Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Tango, great report as always.
I think you bring up great questions and it again goes back to the idea we have often discussed. There is no real catalyst to change the mindset. To me, the reluctant longs are merely trying to bottom pick and when the cracks again appear to show, they run for the exits. Just my feeling. As for the buyers, they seem to think they can get cheaper prices. We saw a nice rally off the lows, funds covered and commercials added new sales. Why is this any different than any of the other 5-10 cent rallies we have seen over the last couple of years??? To me it is not. With the proximity to the winter months in Brazil, I think now many connect the fund short position with a mass exodus type situation. I will repeat something that you said, that I think has not been fully digested. Most of these funds, particularly the system based algo's are purely reacting to price. What causes or what may potentially cause a price spike is not important. Only when a certain price level is met will the systems kick in. So the idea of winter approaching is legitimate but without an event causing a spike in price, the funds will continue to do what the price dictates. The idea that they will not sell low prices is not true. Can some other group drive the price higher and get the market to a level that wakes up the funds ? Absolutely. But the idea that cold weather "may" occur, will not turn an algo seller into a buyer. Only price will do that.
Having said all that, if there was a dynamic event that created a fast rise in price, then we can get one of those rip your face off type rallies. For me, better to react if and when that does occur. In the meantime, I think some upside option exposure while vol is cheap is a good idea. It allows one to be positioned for any surprise while objectively participating in what the market does on an intra-day basis.
Just my thoughts.