From the Desk of Ian Culley @IanCulley
I’m avoiding the US dollar and interest rate chopfest.
That includes interest rate-sensitive commodities like crude, copper, and gold.
So, let’s check in with a commodity group that walks to the beat of its own drum…
The New York City Softs: Cocoa, Coffee, Cotton, and Sugar.
First up, Cocoa.
I’m sure you’ve seen Cocoa’s 45-year base breakout to new all-time highs:
Cocoa futures have been the main attraction, showcasing a face-ripping rally reminiscent of the 1970s.
In the 70s, Cocoa experienced two 400-plus rallies, each spanning approximately two years trough-to-peak (December ‘71 to April ‘74 and June ‘75 to August ‘77).
Cocoa might have another explosive rally in the tank!
For now, it’s bouncing between two critical extension levels:
Bulls are supporting higher prices at roughly 7,200, while bears are capping the next rally at 10,300. Momentum is within a bullish regime, and a parabolic trendline from the 2022 lows remains intact.
We could see another new all-time high this summer.
But I’d like to see price consolidate for at least another year before getting involved. Cocoa could use a healthy consolidation following its 450% markup phase.
Meanwhile, coffee futures are preparing for blast-off:
Coffee is also forming a 45-year base as the monthly MACD prints a bullish crossover.
I’ve been sweet on coffee since last fall, and it was one of the first markets I covered this year.
The futures contract completed a bullish reversal in April and has chopped within a broad range since:
We can update our levels by adding a buy signal on a daily close above 234.
If and when the market fills our orders, you can feed the ducks at the 1977 high of approximately 300 or sit back and let it run.
I prefer the latter approach as the commodity bull run hits its stride.
Cotton futures are another exciting market despite the fresh 52-week lows:
I like taking a swing down here. But I won’t chase.
Instead, I’ll wait for a pitch above the November 2023 and May pivot lows of roughly 75:
If buyers drive price above those former lows, I’ll buy strength with an initial target of 89.
Last but not least, Sugar:
After a six-month decline, sugar futures are attempting to reclaim a critical extension level.
But buyers are running into a potential confluence of resistance at its year-to-date downtrend line and a crucial polarity zone:
A decisive close above 19.95 completes a bullish reversal with an initial target of 25.50.
Remember, we’re navigating a commodity supercycle. Don’t sweat the corrections in Crude or Copper.
When one group becomes noisy (metals and energy), focus on opportunities in other less correlated areas – such as the New York City soft contracts.
Are you prepared to ride coffee and cotton futures to new all-time highs?
–Ian
COT Heatmap Highlights
- Commercials posted their largest net-long position for cotton in three years.
- Commercial net-long positioning for palladium hit a new record.
- Commercial hedgers are bullish Canadian dollars, as they carry their largest long position in three years.
Click here to download the All Star Charts COT Heatmap.
