Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
JuanV mentioned in last week’s post that he would not post this week’s COT report so here it goes. Unfortunately I no longer have template from when I once reported on the COT nor do I have Juan’s very illustrative template.
The market closed on 12/19 at 121.75. The systems bought the market on the following day to make a high of 124.05. The OI however was up a mere 557 lots indicating that there was new selling as well as short covering. As we see on the COT, there were several sectors that sold new, namely, commercial, managed money and swap dealers (institutional). This selling took place throughout the remainder of last week to push the market down to 119.50 on 12/22. The commercial selling may very well have been origin, but it could have been option related. Managed money could have been systems but the COT/OI changes seem to say otherwise. There were 93 funds that were involved in selling which represent a variety of strategies. On 12/21 the OI increased by 2,628 lots. The explanation for this is theoretical of course but the pieces seem to fit. The swap dealer category on the COT was up 2,520 lots on the short side. It seems to me that an institutional client arranged an EFS with a trade house to sell 2,500 lots or so. The trade house in turn booked the deal and proceeded to sell what they had purchased. The following Tuesday the market recovered as systems and other shorts bought from longs. The buyers on the COT were mostly commercials as well as managed money.
The unusual activity could be attributed to year end squaring of books but it may be significant that commercials were such good buyers as the market eased. The remainder of the week was continued short covering and long liquidation. Sizable offers were taken on the way up and sizable offers remained. The mood of the market is friendly but it is obvious that there is a lack of trust in it as well. Longs are plentiful and are eager to sell. The lack of trust is also shown by day traders as prices rise by the end of day. Considering behavior of certain markets that have been very steady, tax windfalls that will look for investment opportunities, erratic weather that we’re seeing, I mo, 2018 may prove to be very interesting. Besides any other considerations that may influence the market, the COT presents a bullish setup. Healthy and prosperous 2018 to all.