Futures

Monthly Edited by Senior Analyst

Mark A. Schimmel

Elliott Wave International

P.O. Box 1618, Gainesville, GA 30503
770-536-0309; 800-336-1618; fax 770-536-2514
www.elliottwave.com
Junctures
© January 2001 issue
(data through January 18)

Monthly Futures Junctures (MFJ) is designed to identify a selection of markets with the clearest wave patterns and most
immediate profit potential. Mark A. Schimmel, EWI’s Commodities Analyst, combs through all the futures charts and presents
you with the top opportunities that he expects to develop over the coming 4-6 weeks.

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PERSPECTIVE
CME PORK BELLIES
Pork Bellies are
setting up for a major 110
drop to new lows. On 105
the daily continuation chart, prices 101.10 PORK BELLIES
100
are about to test the 71.40 peak. (Daily Continuation)
Once above this peak, prices 95
(2)
would complete wave C of a 90
larger correction from 57.87.
85
Then, get out of the way as prices
plunge to new lows. Once at new 80 (1)
(4)
lows, Bellies would complete 75
8
another pattern, an impulse wave 71.40
70 A
from 101.10. The Wave Principle 6
65
suggests that after an impulse
9
wave completes, prices maneuver 60
7
in the biggest correction since the 55 Data Courtesy CQG (3) B
beginning of the first wave in the © January 2001 Elliott Wave International (5)?
50
impulse. Many times prices seek 4/3/00 6/14/00 8/24/00 11/3/00 1/18/01
out the end of the previous fourth
wave. In this case, that would
carry prices back up to 71.40, the
end of wave (4).
 Futures Junctures —January 19, 2001

Featured Opportunity in
SOFTS
300
LIFFE SUGAR
Sugar staged a pullback that bottomed at the 3
SUGAR WHITE
224.60 low last month. A bullish reversal 280
(Weekly Continuation)
took shape from that low. Look for a rise
above 253.90 that carries toward a test of the 285.20 260
6 (i)
peak.
(ii)
240
The sell-off from 218.50 to 163.60 is part of a larger rally
sequence up from the April 1999 low. This choppy 7
decline counts best as a second wave. Sugar’s pullback 220 1 4?
from the top of wave 3 at 285.20 did not overlap the
218.50 peak (wave 1). Therefore we feel comfortable in
200
labeling this wave 4. Of note: since the 224.60 low, sugar
has traced out two first and second waves. As such, we
have an ideal entry for a ride to new highs above 285.20. 180

160 2
5
Data Courtesy CQG
(5) © January 2001 Elliott Wave International
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INTEREST RATES
108

TREASURY BOND CBOT U.S. 30-YEAR TREASURY BONDS

(March Contract) We recently monitored this market for a top in our short-
107 Hourly term service, Daily Futures Junctures. Bond prices fell
sharply to 104^03 in an undeniably impulsive drop. Then
they bounced to 105^24 in a choppy corrective rise. From
there, we saw an opportunity for another down leg. That
106
b is exactly what we got, as prices plunged to a low of
102^24 before we exited this contract. At this juncture,
we believe that the entire decline from 106^20 is a zigzag
105 that counts best as a fourth wave. If correct, there will be
a bullish reversal that completely retraces this weakness
back to 106^24. Jordan Kotick, EWI Senior Interest Rate
Neckline Analyst, concurs that prices are headed up toward a
104
a challenge of the 106^20 peak.

103

Data Courtesy CQG

c?
© January 2001 Elliott Wave International 4
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 Futures Junctures —January 19, 2001

UNFOLDING WAVES
1900

CSCE COCOA (2)

In late November, we told Reuters COCOA
News Service that Cocoa was coming 1700
(Weekly Continuation)
into a major low. Cocoa obviously 2
heard our call as it ended its entire bear
market from the December 1997 peak at 1766 (basis 1500
weekly) by bottoming at 674. This bottom com- 1
(1)
pleted a highly reliable Elliott Wave pattern called an
“ending diagonal triangle.” The Wave Principle 1300
suggests that once this type of pattern ends, prices
resolve in a swift and sharp manner back to the 4 1168
origin of the pattern, or back to 1058 (basis March).
1100
Currently, prices are yielding a larger rally that has
taken out the wave (4) peak at 929. They are also
within striking distance of the 1058 target. Reuters (4)
2
called us again about Cocoa on January 18. We told 900
4
them “it’s not over yet. I think we will get to our 3
$1058 target, or $1168 on the weekly chart.”
700 51 3
(3) 5?
Data Courtesy CQG
© January 2001 Elliott Wave International
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1100
1058
1050 COCOA
(March Contract)
1000
2 Daily

