As we continue a volatile week of trading after the new global variant Omicron was announced, traders wonder how long these trading conditions will last. The moves in the equities the past week look very similar to days we saw in March of 2020 – 500 points lower, 500 points higher give-or-take and repeat. So traders are asking themselves, is this volatility here to stay or will we experience a Santa Claus rally, Friday’s job’s data may provide some direction, at least in the short-term. The cocoa market rallied Thursday, erasing recent loses – following the move in the equities for now.
Demand in cocoa will be a key fundamental to watch. If earnings and demand look positive, cocoa should continue to climb back towards 2600. If this new Omicron variant proves to be a new concern and new restrictions are implemented – fundamentals won’t have control of the market, but outside global factors will be in control.
Trader’s need to also keep an eye on weather patterns in West Africa as the dry season approaches. With the current expectations in the coming weeks, it looks like prices should find support.
For now, traders should take a wait and see approach in the coming days as more news is likely to break on the variant, but solid answers won’t be available till year end according to health officials and vaccine companies.