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
© December 2000 issue
(data through December 14)

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.

ANNOUNCEMENTS
Bob Prechter will be speaking at The Atlanta Investment Conference April 19-21 in Clayton, Georgia. He will join a line
up of more than 20 internationally renowned speakers. The regular cost for attendance is $459, but if you order tickets before
January 30, you can save more than 10%. Contact atlinvestconf@mindspring.com or call 800-864-0014 or 770-859-9937
for information on how to attend.
Why limit yourself to commodity futures? Today’s price volatility presents big opportunities in stock index futures. Now
is the perfect time to check out EWI’s Financial Forecast Service. See enclosed insert for details.

PERSPECTIVE
CSCE COCOA
We have been 1058 1050

monitoring Cocoa COCOA

2
for several months. At first, we (March Contract) 1000
thought prices had formed a Daily
contracting triangle. Once 950
prices fell in our supposed
“thrust” it became apparent 900
4
that a contracting triangle was
1
lower confidence. Now, Cocoa 850
is close to ending the entire
bear market from the Decem- 3 800
ber 1997 peak at 1766. This
market has been weak and now 750
might be showing signs of
Alt: 1 flat 2 3 4
bottom searching. Once there is 700
Data Courtesy CQG
a significant low in place, © December 2000 Elliott Wave International
expect a larger rally to carry 650
prices back to the 1058-1168 1/4/00 2/23/00 4/11/00 5/31/00 7/20/00 9/7/00 10/25/00 12/14/00
area.

An “ending diagonal triangle” is taking shape from 1058 (basis March). The fifth and final leg of this pattern from 875
has been falling and is now experiencing “throw over.” “Throw over” is a condition that occurs when prices exceed
the traditional trend line drawn across waves 1 and 3 of the diagonal. Prices appear to be accelerating (in this case
lower) when in reality they are in a final exhaustion move. Once this pattern bottoms, expect a swift and sharp rise
back to the 1058 peak, the origin of the pattern. The next target would be 1168 (basis weekly), a previous fourth
wave.
 Futures Junctures —December 15, 2000

Featured Opportunity in
SOFTS
14

13
CSCE SUGAR SUGAR (5)?
Sugar formed a wave (4) pullback (Weekly Continuation) (3) B 12
Data Courtesy CQG
(weekly chart) that bottomed at © December 2000 Elliott Wave International
1
11

867 within the span of a previous 10

2
fourth wave. The pattern took the shape of A
9
C
an expanded flat. Prices are now bottoming (1) (4)
8

in a second wave and will then head for a 7

test of the 1033 March peak. Then, we 6

would look for a pullback that sets up the 5

462
remainder of the rise toward a new high (2) 4

(weekly chart) to an objective of 1160, the 3

point where wave (5) would equal the 2
distance traveled in wave (1), a common 1/4/99 8/23/99 4/10/00 11/27/00

relationship found in normal five-wave

moves. 11.0

SUGAR
(March Contract)
10.5
Hourly 1
a
10.0
c
e
9.5
d
b
2? 9.0

C 8.5
(4) Data Courtesy CQG
© December 2000 Elliott Wave International

8.0
10/26/00 11/7/00 11/17/00 12/1/00 12/14/00

300
SUGAR WHITE 3 LIFFE SUGAR
(Weekly Continuation) Sugar’s pullback from the
275
Data Courtesy CQG
© December 2000 Elliott Wave International top of wave 3 at 285.20 did
250 not overlap the 218.50
peak (wave 1). Therefore we feel
comfortable in labeling this wave 4.
1 225
4 Now look for wave 5 to rally and
200
eventually exceed 285.20.

175

2
5 150
(5)
125
1/4/99 8/23/99 4/10/00 11/27/00

2
 Futures Junctures —December 15, 2000

CSCE COFFEE
Coffee’s entire rise is
ove
from 48.10 (1992) ve
M
Wa ective
Y 350
to 318.00 is a three- e e r (C)
Thr Cor COFFEE
wave advance, corrective 318.00
W (Monthly Continuation) 300
under the Wave Principle. So,
prices would completely retrace (C)
this rise. Thus far, prices have 250
fallen to a new low of 63.65,
basis the monthly chart. This 200
decline has fallen a bit too far,
too fast, suggesting a corrective (C)
rally to work off very “over- (A) 150
(A)
sold” conditions.
(A) (B) 100
Look for a new low for the X (B)
move before prices reverse and (B) 50
stage a corrective rally. Then, 48.10 Data Courtesy CQG
initial resistance comes in at © December 2000 Elliott Wave International
0
75.10 (basis March). This
1/2/91 1/3/94 1/2/97 1/3/00
objective is a previous fourth
wave in the decline from
95.50. Beyond here, resistance comes in at 76.95. This resistance not only represents a sideways consolidation, but is
also the .382 retracement of the same decline. The .618 retracement comes in at 84.25 (basis March).

