Coffee Traders' Forum - A Discussion about Coffee Futures Trading
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Latest COT report.
Reporting period : 4/25/18 through 5/2/2018.
Trading range : 12045-12525 (traded up).
Settlement : 12480 (+4.35).
Total OI change : -2,889
So for the 2nd straight week, we see a COT period that shows gains of more than 4 cents. Also for the 2nd straight report, we have prices trading higher throughout the period. Over these 2 periods, we have total OI declining by -15,519. The obvious, is short covering by the large fund/specs. There are some other changes as well, none of which are surprising. Let's dig in to this latest report.So f
To start with the large funds/specs, we see a week over week (period over period) change of +13,649 to the net short, bringing that position to -45,485. Recall, the April 20th report showed a record net short of -70,577. So , this net position has declined by 35.55% during this rally. The market over this period is higher by about 7.7%. To say there has been relief to the net short is a very fair assessment. The gross short, now -93,738 is still lofty, but a decline of -23,335 from that same 4/20 report. That is a decline of just about 20%. As for the large fund/spec longs, we see they were buyers this period as well. Looking at managed money longs, they added +3,731 futures. Managed money shorts did most of the buying, covering +12,600 shorts, leaving the smallest gross short since early February. The other groups in the non-commercial sector were active as well. No surprise, large trader longs were in liquidation mode, taking advantage of the price spike , selling out -4,390 longs. Small trader longs also benefited from the price rise and liquidated -977 contracts. None of this should come as a surprise. It is something both Tango and I attribute to the walls of resistance that emerge on the way higher. I think my behavior day to day and throughout this rise in price is a microcosm of how these groups behave as well. I think that likely goes for many here at CTF.
Switching to the commercial side. We see the commercials were active sellers. Again, no real surprise. If we think back about a year, we saw similar behavior by the commercial sector anytime the market made and upside spike. Commercial shorts are quite active and pad their short position during such market moves higher. Referencing the popular supplemental version ,we see a gross short of 107,798 , +12,510. Futures only, this group sold 9,078 new contracts for a gross short of 87,889. Think of the huge icebergs that we commented on during the week, which turned out to be walls of resistance. Commercial longs were also sellers, and again, not uncommon to see this position lighten up on an upside spike. Via the supplemental, commercial longs still hold a gross long representing 96.41% of the max. While EFP/EFS action was substantially lower with FND behind us, we still see +4,480 combined.
So where do we go from here?? On the surface, not a very friendly report. We already had Nagual commenting on the "unfriendly" nature of this report. Nagual has provided invaluable contributions almost daily and no better time than now to extend some thanks. For me, while I do not find this report bullish, I am not so quick to treat it is a downside catalyst. I think it will be key to see what systems are doing Monday morning. Today was the first day all week where the action , IMO, was hard to decipher. As I posted earlier, while we had a fun and exciting week ,generating a good amount of bullish enthusiasm, we only closed higher by 0.20. And despite what felt like a very strong rally, we only managed to gain 3.55 CENTS when the high of 12595 was achieved. I echoed Koefenista's thoughts earlier this week in regard to the underwhelming results of the upside effort. For now, the shorts are getting out as they choose. This , at some point, may change. But in reality, here we are. A theme that has been repeated since the start of the year. We have a range-bound market, with the range expanding at times. This is not surprising. As much as some want to will this market higher, it takes time. Jack Scoville made some promising remarks earlier in the week. I think he is spot on. Phil has been on top of the bullish potential of this market and I think now the underlying ideas are coming closer to fruition. As we begin to creep closer to winter in Brazil, we hope to hear more from ALF and all the value he brings , particularly in terms of weather. I had been very discouraged by this market leading into FND and as is often the case, it was in fact first notice day for May 18 that turned this market . The daily remains in a "buy" and I think the market is again quite trade-able. Let's not forget, as the harvest in Brazil picks up, what will this potential monster crop actually look like??? Some have focused on the dry weather, but in reality, it is allowing good progress for the conillon as its harvested. Last month was a bit below normal but at this time subsoil moisture remains ok (ALF feel free to chime in).
Technically, things are starting to improve. The market managed to break the 100 day MA and trade decent volume , though we closed the week back below . Still, we are making positive strides and we see the 20sma approaching the 40sma for the first time since ( a brief period) January. We should also keep an eye on the REAL as we saw it fall about 3% this week. Continued weakness can not be ignored IMO. We had heard some make such comments. We saw a nice rally in Robusta which has finally shown signs of life! Very large options buyer of upside calls is worth mentioning.
Good trading to all.