Daily Analysis

December Cocoa

Technical factors as well as friendly fundamentals ignited a huge surge to the upside in December Cocoa on Wednesday.

Technically, December Cocoa has been trying to establish support inside of a retracement zone at 2731 to 2666.  The inability to break yesterday's low at 2698 when it was tested early this morning triggered a short-covering rally which tripped buy stops and encouraged short-covering all the way up to the recent top at 2999.

Upside momentum now indicates that this market has the power to breakout above 2999 and perhaps challenge the July 2008 top at 3217.  Speculation that El Nino weather conditions in West Africa may cause production issues has been supportive for this market.  In addition, fresh money flowing into commodity funds is helping to provide unexpected demand.