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March coffee futures are in a six-week-old uptrend on the daily bar chart and hit a fresh nine-week high of 136.00 cents on Wednesday. Coffee bulls do have upside near-term technical momentum and are looking for more on the upside in the near term. See, too, that the shorter-term moving averages I follow (9- and 18-day) are in a bullish mode as the 9-day is above the 18-day moving average.

Coffee prices remained confined to a 150 point range on what amounted to an inside day Thursday. Traders processed the meaning of the previous two days, Tuesday reversal and Wednesday sharp gain. I expect funds to be supportive if not encouraged to add to their long positions on Friday... And yes, there is a part of me that is waiting for the other shoe to drop.

After starting out of the gate strong on Wednesday morning (March opened outcry at 1979+25), cocoa prices pulled back to settle unchanged on the day. For this obvious bull I was concerned, especially when looking at the short term picture. I do however continue to hold my long view towards this market and anticipate a favorable push through the psychological barrier of 2000 soon. If that should happen then 2125 would be my next upside target. Another failure at 2000 will cause me to lighten up. A break below 1890 will chase me off the long side.

December corn futures saw a rally during the first half of October that pushed prices well up from what is now strong technical support at the early-October low of $3.35 a bushel. However, prices have backed off just recently and are now right in the middle of a well-defined trading range between $3.35 and strong overhead technical resistance and near the September high, at the $3.90 area. My bias is that December corn will stay within this well-defined trading range until the contract expires. However, the weakening technical picture in the wheat futures market is likely to limit the upside price potential in corn, in the near term.

Cotton prices added another 25 points on the up side Friday, with December closing near its high at 6540. While this closing strength gives rise to a short term low now being in place I do not trust the long side. Why, because of the drop in the Dow.

The OJ market has seen a sharp move higher today and we are reading this as a short squeeze. We could see it go a bit higher but with the 2007 hurricane season ending with no hurricanes in sight. the fear that has kept this market up should begin to come out. Our Proprietary models are also issuing sell signals today as are slow stochastics as you can see in the chart below.

While I’m not ringing a bell and calling for a major top in the coffee market, I think Tuesday’s action looked a lot like the life guards clearing the pool in preparation for adult swim time. Regular readers will note that I called for such an opportunity to get short and sell into expected strength yesterday (nothing like tooting your own horn, but hey even a broken clock is right twice a day). I hope that some of you followed my advice as prices did drop off in NY once 135 was reached in December. Next on the agenda will likely be stop hunting underneath, first at 130.50-130.00, then beneath 128.

Cocoa has seen a long term up trend for all of 2007. In just the last few weeks we have seen a nice pullback in this rally and we are using this pullback to reposition ourselves long this market. Technically we have just gotten a strong buy signal from the Williams %R indicator show in the chart below. The last time this indicator gave a buy signal like we are now seeing the market rallied over 600 points. We are not looking for Cocoa to break out to new highs but rather just test the highs we saw just a few months ago.