WORLD COMMODITY PERSPECTIVE
SUGAR: Once again sugar finds itself in a vulnerable position. We could see a push above 12.44 and a test of the 12.50 resistance level cited last month and still look at the market in a negative light. 12.85 continues to represent key resistance. Given the rally over the last two months, that resistance level is not far away.
If key resistance is surmounted, I would expect a rally beyond 13.25. The next objective would be 14.25. Still, I would favor a long-term bearish outlook.
Elliott Wave Analysis–The weekly chart show a three-wave rally from 10.60 to near 12.50 resistance. The rally could be the second zigzag to complete a double zigzag wave (E), which in turn completes the consolidation from 9.62 (July 1995). At resistance, the second zigzag will equal the first from 10.10 to 12.00.
Key resistance at 12.85 represents the top of the wave (C) in the triangle formation unfolding over the past two-plus years. Wave (E) should not exceed the (C) extreme, so upside potential under the preferred interpretation is limited.
While I rely almost entirely on the Wave Principal for my market forecasts, I cannot overlook the latest Commitment of Traders data. It shows that commercials (theoretically the smart money) have a net short position comparable to that at the January 1995 peak at 15.83. Large specs (commodity funds) have a long position larger than at that peak, while small traders are more bullish that at anytime since. We'll see who blinks first.
COFFEE: My contention that the December contract could return to the 144.00 low before coffee mounted a rally attempt proved correct, as 142.50 marks the bottom. Last month I stated that the closer the market came to this prior low before a reversal took place, the larger the subsequent rally might be. A possible objective area for the current rally lies at 174.70 to 175.55, or 160.60 to 161.30 basis the March contract, and I cannot rule out a test of the 196.00 and 175.50 peaks registered in September before this market turns lower again.
Keep in mind that despite the anticipated advance, the long-term trend is toward lower prices. Still, we could see months of consolidation limited to the 175.50 to 136.30 area basis March futures before the market begins to lose ground again. Surprisingly, the fastest route to ta resumption of the bear trend would be a rally above the September peak.
November 14, 1997 Jim Martens
Elliott Wave International
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