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Posted by Tango
on February 10, 2019, 9:53 am
The attached chart is an attempt in depicting RC for the week in relation to KC. Both markets began at the low of the period, made their respective highs on Friday and retrieved at the end of the period. The arbitrage ranged from 32.73 on Friday and a high of 35.22 where it closed and showing the continued weakness of RC relative to KC. During this time we see a major presence by funds on the buy side in the form of short covering as commercials sold. As we have been tracking the KC OI every day we saw the same kind of activity, supposedly, as the OI dropped or was near unchanged.
There is nothing new about the marketsí behavIor. Rallies continue to be opportunities to sell both futures and volatility. The state of the market is not an isolated instance. Many futures markets seem to have lost interest and enthusiasm. My view is that disruption of trade practices and the inability, or unwillingness, to establish policies has negatively impacted economies throughout the globe as well as investment incentive. Specific to Brazil, we continue wait for policies to emerge from the administration. The question remains will Brazil expand coffee production or curtail it.