Catching a Falling Knife in the Softs

While energy, uranium, and even parts of the grains complex have been quietly working higher, there’s one corner of the commodity market that’s been an absolute train wreck: the softs.

Since peaking in early 2025, our Gold Rush Soft Commodity Index, an equal-weight basket of Cotton, Coffee, Cocoa, and Sugar, has completely unraveled. 

After a powerful multi-year advance that carried price all the way back to retest the 2011 highs, the group rolled over hard. 

What followed has been nearly a vertical move lower.

From peak to trough, the index has cratered by almost 40% and is now trading at the lowest levels since 2023.

Technically, the damage is clear. That retest of the 2011 peak marked a major inflection point. 

The failed breakout attempt turned into a decisive rollover, and momentum accelerated to the downside. 

The primary trend is down, and the structure reflects that.

But commodities, especially the softs, don’t decline in an orderly fashion. 

They unwind violently. 

They overshoot. 

They stretch to extremes.

And when they get stretched far enough, they tend to mean-revert just as aggressively.

So while we’re not arguing that soft commodities are entering a new secular bull market, we do think this group has reached a level where a tactical bounce is worth stalking. 

Within this beaten-down basket, Coffee futures stand out as the most compelling setup.

Starting with the weekly chart, Coffee carved out a textbook double-top formation in 2025. Now the black bean is flirting with a major breakdown as it tests a key level of interest.

That level comes in around 275.

First, it represents the volume-weighted average price anchored to the 2023 low, effectively the average cost basis of the entire advance off that bottom. That’s a logical zone for longer-term participants to defend. 

Second, it lines up almost perfectly with the July 2025 low, adding horizontal support confluence to the setup.

In other words, this is not just “some” level. It’s a structurally critical one.

As the price retests that 275 support zone, the 14-day RSI is carving out a textbook bullish momentum divergence. 

In other words, price has retested its lows, but momentum has made a higher low. 

That’s classic downside exhaustion. It’s a pattern we frequently see at key turning points, especially after sharp selloffs.

Momentum is no longer confirming price weakness.

When you combine a well-defined structural support level with a bullish divergence in momentum, you often get a sharp mean-reversion rally. 

So, here's how we want to trade it.

We want to own Coffee futures above 275, with a target of 350 over the coming 2-4 months,

Again, this is not about calling the end of the broader downtrend in soft commodities. 

The bigger-picture structure remains damaged. 

But after a nearly 40% collapse in the Gold Rush Soft Commodity Index, the risk-to-reward is heavily skewed in our favor down here.

What are you seeing in commodities? Let us know what you think. We love hearing from you!

Commitment of Traders Highlights

• Softs - Commercial hedgers trimmed 181 contracts from their net-short Coffee position. The bulls want to see the smart money resume shorting the commodity.
• Energy- Commercials set fresh multi-year extreme net-long positions in Brent Crude Oil & Natural Gas. In other words, the smart money is aggressively betting on higher energy prices.
• Treasury Bonds - Commercial hedgers added more than 35,000 contracts to their largest net-short U.S. 30-Year position in years. This suggests higher yields are coming for the long end of the curve.

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