My mother’s idea of heaven is sitting in bed with a good book, a box of posh chocolates at her side. I know I’m in a small minority, but I really don’t like chocolate. Squeezing around the aisles of my local supermarket this week, the sight of piles and pyramids of eggs, bunnies, carrots and assorted confectionary makes me feel quite sick. The thought of stuffing all this into eager little – and big – mouths over this weekend is, quite frankly, frightening. For one, my waistline really doesn’t need it, and I feel sorry for those battling against obesity faced with such great a temptation.
The trouble is we’ve got used to seeing the ubiquitous but cute Lindt bunny year-round. Assorted Cadbury’s eggs have been available for weeks, as have hot cross buns, and check-outs tend to be stocked with sweets. Mexico and some US cities have tried taxing fizzy drinks, apparently with little success – and tempting some to hit the (beer) bottle as some brands are now cheaper than pop.
Not to be a spoil sport, this week I’m focusing on the charts of the ingredients of these treats. Known in the trade as ‘softs’, they are tropical agricultural commodities – only. The Intercontinental Exchange (ICE) tends to have a stranglehold on their futures contracts, although India and Malaysia have active contracts in the minor markets.
Côte d’Ivoire last year overtook Ghana in West Africa as the biggest producer of cocoa, and, together with Cameroon, Nigeria and Togo, account for two-thirds of global output. The biggest manufacturers are Mars, Mondeléz, Barcel (Mexico), Nestlé, Hershey and Ferrero. The chart shows a perfect rounded bottom formation in 2017 – with gaps both on the way into and out of it – a textbook example of how sometimes technical analysis works extremely well. Prices should now hold above $2,300 per metric tonne, the lowest point of March’s gap. Gaps also suggest markets with strong momentum, so we’ll pencil in a rush towards the $3,350 area which has capped most of the time since 1979. Note: the record high was $5,379 in 1977.
Sugar has been making a sluggish attempt at basing since June, a common problem with bear markets. It’s so slow and boring that trade dries up, processors go out of business and planting gets scotched. However, when these businesses have access to cheap credit, what happens is we end up with ‘zombie’ firms limping along but not dying. Therefore, we expect price action in 2018 to be dominated by repeated basing attempts somewhere between 12¢ and probably no lower than 10¢ per pound.
Arabica coffee’s chart is similar, but a little more dynamic, as evidenced by the hammer candle in late June. Again, we’re witnessing an attempt at forming a base, with plenty of historical lows between $1.2 and $1 per pound. This year’s drift is caused in part by speculation that Brazil might have a bumper crop because irrigation schemes in the north-east of the country opened new planting regions.
Palm oil, the gloop used in many fast-moving consumer goods (FMCG), is traded on Bursa Malaysia, priced as ringgits per metric tonne ($1 = MYR 3.8950). The chart hints at a potential double bottom at 2300 – but then again, maybe not – in which case we’d expect laborious basing at the psychological 2000 area.
