Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Good report Juan. Also compliments for pointing out several times in your posts that new selling was taking place. I suggested that new spreads were concealing liquidation of buyers and sellers but it turned out only partially true. There were new spreads put on by large and small traders. Swap dealers liquidated spreads and it’s very possible that the liquidation of commercial longs represents a leg of a spread. There was consistent forward selling that could be origin but for the most part I think that new commercial selling is options related.
I find the report, on its own, as very bearish as well. I like looking at the disaggregated rather than the supplemental because it’s the actual activity in the market including option hedges. The market closed on 4/17 at 115.85 and made a high during two COT periods of 125.25. During this time the gross managed money shorts went from a high of 107,841 lots to the latest number of 86,509 lots. Funds covered 21,332 lots in a range of 9.40 cents. The resistance is significant. Nevertheless as you say the market has been easier to trade.
We can target any price we want but what’s important to a trader is what will the market do in between now and that target. Knowing the depth of market, the market’s current dynamics, options, fibs and other chart points, and even the sentiment and contributions of various forum traders, are all necessary tools for a trader.
For the remainder of the week we saw more of the same. Big selling by longs as funds covered. On Friday the market was quiet and weak but, at the lows, the 122.00 level, bids began to line up and the depth of market on the buy side was pretty dense. By the close, short covering pushed the market higher. I’m in the camp that thinks the market will move higher based on the large gross short position of the funds, and the possibility of a serious frost as anticipated by Wheatsoy. In the meantime, regardless of weather anticipation, currency or any other incidental occurrence, commercials will continue to sell seemingly any quantity that funds and others want to buy. The increase of the managed money longs is something to keep in mind for the near future as well. In a nutshell, the market remains steady but still needs to prove itself.