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Arabica and Robusta COT Reports
Posted by Tango
on June 22, 2019, 8:21 am
During this COT period the market began at the highs and dropped sharply lower to end at its lows. The roll was in full steam as the July OI dropped 56,234 lots of which 35,803 lots were rolled into Sep, and a combination of 24,412 EFP/EFS were posted. Looking at the OI, Sep is considerably smaller than previous front months at FND time. Whether this means a further slowdown of the market or the potential for new business to come in is uncertain. The primary sellers during this time were managed money and so the assumption that this group were still covering and buying new, as they had done for a couple of months, was incorrect. 7 long funds liquidated and 5 short funds sold more. The OI changes during roll period are easily misinterpreted as to what sector is doing what. The buyers that we saw were commercials, as the market dropped, and large traders who provided any strength. The pattern in Robusta, which was not subject to the roll yet, is the same as Arabica. The exception is in the swap dealer category, which is more likely end users in this market and less likely institutional, were buyers. The significance of this latest COT report is that either we should discount it because of FND or it represents randomness and an unreadable pattern. There are140 managed money funds and 117 large traders who are the primary spec participants in the market for now and they at times behave the same and at times not. If we had a bull market, mostly all of them would be buying.
Going forward, the market feels directionless. Thursday and Friday seemed like a hiatus as Brazil celebrated a holiday. FND is behind us and Monday should give us new indications. Forward selling has been absent for some time. Forward bids are below the market. As the market heads lower or higher it will be met with delta hedging. Charts should be useful.