Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
What a difference two weeks makes ... A period of rolling contracts, expiring options and first notice day lead us to where we now stand. The elephant in the room remains the large fund short position. That is the one thing that has not changed much.
In that two week period, total OI is lower by -39,070. Of that, -17,637 came from this reporting period. As of today we can add another reduction of around 5-6K off the total OI.
This report encompasses the 5 days leading up to FND for Z7. Again, we see the positioning on the commercial side reflecting the needs of the producers/merchants etc. The gross long now at 56,934 is the lowest since September 29th. When we look at the supplemental report , the gross long of 79,972 is 74.38% of the max long position. This is down from 2 weeks ago when the gross long of 93,816 was 95.98% of the max. As a basis of comparison, back on 9/29, the gross long of 78,575 represented 86.71% of the max long. As for the commercial shorts, we again saw the impact of first notice day at work: gross short -63,340 (futures only) and -75,327 (supplemental). As of this report, the supplemental data represents only 42.56% of the max short.
NET position which will be referenced on the commercial side = +4,465. This marks since straight weeks of a NET LONG commercial position via the supplemental report. A big reason for the changes we see in this report are reflected by the 14,702 EFP/EFS for the period. Swaps are now net long 37,859, this the highest since November 2016.
On the non commercial side and a still very short LARGE FUND NET position. We saw the market trade down right into first notice day before we got a bit of relief. During this time, we see managed money continuing to add to the short side. The biggest eye-opener to me is the movement in the options delta from both Longs and Shorts. Nothing else that I see really stands out as anything representing any major shift. There was some activity within the index traders. We see the index traders again very active. Index shorts covering another 4,986 contracts, and have now covered +9,621 over the last 4 reports. This in a market that has basically been in a trading range of 7.5 cents over this time. Smallest gross short held by the index traders since January 20th of this year.
So what should we expect from here?? Well, as noted, the OI has continued to decline, though I think we are very near a bottoming level in terms of open interest. We see the commercial sector has some room to increase activity. Depending on direction will dictate which side of the commercial sector begins to increase such activity. The market showed good support today from 1.28- 1.2770 in a fairly uneventful day. I think where we begin to move relative to this level tomorrow will be key. IF the market cracks and begins to drift below 1.2750, and I think the 1.2800 level becomes potential over head resistance. Similarly , moving north through 1.2850 will leave the 1.2800 level as supportive. I wish I could offer more, but the market is trapped, range-bound for the most part. What dynamic will change in order to get this market moving-- with potential momentum behind it ???
As we go into the final month of the year, we will hear more chatter about potential field survey's, the index re-balance and of course the weather. Until then, the market remains trapped in the "box" that I have referenced many times over the last several weeks. The November 14 high of 13230 almost got us out of this congestion area but the market was unable to hold on to the gains. Awaiting an eventual break-out of this trading range.