I can't count the number of times I've followed mainstream fundamental analysis to its logical conclusion -- only to find a market's prices doing exactly the OPPOSITE of what their supposed to.
Case in point: On December 15, Cocoa prices stole the commodity show after rocketing to their highest level in 32 years. And, according to the usual experts, a "perfect bullish storm" was set to keep the market airborne for quite some time. On this, the following news items from the time set the bullish tone:
- "Cocoa Soars. Prices are propelled by fears that output in the 2009-10 season will lag behind demand for the fourth consecutive year." (Financial Times)
- "The cocoa market has not seen such a prolonged deficit since the 1965-9 shortage. The cocoa sector in Ivory Coast [the world's largest producer] is in structural decline due to years of insufficient husbandry and investment." (Reuters)
Adding to the bullish blizzard of woe -- "Concern that Saharan dust storms" will "jeopardize flowering and seriously damage production"; that "El Nino" will hit supplies in Indonesia and parts of South America; and finally, that "fresh fears of political instability in Ivory Coast" will delay output.
YET -- despite the "squall" of upward support, cocoa prices turned down on December 16 in a powerful selloff to the one-month lows we see today.
On the other hand, EWI's chief commodity analyst and Futures Junctures Service editor Jeffrey Kennedy foresaw Cocoa's downside potential before the tide began to turn. In the December 11 Daily Futures Junctures Weekly Wrap-up, Jeffrey presented the following close-up of Cocoa that showed prices at or near an important peak. (Some Elliott wave labels have been removed for this publication)
Now for the best part: In the December 30 Daily Futures Junctures, Jeffrey revisits the cocoa market to reveal whether the end of the near-term downtrend is in. Also, in the December 2009 Monthly Futures Juncture, Jeffrey introduces a riveting new, long-term wave count for cocoa in the opening "Featured Market" segment. There, Jeffrey writes:
"Cocoa's price chart is flashing like a strobe light." And, he reveals whether the 8% drop from the December 16 high is a mere blip in a larger rise to new highs.