may be some further upside strength in this technical rally although the daily trend has turned down. Cocoa arrivals at Ivory Coast ports have been far above expectations. The weather in the growing areas continues to be positive to growing conditions. The larger than expected crop is putting pressure on cocoa prices.

Do not trade without protective strategies such as stops and or options.  

Sugar 11/12/2009

Life Time Trading Range 2.30 Cents ' 66.00 Cents per Pound

Trades on The ICE 2:30 AM ' 1 PM CDT

With commodities in general taking on a bearish tone sugar comes complete with a supply deficit. I suspect that sugar will show resilience as buyers come into the market on dips. Sugar has been in a trading range for three months. It is now trading in the extreme lower portion of that range. As a former floor trader I would have to say 'Buy sugar ' sell the world'. But I won't do that. What I will say is that if you want to take advantage of a down move in commodities don't short the sugar as there are other markets with greater opportunity.

There is word out of Mexico that upwards of 45,000 tonnes of sugar may have suffered damage from heavy rains in the growing areas. If that is the case 1% of Mexico's sugar production will be removed from the supply quotient. The positive economic news out of China and the needs of those countries with supply deficits should serve to support the market.

Do not trade without protective strategies such as stops and or options.  

Cotton  11/12/2009

Life Time Trading Range $26.84 ' $117.20 per Pound

Trades on The ICE 8 PM ' 1:30 PM CDT (Next Day)

This week cotton traded at its highest level since October of 2008. The market quickly reversed, broke sharply and made four week lows. This market action is significant in that it shows the cotton market has taken on a significantly bearish tone. Until now the slow harvest, real and imagined damage to the crop from rainy weather in the Mississippi Delta and increased world demand had been enough to support the market. Game over! Drier weather is moving into U.S. cotton growing areas allowing the harvest to speed up.

When markets react bearishly to bullish news it's time to step aside if you're long or consider taking a short position. There are three things to remember when this type of thing happens The market is the market is the market, It is never wrong.

If you do enter a short position don't sell the breaks. Wait for an up day and sell into the strength. Remember this rule and you should save yourself a lot of aggravation. In an up trending market buy the weakness (breaks) of the strength. In a down trending market sell the strength (rallies) of the weakness.

Do not trade without protective strategies such as stops and or options.

Good Trading!  

Robin Rosenberg  (800)611-6974

rrosenberg@pfgbest.com  

PFGBEST Research Team

Phone: 800-361-6855 or 319-553-2181

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