Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Thanks Tango for wonderful analysis as always. I will add just a couple of comments.
I have alluded to the commercials possibly placing a lid on any significant advance. Hard to say there is currently "a lid" on the market, but as you pointed out we did have an active commercial sector. Both longs liquidating, but to a larger extent there was new selling by the shorts. Still, we closed about a penny off the highs, and 8.50 cents off the low made 3 days prior. Impressive to say the least.
For me the large fund/spec short remains key. We know we often see the systems dictate the early intra-day activity, which IMO trickles over into other sector participation. Again, we see a good decline in the "NET SHORT" position. As you pointed out, in the form of long liquidation and short covering. The short covering to me is important. Disaggregated shows managed money buying back ~9,500 contracts! Just one month ago (6/30 report) we saw the record net short position held by this sector. While this # has been reduced over the last 2 reporting periods, the assumption is there is now room for them to again add new shorts. That is certainly one potential scenario. I would just like to point out that this particular sector is often momentum driven and so long as this market continues to creep higher, they will continue to cover shorts. AS Tango pointed out the managed money longs were happily liquidating, so this is something that would need to change for a more sustainable advance.
One last point. Take note of the activity by the indexes. Longs added +3,014 while shorts added +2,335 new shorts. A modest net change (+679) but they are more active in the market than they have been over recent periods. Will other market dynamics change to bring on a more active investment into commodities, particularly coffee?? I suspect yes, but we will need to see more evidence of such before I can feel safe with that idea. As mentioned throughout the week, there seems to be an underlying supportive element to the pieces of news that have been trickling into the market of late. Sure we will remain to trade with peaks and valleys, as technicals pave the way in the short term. Still, for the first time in several months, I am beginning to, again,have a favorable view of the upside as we approach Q4. Just my take.