The commercial sector repeated the same pattern as the previous report by liquidating longs and adding shorts. As we know spreads are shown as individual legs for this sector. However, we have been seeing origin selling for several weeks as it manifests itself in the forwards. Reuters has reported that there was heavy origin selling prior to the frost. But middle months, May, July and Sep selling was seen and reported before, during and after the frost and contributed to the heavy resistance and subsequent weakness that we saw during the frost experience. Selling was also present extending out to Dec21 but to a lesser extent. Since the COT, the selling has decreased significantly and spreads have shown some adjustment to lower levels.
The market as a whole has not been impressive. Itís holding it seems but rallies have been invitations for sellers. Activity has been light and the market becomes still after any move. Although spreads have loosened up a bit, they continue to be tight in the back. In addition to forward activity decreasing warehouse stocks may be having an impact to spreads.
For the near future, the fact that funds are going long is a positive. Together with the possibility of a macro climate developing, which Volcafe is now citing, may indicate a trend reversal. I personally donít see it after considering fundamentals and the negative trade and economic environment that exists globally..
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