Side Note: For the record, I continue to agree more with Warren Buffett’s thoughts on technical analysis, “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer.” However, I will continue to post analysis, at least through this financial quarter ending in June.
Cotton (CTY00, Cash Index): I’m going to call the major (long-term) trend sideways between the April range of 67.42 to 61.11 . Theoretical Positions: Long-term investors are likely on the sidelines in cotton at this time, with stop orders on either end of the April range.
Coffee (KCY00, Cash Index): The Index continues to tease bearish reversal patterns without actually confirming a new major downtrend. Theoretical Positions: Long-term investors could look at going short coffee. The risk is the market remains fundamentally bullish, as indicated by the continued backwardation (inverse) in the futures forward curve. If shorts are established, sell stops would be placed above February highs (depending on which futures contract one uses).
Cocoa (CCY00, Cash Index: I’m not seeing a clear trend on the monthly chart for the Index. Meanwhile, the futures market’s forward curve remains in strong backwardation indicating a long-term bullish supply and demand situation. Theoretical Positions: Long-term investors are likely on the sidelines in cocoa.
Sugar (SBY00, Cash Index): The Index erased previous ideas of a major uptrend as it fell to a low of 17.24 during April, its lowest price since July 2021. Theoretical Positions: Long-term investors may have gone long the sugar market, futures or Exchange Traded Funds (ETFs) near the August 2024 close before adding positions near the January 2025 settlement. If so, sell stops below the January 2025 lows would’ve been triggered.
Orange Juice (OJY00, Cash Index: The monthly chart looks like something we’d see with natural gas (aka the Widow Maker). That being said, OJY00 did complete a bullish key reversal at the end of April, coinciding with a bullish crossover by monthly stochastics. This means the index both signaled (stochastics) and confirmed (key reversal pattern) a new major uptrend. Theoretical Positions: Long-term investors could buy back short positions at the September 2024 close near the April settlement of 272.50 and go long at the same price. Sell stops would be below the April low of 211.90.
The Bottom Line: I don’t see anything I like, from a long-term investment point of view, in the Softs sector. Orange juice is the natural gas of the Softs sector.