150
NYCE ORANGE ORANGE JUICE
JUICE (Weekly Continuation)
140
Orange Juice is now rallying
in wave (E) of a larger wave (C)
: contracting triangle from 65.45 130
(February 8, 1993). Look for juice to
head toward the August 1999 peak of 120
105.55. The objective above this peak
comes in at 107.55. At this point, wave X
(E) would achieve a .618 relationship 110 (E)
with wave (C) in the pattern. Under the
Wave Principle, this is a common 100
relationship.
90

80

70

66.15 (D)
(B)65.00
60
Data Courtesy CQG
© December 2000 Elliott Wave International
50
1/6/97 12/22/97 11/30/98 12/6/99 12/11/00

3
 Futures Junctures —December 15, 2000

UNFOLDING WAVES
CBOT SOYBEANS
The quarterly chart shows that Soybeans rallied in a third wave to a high of 12900 in 1973. All the price
action that follows is a complex fourth-wave correction. This has put Soybeans in a steep decline to the
early August low at 433½. They are now correcting that sharp fall. However, the bounce from 433½ is
only three waves, suggesting another down leg. The weekly chart shows a corrective (A)-(B)-(C) from the 401½
support (July 6, 1999). This suggests that prices will visit this support again.

1400
3 SOYBEANS
(Quarterly Continuation)
1200

1000

800

600

400

4?
Data Courtesy CQG
© December 2000 Elliott Wave International

200
1/5/70 1/2/74 1/3/78 1/4/82 1/2/86 1/2/90 1/3/94 1/2/98

SOYBEANS
(Weekly Continuation) (4) 620

Data Courtesy CQG C

© December 2000 Elliott Wave International
0 580
8
6 540
A
9
500
7
460

B
420

5
(3) 380

340
10/5/98 6/28/99 3/20/00 12/11/00

4
 Futures Junctures —December 15, 2000

FLASHBACK
380
NYFE CRB INDEX
V CRB INDEX Last month we featured the CRB Index on the front page of the letter. We
340
5 (Monthly Continuation) now think that this index presents a very bullish picture. We have the end of
a pattern at 182.67, completing a twenty-year bear market. The pattern also
300 ends very close to the termination point of a previous fourth wave. This is a
(A)
(C) B common relationship under the Wave Principle. The rally that follows is a
(E) bit choppy and bears monitor-
260

3 ing. It could be corrective. 200

Nevertheless, we are giving this
A index the benefit of the doubt as (iii)?
220
SOYBEAN MEAL
(D)
it begins a push toward the high 190
(January Contract)
(B)
of the pattern at 337.60 (No- Daily
4
180

C? vember 1980).
180
140
3 (i)
Data Courtesy CQG
© December 2000 Elliott Wave International 6
100 170
1/3/72 1/1/76 1/1/80 1/3/84 1/4/88 1/2/92 1/2/96 1/3/00

(ii)
7
CBOT SOYBEAN MEAL 160 4
1
Soybean Meal did not complete its five-wave rise from 146.7. Last month,
we thought that a fourth wave contracting triangle was taking shape from
the 174.9 peak. This did not pan out. Instead, it now appears that a fifth 150

wave is extending from the 161.9 level. This rise needs to register a new 2
Data Courtesy CQG

high and then form another smaller degree fourth and fifth wave before it 140
© December 2000 Elliott Wave International

is complete. 7/3/00 8/11/00 9/21/00 10/31/00 12/11/00

90 110
PORK BELLIES
is 105 (Daily Continuation)
80 o ve (C)?
eM e
Data Courtesy CQG
av ctiv 7 100 © December 2000 Elliott Wave International

e W rre
re Co (ii) (2)
70
Th 95

(C) 6
(i)
60
(iv) 90

(A)
85

50
(A) (B)
(iii) (v)
80
(1)
8
40
(X) 75
(B)
70
30
LEAN HOGS
65
(Weekly Continuation)
20 Data Courtesy CQG
© December 2000 Elliott Wave International 60

55
(3)?
10
4/3/00 6/6/00 8/8/00 10/10/00 12/12/00
7/6/98 2/8/99 9/20/99 5/1/00 12/11/00

CME LEAN HOGS and CME PORK BELLIES

We also talked a bit about Lean Hogs. We mentioned that they needed to form a fourth wave that gives way to a new
low for the move (weekly chart). That would then complete a large five-wave bearish reversal. We would then look
for a corrective rally that sets up an even larger decline. This decline should take out major support at 4020. In
addition, Pork Bellies are also working in a fourth wave that we expect to “roll over” and print a new low for the
move. Many times, Bellies follow the hogs, helping us confirm the price behavior.
5
 Futures Junctures —December 15, 2000

Ask SCHIMMEL...
This is a new 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 any-
time. E-mail: marks@elliottwave.com or give me a call at (800)336-1618 Ext. 3003.

Subject: Triangles

Q: I have a question regarding triangles. I am getting a perfect triangle in the spot gold chart while the triangle is
distorted (edges are not converging on a straight line) in the continuous futures chart. On such occasions, which chart
shall I use for wave counts?—MK

A: You can use the chart that counts the best. However, if one chart appears to have a textbook Elliott wave pattern
and the other chart does not, I would caution you about trading that market. Also, I defer to the cash market when
there is a question about a top or a bottom. Many times, the futures contract might look like a three-wave move
ending in a top. However, the cash market would show that the very next upswing went to a new high. This would
underscore a “failure” in the futures contract. So, using the cash contract would help clarify this problem.

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