(KC) New Coffee Lows Reaffirm Major Bear, Define New S-T Risk Parameter

Technicals, March 12, 2012; 7:30am

By virtue of overnight's break below Thur's 185.10 low detailed in the 240-min chart below, the market has defined Thur's 192.00 high as the latest corrective high and absolute tightest risk parameter it now is minimally required to recoup to confirm a bullish divergence in short-term momentum. Such a momentum failure is needed to stem the clear and present downtrend in favor of an interim correction. And in lieu of such a more objectively defined low, the downtrend remains intact ahead of further and possibly accelerated losses straight away.

The daily log scale chart below shows not only the simple downtrend pattern of lower lows and lower highs, but also the accelerated nature of the bear over the first 2-1/2-months of this year. Inferring an "extended" 3^rd-Wave down, it could take weeks or even months to slow down this bear enough to expose a base/reversal threat. And while the market's downside potential remains indeterminable and potentially steep, the risk levels the market is required to recoup to defer or threaten a bearish policy are clear at 192.00 (tight) and 28-Feb's 207.35 high.

As we've been discussing for months, the scope of the decline from last May's 308.90 high shown in the monthly log chart below is sufficient to threaten the secular bull trend that's been intact since Dec 2001. This does not mean we're forecasting a return to 2001 prices. But it does mean that this developing bear trend has major downside potential that could last quarters or even years, and that until or unless the market arrests this slide with strength above levels like 192.00 and 207.35, further and possibly steep losses should not surprise.

The weekly log chart above shows a recent 35% reading in the Bullish Consensus measure of market sentiment (www.marketvane.net). This is the lowest, most pessimistic reading in three years and certainly the type of level that could accompanied a broader base/reversal threat. But as we do not consider sentiment an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to threaten the major trend (i.e. above 207.35), it will not inhibit further and possibly steep losses.

As for prospective support candidates, the monthly log chart below shows Feb'08's 171.90-area of former major resistance that now may provide support while the 50% and 61.8% retraces of Dec'08 - May'11's 102.15 - 308.90 rally bracket this level at 177.63 and 155.89, respectively. Also, 143.48 is the 38.2% retrace of the secular bull from Dec'01's 41.50 low to last year's high. But RELYING on this range to hold would be a gross mistake in the absence of a confirmed bullish divergence in momentum.

As always, the only thing that stops lower prices is....HIGHER prices; specifically, a confirmed bullish divergence in momentum above a recent corrective high like 192.00 and especially 207.35. When the market confirms such strength, we'll have solid evidence that the bear is losing steam or is over. Until such strength is shown, there is no technical factor in place at the moment to suggest that this market is headed anywhere but down. These issues considered, a full bearish policy and exposure remain advised with strength above 192.00 required to defer this call in favor of an interim corrective pop, and strength above 207.35 required to threaten the major bear sufficiently to warrant moving to a neutral/sideline position. In lieu of such strength, further and possibly steep losses remain expected.