COFFEE AND CATTLE
November 6, 2019
COFFEE: As we mentioned last week there was an excellent chance that Coffee could reverse to an uptrend. Well indeed as of the close Friday last (November 1) December Coffee did indeed reverse from the long term downtrend to an uptrend. So as of now according to the LAWG 647 Model what do we know?
We know that Coffee is in an uptrend and needs a close this Friday (November 8) at or below $89.05 to reverse back to bearish. While possible……. I suggest not likely. Looking forward over the next several weeks it appears to me that it will be equally difficult for Coffee to reverse to bearish. We know that as of Friday last the Positive Indicator had exceeded the first standard deviation of the 218 week average. As of this writing the Positive Indicator is just short to reaching the second standard deviation of the 218 week average. Over the past 218 weeks the Positive Indicator has reached the second standard deviation eight times and exceeded it six times, but as we know past performance is not indicative of future results.
What to do? I am suggesting one look for values to get long but as Warren Buffet once said it isn’t where you sell something it is where you bought it that matters. Looking at the Coffee market it appears there is a bunching of technical support levels between $102.00 and $105.00. If you are looking to get long Coffee assess your risk tolerance and pick your poison and use stop loss orders for protection.
CATTLE: The Cattle market shows signs of a continued up trend so what do we know? We know that December Cattle will need a close at or below $103.67 this Friday (November 8) in order to reverse the trend, my opinion….not likely. It will be even more difficult to reverse the trend on the 15Th when the key price is at or below $99.75. We know that as of last Friday the Positive indicator had exceeded the second standard deviation of the 218 week average and was approaching the third. During the trade on Monday the Dec Cattle did touch the third standard deviation of the 218 week average which in my opinion is the cause for the slight setbacks Tuesday and during the trade so far today.
What to Do? While the market can surly rally from present levels I recommend caution if buying here as it appears to me that the market is becoming top heavy unbalanced. If December Cattle rally from present levels and exceed the third standard deviation of the 218 week average I will look for short term selling opportunities.
There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.