The Torrid Tropicals are hot, hot, hot!

Question: Do you avoid trading Sugar, Cocoa and Coffee? Is that because you ‘do not understand them’ or have no interest? Another question: If you make a good win in the market does it matter to you which market you traded? Because if it does, then you are more a gambler than a true speculator. A speculator will seek out opportunities in any qualified market no matter its name.

A racetrack gambler/punter will align themselves to their selection of named horse and jockey and put their money on that usually with little in the way of sound analysis – and emotionally cheer their horse on during the race! Betting with no sound strategy is pure gambling – and that is what most stock and spread better traders do I’m afraid.

A speculator will regularly review a range of markets and close in on those few that appear to offer high reward/low risk opportunities at the time. That could be the Dow, the Dollar, Carbon Emissions – or Sugar, Coffee and Cocoa!

So, with this in mind, ask yourself: are you a gambler or a speculator? If the latter, you will take a serious look at any qualified financial market which you can review using sound proven principles, such as my Tramline methods (there are others!)

A speculator will look to build wealth over time only in markets he/she judges to be ripe for exploitation for profit using his/her analytical methods. He/she will avoid the setups that do not analyse well.

With this in mind, I issued my blog Sugar is getting sweeter on April 8 and this what I wrote then:

My VIP Traders Club have been swing trading Sugar this year and prices have been zooming northwards as traders are realising that supplies are likely to be tight this year. Last week it reached highs last seen in 2016. That is notable.

If this were a tech share, this news would be all over the MSM with breathless headlines. But I have searched and failed to spot any mention of sugar almost anywhere.

This is no off-the-wall commodity such as Carbon Emissions. After all, everyone on the planet consumes this commodity (avg annual per person consumption is over 20 kg) but very few trade it. Pity (for them).

Many would say they know nothing about trading it or the economics of it. They are more comfortable with an obscure AI start-up I guess (take a look at C3.ai Inc).

Because this commodity attracts very little attention outside of the trade, most traders have missed this exceptional action.

Here is the long term chart I posted in April:

It appeared the market was likely starting a major third wave up. As we know, third waves are usually long and strong and take few prisoners. Thus I anticipated a very strong bull phase with few major set-backs.

So what did we see?

After that blog was posted, the market kept advancing to near the 27 cent level in late April – this was an important Fib 62% retrace of the entire decline off the historic 2011 high of 36 cents. And that was my main target I established when starting the campaign – and an obvious place to take profits.

I knew the market would then enter a more two-way phase and trading would be a lot more difficult but expected a corrective Elliott wave three down period that would confirm the ongoing bull market. And in mid-May I identified a shorting opportunity that if successful would trace out the ‘c’ Elliott wave down of the three down.

And that is what occurred and with grateful thanks, we took profits on those shorts last week and reversed to long just prior to the Thursday surge. We now hold long positions protected by a stop placed at Break Even for a no-loss trade.

And Cocoa is bubbling

In that same April 8 blog, I posted this chart of Cocoa

This is what I wrote in April:

It has carved out a very impressive 12-year old wedge and one of the features of a wedge is that when the market decides to break out, the move is usually very powerful – and the older the wedge, the stronger and longer the break. My first major target is the ‘b’ wave high at $3500.

Note the large swings from the highs to lows that offer great profit potential for serious traders using a professional swing trading strategy.

So this bullish outlook for cocoa puts it on a par with my sugar forecast – much much higher. So after years in the doldrums, what is going on with the tropical commodities?

I was soon to get my answer – all three were on the path in their strong bull trends. Here is the updated Cocoa chart

And we are seeing the very powerful move I forecast in my April blog with eight consecutive monthly up closes – a very unusual sequence. And testament to the power of basic chart reading identifying the 12-year wedge.

Coffee has been in a similar bull phase – so what is going on with the Tropical ags? They are all separate commodities grown in different parts of the world. They have different outlooks for their next crop seasons and existing stockpiles – why should they advance together?

Is it because markets expect the coming El Nino weather event will be a very serious hazard to all crops in the tropics (and likely elsewhere)? In the past few days, weather observers have noted the unusually warm body of water in the Pacific moving towards South America that is the prelude to previous El Nino waves of destruction that have hit huge areas of land. And this one seems to be a very strong event that will adversely affect weather later in the year – at the height of crop growth and harvests of our markets.

