Market speculations of any kind have a tendency to overshoot. Too much optimistic speculation gave us Nasdaq 5000 back in March of 2000, as well as pundits' calls for the Dow to hit 36,000. Recently, a surfeit of pessimism has allowed us to witness the most ferocious bear market in modern history, in what might later be shown to be overkill.

Overshoots happen in all markets, so let's put the recent, powerful surge and potential excess optimism in September

orange juice

(OJU2:NYBOT) into perspective. Juice has been rallying on anticipation that private forecasts of the Florida crop due out next month will only be about 230 million boxes, about 5% below the recent harvest. Factored into this analysis is the belief that trees in the U.S. citrus belt will produce less fruit after several years of above-normal harvests as part of a natural, cyclical fluctuation in output.

What we currently have in the juice market, then, is speculation over estimates, or speculation on speculation.

Let's put speculation aside for a moment, though, and look at what we do know. The USDA said last Monday that there is plenty of new-fruit growth, and that crops are making very good progress amid normal weather and moisture conditions. So it seems we are on track for another good year, and we still have supply overhang from last year to mitigate a cyclical decline in the harvest. Also, homegrown orange production is only part of the equation. Brazil is the world's largest juice producer and exports the bulk of its production to the U.S.

The current situation is an ideal one for contrarians interested in fading the parabolic rally of the past three weeks.

The obvious place to short the front-month September orange juice contract is at the double top, as depicted in the following weekly chart. A failure off the double top has 96.50 as its first downside target.

Index Futures

The most noteworthy feature to me about Wednesday's impressive rally in stock index futures was where the bottom occurred. I have recently been pointing out potential levels to fade or trade against in what had become, in my view,

unsustainable downside momentum.

The S&P 500 cash index traded through those levels but halted at the next most obvious level: the 50% retracement of the 1552.87 high at 776.43. The cash index hit a low at 775.58, less than 1.00 point from the 50% retracement of the zero-to-all-time-high peak. Although there is no reason why we can't take out Tuesday's low -- anything is possible in the markets -- the 50% level should provide formidable support for the S&Ps and other stock index futures.

Copper

September

copper

(HGU2:COMEX) has been selling off along with equities since I suggested back on July 2

that the industrial metal could reverse at resistance. The thinking has been that the negative wealth effect from declining stock values will lead to slower-than-expected economic growth and reduced demand for copper's industrial uses.

But Tuesday, copper left a tail that

closed

above a Fib cluster indicated on the following chart, in cahoots with the rally in equities. Importantly, the cluster coincided with the 200%

price projection of the first pulse down, marked C-D on the chart (the 200% projection is the wave C-D, which is exactly twice the move of A-B). Support levels Thursday for copper are at 68.50 and 67.90. Upside targets reside at 71.60 and 72.40. Note that the bigger picture trend in copper is down and that this is a countertrend move until we take out the 80.00 high.

Closing The Window

Finally, in October

sugar

(SBV2:NYBOT), Wednesday's gap lower closed the window left on the chart July 19. Wednesday's punch lower was the biggest down move of the year and suggests an intermediate-term top is in place.

Marc Dupee is an independent trader and co-author of the book

The Best: Conversations With Top Traders. Dupee was formerly markets analyst and futures editor for TradingMarkets Financial Group. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback to

Marc Dupee.

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