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- Apple stock has fallen on hard times of late and is in position to complete a long-term bearish reversal pattern on its monthly chart.
- Bitcoin is Bitcoin. Today is the toast of the town. Tomorrow it could simply be toast. Granted toast nobody can see, feel, touch, or anything else.
- Cocoa remains hot, though a change in weather pattern could deflate this historic supply-driven rally like a soufflé.
If you’ve been paying attention to global investments, and if you are reading this on Barchart I assume you have, you know there are three markets dominating nearly every discussion: Apple, Bitcoin, and Cocoa. In other words, the ABCs of today’s markets are as easy 1 2 3, and so on. I’ve written about each of these markets in the past, so as we take a look at where we are today we’ll also circle back to my previous takes. That should be fun. The bottom line is something we have all learned about markets: They change over time. Sometimes.
Let’s start with Apple (AAPL). Nearly two years ago I wrote a piece asking if Apple had become the new safe-haven global currency. At the time, Russia’s latest invasion of its neighbor and sovereign country Ukraine was still relatively new, and the hot topic of the day was the debate over a global safe-haven currency. Russia, and its handler China, didn’t want global transactions being based on the US dollar, opening the door to any and all possibilities. One of them I tossed out was Apple, given the reach of the company’s products from one corner of the globe to the other[i].
However, since posting a high monthly close of $196.45 at the end of July 2023, Apple has come under increased pressure. After falling to a low monthly close of $170.27 at the end of October 2023, the stock rallied back to a high monthly settlement of $192.53 as 2023 came to an end. But the stock could go no further, and now in early March it is poised to fall below last October’s low close. What has taken the bloom off this “some kinda fruit company” (according to Forrest, Forrest Gump)? Besides making headlines nearly every day for different lawsuits filed against it, Apple has simply fallen behind competitors in the world of Artificial Intelligence (AI), according to one investment fund manager I talked to. Money now flows out of the once Apple of investors’ eyes into Nvidia, the latter on course to set a new all-time high monthly close beyond February’s mark of $791.12.
And then there’s Bitcoin (BTCUSD). In June 2022 I compared investments in Bitcoin and natural gas, the famed Widow Maker of the commodity complex, wondering which was scarier. The pro-Bitcoin crowd is growing louder, yelling about how this unbacked and undefined measure of worth is the wave of the future. Someday, so the argument goes, it WILL not only be the global currency, but the standard of value used around the world. Now, if only anyone could actually explain how it works. Oh, that’s right, it doesn’t matter these days. What I also find interesting is that many of those squawking about no end in sight for Bitcoin, already priced beyond $65,000 (US dollars), are the same ones saying global stock markets are a bubble ready to pop.
Has Bitcoin replaced gold as the global standard of value? That seems to be the argument of the day. I still come down on the side of gold, but I’m old, and the discussion seems more and more to be had over a generational divide. For now, I continue to agree with the late Charlie Munger who famously said about Bitcoin, “It’s like somebody else trading turds and you decide I can’t be left out…I don’t welcome a currency that useful to kidnappers and extortionists and so forth”. I’ve seen the question asked: Which would I rather buy now and have to still own 10 years down the road? Gold will have value. History has taught us that. We don’t know what that will be, but it will have value. Bitcoin could be at $600,000 (per unit? Who knows?), $0, or anywhere in between. That’s the risk when trading cryptocurrencies unbacked by anything meaningful. Something new is bound to come along.
Cocoa (CCH24) has captivated the commodity complex since breaking out if the long-term sideways trend on its continuous monthly close-only chart at the end of April 2023. At the time the high-end of the range was $3,008 (per metric ton), with a low end near $2,250. From a purely technical analysis approach, the bullish breakout projected an upside target near $3,770. As of this morning (Tuesday, March 5) the spot-month futures contract had nearly doubled that target price as it sat near $7,000. As the market was breaking out last year, my piece for Barchart highlighted how cocoa was the latest of a series of explosive markets in the Softs sector. The common thread was adverse weather creating supply shortages at a time when demand was staying strong. The difference between cocoa and moves made by other markets in the sector is its staying power.
Based on cocoa’s forward curve, the situation isn’t expected to change any time soon. The market continues to show a strong inverse (backwardation) meaning nearby contracts are higher priced than deferred issues. This tells us commercial interests are pushing prices up front in an attempt to source supplies to meet demand. A look at the market’s quote screen shows futures spreads are inverted as far out as September 2025, at least. Reportedly, roughly three-fourths of the world’s cocoa is produced in West Africa, a part of the world where the effects of El Nino have shown no decline, meaning continued hot and dry conditions reducing cocoa production. This again puts the spotlight on the idea most production commodities are weather dervivatives at heart, another subject I’ve talked about at length.
Now comes the big question: If I’m a long-term investor, which one of these markets do I buy? A) Apple B) Bitcoin or C) Cocoa. First, I’m not making a recommendation. Feel free to reread that sentence as many times as it takes to sink in. I AM NOT MAKING A RECOMMENDATION. Now that we are on the same page, from an analytical point of view, there is something intriguing about cocoa’s forward curve. The May contract is priced near $6,420, and if we believe in the idea of an Up Escalator Simulator[ii] we would expect May to challenge the high set by the expiring March contract. The risk is substantial: Who is willing to buy cocoa near $7,000? But as long as the forward curve is inverted (backwardated), the market could continue to draw investment money.
[i] I always found this saying interesting given a globe, by definition, is a spherical model of the Earth. Sorry flat-earthers.
[ii] An Up Escalator Simulator means the next deferred contract or spread should follow the path of the contract or spread before it. In this case, moving up or higher.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
