Cocoa’s Critical Mass
When you see multiple
gaps, laps and expansion bars
as a market moves off a low, the commodity is talking. Take cocoa
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PowerRating). Since hitting triple bottoms on Sept. 5, the futures
has left four gaps and four expansion bars. That’s been done
in just 13 trading days and represents a critical mass of at least five such
signals within a 21-day period. Collectively, this is a sign of a runaway
market. The important London cocoa market saw a jump in prices as well as
world cocoa rallies, on perceptions of a deficit in supplies of the bean from
the world’s largest producer, Ivory Coast.
Cocoa is on the Momentum-5
and
New 10-Day Highs lists and made good on an Off The Blocks
entry in shortened trading.
A weak yen. It remains one of the few policy options
available to bail out the fledgling Japanese economy. Interest rates were
cut from .25% to .15% a week ago, in coordination with the Fed and ECB. How
much closer to free money can you get? Officials have to do something and
the Japanese do not want a high yen to impede an export-led recovery. So for
the sixth time in just over a week, the Bank of Japan intervened in global
currency markets overnight, selling yen. The BOJ also apparently acted in a
coordinated manner, with the help of other central banks.
After the disappointing impact to their fifth
intervention yesterday (the yen closed down just .0020), the BOJ needed to
show they are serious, or lose credibility. After gapping down, a short
entry was possible when the yen retraced to two ticks above opening levels.
Pit traders often get short (or long) extremes such as the high of the
opening range or at the highs and lows of the session.
The entire yield curve is rallying, sending interest
rates on the short end to their lowest level in 40 years! Five
year notes
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PowerRating) are rallying out of a pullback from high formation
and are up 8/32 at 108 15/32. From the Momentum-5,
10-year notes
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PowerRating) are trading at a contract high.