Cocoa big drop 15:30 yesterday
- Thread starter benwm
- Start date
Fat Finger
That's what normally happens when prices move too far away from the TRUE supply & demand situation.
In this case - Cocoa there is plenty of supply available, the move up is simply fear of an ARTIFICIAL tight supply situation because of political instability in Ivory Coast. There is plenty of beans out there heck even Ghana is stepping up.
If prices reflected the TRUE supply & demand situation Cocoa should be in a bear market. But then markets don't give a rats ass about that.
Thats why its difficult in my opinion to marry fundamentals with trading decesions based on price as in the moment. At some point in the future prices will collapse to line up with fundamentals.
That's what normally happens when prices move too far away from the TRUE supply & demand situation.
In this case - Cocoa there is plenty of supply available, the move up is simply fear of an ARTIFICIAL tight supply situation because of political instability in Ivory Coast. There is plenty of beans out there heck even Ghana is stepping up.
If prices reflected the TRUE supply & demand situation Cocoa should be in a bear market. But then markets don't give a rats ass about that.
Thats why its difficult in my opinion to marry fundamentals with trading decesions based on price as in the moment. At some point in the future prices will collapse to line up with fundamentals.
Il Principe
Guest
You marry fundamentals with spreads. There may be supply out there, but if it's not quality, front months will be bid higher hoping fresh-off-the-boat cocoa is better or "blendable". If CdI is falling apart & ships aren't sailing out of the largest producer, then the premium for higher quality Ghana is probably thru the roof, not to mention fuel surcharges from >$100 oil. But if you trade flat price, lotsa luck. It's like an electric yo-yo.
