\"Quantcast\"/

Prop Trading Futures

Is The Stock Market Running Out Of Caffeine?

Equity futures are not one my favorite instrument when it comes to trading. Anyway, nobody trading financials should ignore or not analyse the US Markets, at least on a weekly basis. So do I.

So, let’s dive in into today’s topic. A couple of weeks ago I wrote a post about the current status of  the main US averages. As usual I watch markets from a chartist perspective and I avoid to mix opinion with unbiased analysis. So what I did? I showed to you that all main averages have monthly patterns and trends that are still pointing higher from here:

“Look at the Dow Jones Transportation Average ($DJTA) or the Standard and Poor’s ($SPX) charts to see a meaningful breakout from multi-year charts developing in a perfect fashion. And then look also at the Nasdaq 100 ($NDX) that is far below the levels where it was 15 year ago, breaking out from a consolidation lasted a decade.”

Note: for most traders (and also for short term investor) monthly charts should not be used for trade management or for generating signals. They are just useful for spotting possible trends.

Then last week I wrote a post about trends in Coffee and I briefly introduced a trading strategy for it. At that time I thought also to spend some world on the #1 Coffee stock: Starbucks $SBUX.  But I didn’t. I. So today I want to bring up that chart again for you for two reasons.

Firstly because $SBXU is a leader and a good proxy for the stock market. Well, right now Starbucks price action is telling a different story than the major Indexes do.

Let’s take at example $SPY:

Stock market

$SPY is clearly trending higher on multiple time frames.

On the other hand look at the weekly trend in $SBUX. You see how is pointing down? And what is most interesting to me is that there is 18-week Head and Shoulder that may be also forming at this time.

Starbucks Stock

(Note: It is required a strong close below 76.0 to confirm this Head and Shoulder Pattern. Until then it’s nothing but random consolidation, from a technical charting point of view).

So, what does this mean?

Beware bulls. Watch closely for Starbucks after the holidays! It’s running out of Caffeine!

Finally let’s quickly dive into Coffee, the commodity, for a moment. Last week I described a potential reversal pattern in the commodity.

I find interesting that, after multi-month trends for both the row material and the stocks we are at a point where they could eventually reverse their trend at almost the same time. Well, this is not something I  would trade or recommend you to trade. It lacks of any statistical or fundamental background: Starbucks buys longer-term bean contracts and it is largely affected by macro-economic factors much more than Coffee prices.

P.s. Stay tuned because in a few days I’m going to drop a gift to our free subscribers that might be bleeding you dry as we speak. I’m coming soon, but make sure to be in my mailing list for that time.