Last year, sugar production was the lowest for years which put upward pressure on prices and the higher cane production outlook for next season will be in jeopardy if this El Nino smashes production later in the year.

And of such uncertainty are great bull markets made. With any adverse effects from El Nino months away, there is plenty of room for prices to escalate this year. Hmm.

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JOIN US ON OUR NEXT TRADING JOURNEY

I am preparing VIP Traders Club members for another major foray into the Dollar, T-Bond and Stock Index opportunities. I am expecting huge moves this summer! And what about the ag commodities? Wheat, Corn and Soybeans have been beaten down to a pulp as the trade is forecasting record high crops this season – provided the weather co-operates. But we are taking the opposite view.

But a strong El Nino is also forecast and this will have a massive impact on prices. I am preparing members for strong recoveries. Already we are seeing that in the Tropical ags.

And membership fees are now reduced! Now traders on non-pro spread bet margins can take full advantage.

Take your two-week Free Trial here.

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Meanwhile what are stocks doing?

While the action in commodities is hot, stocks have cooled considerably – except for the AI-themed issues. My litmus test index – the Russell 2000 index of small US caps – did move up last week but has hit a major resistance level

The RSI (lower oscillator) has just reached the ‘overbought’ level where previous tops were made. And at the Fib 62% retrace level. This would be a great place to reverse from kissing my trendline – if the trading gods comply!

Remember, this index is the most highly sensitive to the state of trends in the US economy – and signs are not good. Over in China, problems abound from the ongoing property disaster to weakening exports (mainly to USA and Europe) to a growing disinflation in producer and consumer prices.

And that trend looks set to migrate to the rest of the world with lags. With interest rates still trending up and US money supply dropping, the outlook is for a weaker US economy – and a weaker Russell 2000.

But over in FOMO land, hopes remain exuberant that AI will transform the world – and make investors rich. Here is one of my litmus tests for Big Tech, Meta Platforms

With the Elliott wave five down/three up pattern to the Fib 62% on hugely overbought RSI, we have a textbook potential reversal opportunity. The rally off the October wave 1 low at $88 to the recent $278 high for a gain of 215% has been simply astonishing – and a reflection of the huge degree of speculative excess in this period.

So with the Nasdaq also at its own Fib 62% retracement on similar measures of overbought, could this be the final flourish of the last vestiges of the Great Asset Bull Market of the last 200 years since the down of the Industrial Revolution?

Incidentally, I have highlighted the above disparate markets are all at major Fib 62% levels. This is not accidental. VIP Traders Club members know this is a very significant level since many important market reversals occur from at or near this Fib level (or the 50% level). And even on the very short term 5-min charts, reaching this level often signals reversals.

If this is the final FOMO frenzy flourish, then the downside will be tsunami-like with great waves of unpayable debt leading to rapidly rising defaults sweeping across the globe as the central banks are once again fighting the last war (on inflation) with higher policy rates. If the disinflation now appearing in China is indeed coming our way (see my May 13 blog Are we facing disinflation – and then deflation?), this will trigger the greatest phase of economic destruction since at least the Great Depression.

Here in the UK, I feel we have reached a tipping point. House prices are starting to fall, interest rates are still rising, and the Net Zero fantasy is in great peril. With the Labour party looking like taking the next General Election, their economic policies loom large in investors’ minds.

And just yesterday, they have significantly rowed back on their extreme ‘green’ investment pledges to pump billions of taxpayers money into hare-brained schemes to invest in unproven technologies to transform the energy sector from fossil to ‘green’.

This party has been even more strident in its promise to go ‘green’ than the Tories and such a sudden row-back now just reflects the impossibility of selling billions in new gilts at huge interest cost into a stagnant economy and have it not result in even higher taxes on the public – and likely higher consumer inflation and job losses.

They have thus read the runes of public opinion where the ‘climate emergency’ comes at or near the bottom of peoples’ concerns. They are much more worried over cost of living and jobs.

Could this be the final flame-out of the hugely destructive political Net Zero ambitions in the harsh light of economic reality? if so, then the current Fib 62% levels may well prove highly significant.