950

900
4
850 1
(2)

800 (1)
3 (i)
(4)

750
2 (ii)
(3) 4
1
700 3 Data Courtesy CQG 5
5
© January 2001 Elliott Wave International
(5)
(5)
As shown in Elliott Wave Principle
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 Futures Junctures —January 19, 2001

FLASHBACK

1400
CBOT SOYBEANS
Soybeans rallied in three waves from 433½ 3 SOYBEANS
and topped at 514. That top gave way to the (Quarterly Continuation)
current decline. Now, prices are headed 1200
toward a test of important support at 453½. Once the
453½ support is broken, prices should make their way
to the next support coming in at 433½ and the last
barrier in the way of a complete retracement of the 1000
entire three-wave rise from the 401½ support (July 6,
1999). The Wave Principle cites a three-wave move as
corrective and usually subject to a complete
retracement. 800

The quarterly chart shows that Soybeans rallied in a

third wave to a high of 1290 in 1973. All the price 600
action that follows is a complex fourth-wave correc-
tion.

400

Data Courtesy CQG

4?
© January 2001 Elliott Wave International

200
1/5/70 1/2/76 1/4/82 1/4/88 1/3/94 1/3/00

600
(C)
SOYBEANS 5
(Weekly Continuation)
3
550
1
(A) 514 C?
4 A
500
2

450 453½
B
(B)
433½

400

Data Courtesy CQG

© January 2001 Elliott Wave International

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 Futures Junctures —January 19, 2001

CSCE COFFEE COFFEE

Coffee’s long-term rise from 48.10 to
(Monthly Continuation)
318.00 (monthly) should see a com- 350
plete retracement. This rise is three waves, s
Y
vei
Mo (C)
corrective under the Wave Principle. a ve ive 318.00
W c t
300 ree Corre
Th
Thus far, prices have become very oversold in W
falling to a new low of 61.55, basis the monthly (C)
chart. We now expect a corrective rise to work
250
off these conditions. Initial resistance comes in at
69.00 with 75.10 (basis March, not shown) just
above here.
200

Look for prices to reverse and stage a corrective

rally. The 69.00 objective is a previous fourth
wave in the decline from 95.50. The 75.10 150 (C)
(A)
resistance not only represents a sideways consoli- (A)
dation, but also the .382 retracement of the same
decline. The .618 retracement now comes in at 100 (B)
83.00 (basis March). (A)
X (B)
(B)
50
48.10

Data Courtesy CQG

© January 2001 Elliott Wave International
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150
ORANGE JUICE
140
(Weekly Continuation) NYCE ORANGE JUICE
Orange Juice is tracing out wave (E) of
(C) a larger wave : contracting triangle
130
from 65.45. Juice’s objectives come in near the
August 1999 peak of 105.55 and at 107.55. This
120 latter level represents the point that wave (E)
would achieve a .618 relationship with wave (C)
110 (E) in the pattern. The Wave Principle cites this
guideline as a common relationship. Once wave
(E) tops, a larger decline will begin as prices
100 “thrust” lower.

90

80

70

(B) 65.00 (D) 66.15

60
Data Courtesy CQG
© January 2001 Elliott Wave International
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 Futures Junctures —January 19, 2001

Ask SCHIMMEL...
This is a section for those of you that have questions. It is for serious wave students and novices alike. We
also welcome your views and comments and would like to encourage you to e-mail us anytime. E-mail:
marks@elliottwave.com or give me a call at (800)336-1618 Ext. 3003.

Q: Learning the Wave Principle involves “pattern recognition.” Do the textbook examples really reflect price
moves in the actual markets?
A: Indeed they do. In fact, it’s only by studying the real markets that you see the same price moves unfold again and
again. These are the patterns that make it into the textbooks.

Q: Can you point to any recent examples?

A: Right in this issue of Futures Junctures. Go to page three and note the daily chart of cocoa. The inset is an
illustration of an ending diagonal triangle, taken from Frost & Prechter’s Elliott Wave Principle. The similarity speaks
for itself. This is why we were able to forecast a major low in cocoa, and say that an explosive move higher should
follow. Diagonal triangles produce one of the strongest moves of any Elliott pattern. We saw this pattern developing
and had an excellent way to know what prices would do next.

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The Elliott Wave Principle is a detailed description of how markets behave. The description reveals that mass investor psychology swings from pessimism to optimism and back in a
natural sequence, creating specific patterns in price movement. Each pattern has implications regarding the position of the market within its overall progression, past, present and future.
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