Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
The period began as the market was correcting the initial advance towards 1.35. Very solid support found just below 1.30 and the market again began to climb. No real surprises in this report. The systems continue to buy and that is what is leading the way day to day. The high for the period was made on the final day of the period, as the market gained just over 7 cents for the period. We have mentioned the idea that the commercials would be willing sellers on any advance higher. That has been the case. Rather than putting a lid on the upside, they have just slowed the pace of the move. For the period, the commercial sector sold just over 9,000 contracts. Of that, the shorts added 7,485 new sales. Commercial longs liquidated -1,588. BY looking at the "true" commercial short addition to the report, we see the position continues to trend higher from week to to week.
On the other side, the large fund/spec sector was again in buy mode. Mostly as short covering by the fund shorts, where another 9,687 contracts were bought back. The gross short position now -51,466 compared to the record short of -83,661 on 7/7/17. At the same time the net short position now stands at -14,735 compared to the approximate -41K position a few weeks back.
In addition we see large traders liquidating longs as they take advantage of the price spike. Small traders (as per the supplemental) were net sellers , mostly in the form of shorts adding new sales. Indexes were less active, though both sides trimmed the positions added over the previous 2 weeks. The open interest is down noticeably as the roll as begun. We see a decline in spreads across the board . Expect that activity to pick up further on Monday as the Goldman roll kicks off. A total of ,3739 EFP/EFS were posted and expect that number to begin to climb as well in the coming weeks.
What else should we expect?? I think it is clear as mentioned by Tango in the daily OI update that the pattern will likely continue. Systems will continue to buy as long as the market remains at these levels. The question becomes, do the systems begin buying long? We saw the market advance a little over 2 cents for the current COT period, though mostly a boring a market. September options will expire this coming Friday and the roll as mentioned will pick up its pace. This combination along with summer trading keeps my expectations for choppy market conditions. I think in the coming weeks as we get a better idea of the yields being produced and more clarity on the harvest we may see the fundamentals gain a better grip on the market , particularly the December contract. Worth noting, the market has been shrugging off (for now anyway) bearish divergence across various time frames. I would not dismiss this as even in markets as steady as the one we have, corrections will come and complacency by longs is often part of the equation. Excellent comments by Wheatsoy this week and as always great work by Nagual with his daily fork. Keep in mind he is looking for a cycle high between August 2-8 so we are deep within that time frame. I think Nagual can comment better but I would not be at all surprised to see a right translation of this cycle. Tango as always thank you for setting the market tone each morning. Glad to see JK back and contributing. Orb and MAJA also offering solid insight out of Brazil. ALF and Phil as always thank you as well.