The Coffee has us wide awake!
ANNOUNCEMENT
I have now launched my revamped website and is now live and I invite you to take a look. We have made it more contemporary and in tune with modern tastes. But the ‘guts’ remains the same – a shop window on my remarkable and unique Tramline Trading system that can boost your trading performance.
We are seeing extreme volatility in stock indexes with last week’s 1,400 pip rally in the Dow. But the great news is that I am keeping VIP Traders Club members fully aligned – and giving advance warning – of all of the twists and turns. We are getting most of the thrills and few of the spills!
What is keeping me on track is my use of the EWT – and my reading of prevailing sentiment. Here are our trades
We first entered shorts right near the ATH and added on the way down. But the key factor was my decision to take profits near the low as the momentum divergence was telling me a sharp second wave rally was highly likely.
And that little decision captured many hundreds of pips profit.
And just yesterday, i judged the rally was running out of steam and advised shorting again right near Friday’s rally high.
My best guess is that we shall see some more downside and then a further rally. That would make my wave 2 looking better in time scale.
But what is weighing heavily on stocks is the ever-rising Treasury yields – and the short term outlook appears none too helpful for equity (or bond) bulls
We are in a very large third wave down (in prices) and a smaller scale fifth wave that should terminate well below the wave 3 low before any meaningful rally phase can get started.
As another example of how hedge funds are usually pointing the wrong way at significant turns, here is the latest COT on the 30-yr T-Bonds
Just as wave c of 4 was topping, both hedge funds and retail traders decided to exit a pile of shorts – just at the wrong time! In fact, that was the perfect time to add to them – just as the smart money commercials did (Hint: Follow the commercials, not the hapless hedgies!). They never learn (thank goodness). That’s because they are trend-followers (aka momentum-chasers).
Last week I showed this Amazon chart that pointed to renewed weakness
All my signs were in place for a decline last week and this is the current chart
and indeed, the decline continued with force and has now produced a major wave 1 low and last week’s rally is part of wave 2. It could stretch up to kiss the blue tramline as a max effort, but when it tops, a devastating wave 3 down will begin.
I am closely monitoring this share for PRO SHARES members who hold short positions.
As advertised, the dollar has sharply turned
As you know, I have been carefully watching for signs of a turn down – and I was rewarded last week with a beaut. Here is the USD/CNH, which is one of my prime currency markets.
The offshore Chinese Yuan (CNH) is heavily manipulated by the Chinese central bank, but still adheres to excellent wave patterns. That is because the market is always bigger than any central bank – even in ‘communist’ China. And because of the intense market interest and speculation in the yuan – with widespread MSM coverage – I consider it an excellent trading vehicle – and so it is proving with the sharp decline starting Thursday.
I noted the budding ending diagonal pattern forming the previous week and that is usually a very reliable reversal signal. And the market was in a final fifth wave. Setting sell orders just under the wedge was the best policy (many of the big moves occur overnight UK time, so you did not want to miss this one!).
My best guess is shown with much lower potential. It seems the US is succeeding in convincing the Chinese to ease up on the ‘loosening’ in response to the Trump Tariffs. One of the most sensitive markets to the Tariff Wars is soybeans and that market just shot up last week in tandem with the yuan. So does this suggest at least a truce, if not a peace treaty? Hmm.
And as I forecast, EUR and especially GBP staged impressive rallies last week.
My medium range take is that the dollar is retreating off the extreme bullish DSI 96% readings, but when the correction is over, it will stage another rally. My aim is to pinpoint that turn for VIP Traders Club members.
We have woken up and are smelling the Coffee!
Yes, a few weeks ago, I noted that coffee prices had fallen into major long term support at the $1 area and I started looking for a low risk entry to take advantage of a reversal I believed was dead ahead. And I found it for VIP Traders Club members at the 99 cent level (now trading at $1.24). We are sitting on very large gains – but there is more to come! Here is the weekly
Not only is there a massively bullish momentum divergence, but hedge funds have been running at over 2:1 short as they pressed the short side off the highs and into the hugely oversold sub-$1 zone. Naturally, with Chinese coffee consumption rocketing and no signs of our own Western love affair waning, any disruption to supply (disease in West Africa or Brazil?) would likely send prices zooming – and that is precisely what we are seeing with the 24% advance.
Not only did I find a terrific opportunity in coffee (and sugar and cocoa), I have found one other market that promises rich rewards. Take a Free Trial to my VIP Traders Club to discover what that market is.
