Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Thank you Nagual.
Reporting period : 3/28/18 through 4/3/2018.
Trading range : 11920-11600 (traded down).
Settlement : 11660 (-2.35).
Total OI change : +4,153.
Yet another week of lower lows, and lower highs . Contracting trading range (3.20 cents vs. last weeks 4.25). Wort noting, our current period is trapped in a very uninspiring 2.40 cent trading range. Common theme, an increasing total open interest that continues to grow. K8 lost -5,635 and expect that to accelerate rapidly now that the market is dominated by the KN roll. KN, on the steady side, as hinted by Tango in recent weeks. We see some of the nearby spreads also showing some strength and will likely do so as long as KN remains firm.
Another week, another record short position by the large funds/specs. Now, both gross and NET shorts are in record territory. The gross short for at least 3 weeks in a row now. We see managed money continues to sell futures. This group now carries a gross short of -101,282. Large and small traders were again adding LONGS as we have seen throughout this market slump. With K8 expiration already coming up next Friday, we gravitated on both sides of the 11750 strike. I believe today the K8 11750 straddle was @ about 18.5%. Not saying much for the state of the market.
On the commercial side, we have had so much talk about origin and whether or not they are selling. This report does little to support the idea that they are actively selling. Looking at both the dis aggregate and the supplemental, we see commercial shorts covering some of those shorts. Commercial longs on the other hand, well they are again setting a record gross position. The downside is very thick with bids all the way out the curve. The U8 1.20 strike has shown a resting bid that has likely lent some support to the market. Likely more of the same from the commercial longs. If we look at the options delta we see those same commercial longs were busy in that regard as well. A combination of 3,387 EFP/EFS and again this number will continue to swell as positions are closed and FND approaches. Swap dealers for the most part had an uneventful period.
So what now?? All the volatility in the macro world has not spread to coffee. A very boring market, with very limited intra-day trading opportunities. Trading this market a long time, I am hard pressed to find a more "dull" and lifeless market. We have heard theories from Koefenista and Admiral about the impact of the options along with the very high OI causing a traffic jam so to speak. I tend to agree with some of those thoughts but I think at some point something has to give. Nagual often tells us about the pressures leading into FND if there are last minute fixations (particularly in a down trending market), so that is something to consider. I am truly amazed by how much the funds continue to pile on the short side. At what point does that begin to ease? We know the system sellers will likely remain and it seems until we see a push through 1.20 or better (12095 if we believe in the unwritten "5 cent idea") . I am trying very hard to have upside hope but for now, I need the market to make me believe. Rallies are short lived and for a long time have been great opportunities on the short side. We have heard ideas that the shorts are hurting the market and the farmer etc. I don't buy into that type of talk and to me the market is the final judge on where price is fairly valued. We now have news that Brazil's Lula defies prison order, creating standoff. As I write , he has not turned himself in though his lawyers may be working on his surrender. Tariff talk and all the noise coming out of Washington has wreaked havoc on some markets - soybeans, equities and for a moment cotton ( to name some). Coffee remains indifferent. We have some positive hints about the NAFTA talks emerging, though its hard to put to much stock in anything we hear these days. Either way, coffee likely remains indifferent. I welcome thoughts/comments on this latest COT and what may finally wake this coffee market. For now, I expect more of the same-- a boring, roll dominated market.
Good trading to all.