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Commodity Spotlight: How High Will Cocoa Prices Fly?
For cocoa bulls, June 2008 signifies the real "Summer of Love." At the time, cocoa prices were heating up to their highest level in nearly three decades. And, according to the usual pros, the fundamental backdrop for the sweet soft had more bullish prospects than the Plaza de Toros. To wit:
- “The potential of a weak harvest” + “A possible supply squeeze in the 2008/09 Ivory Coast crop report” = Expectations for the “third global cocoa deficit in a row.” (June 18 Reuters)
- Outbreak of vascular-streak dieback in Indonesia’s cocoa crop (the world’s third largest grower) = a 7% decline in output. (June 17)
- “Strong global demand for chocolate in China and Eastern Europe.” (June 18 AP)
- A lackluster U.S. dollar, which causes “soft commodities to gravitate to higher levels.” (June 18 Reuters)
By all mainstream accounts, cocoa prices had hit the virtual bulls eye. “We haven’t been at these nosebleed prices in years,” began one popular news source. “Especially with the fundamental news coming out. That’s going to really light the fire under this… Prices are going to go to the moon.” (June 18 International Herald Tribune)
Yet -- from its June peak, cocoa prices went from love fest – to – lose fest: The market went on to endure four-month, 40%-plus sell-off to fresh contract lows.
Flash ahead to today: Despite the complete and utter FAILURE of "fundamentals" to prepare investors for the precipitous plunge in cocoa prices last summer – the mainstream experts continue to look at external factors to provide direction.
See: "Cocoa Awaits Cue… The charts are congested, and it's likely an outside influence such as news from cocoa growing countries that will push futures out of consolidation mode." (Jan. 8 Futuresource.com)
Let this be a lesson: NO outside event can alter the long-term path of the INTERNAL Elliott Wave pattern underway in Cocoa's price chart. And, for Elliott Wave International's chief commodity expert and Daily Futures Junctures editor Jeffrey Kennedy, the time to head the "cue" of the wave structure in cocoa is RIGHT NOW.
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