Managed Money were again sellers as they liquidated longs and sold new. Itís worth noting that funds began selling in an upward momentum as shown on the previous COT report as well as in the current one. This indicates a deviation from their usual strategy of trading with the momentum of the market. It is likely that they continued selling for the remainder of the week, but possibly not. The number of funds that were short at their peak was over 100. That number is now 73.
There has been a great deal of discussion in the forum about origin selling. There is no indication of this in the COT and in market behavior. As we know, origin selling seems to take place mostly in forwards, causing spreads to strengthen. We have seen spreads ease as forward consumer bids are hit. Origin usually sells on strength of the market and/or with a weak Real. The Real has been steady. Worth noting is that as funds reversed to sellers 2 weeks ago, and commercials turned buyers, starting at higher prices but continuing into yesterday. This in the midst of higher production reports releases. (Meantime Starbucks hit a 52 week high of 99.72 on Friday after a positive quarterly report. Consumption related news is often ignored). Itís likely that most of the front month buying by commercials was option related.
Yesterday was typical of how the market has been behaving for a few weeks. Rallies are impressive but only to become magnets to sellers. This market has been defined by failed rallies. For now the market tends to linger around striking price levels before it then eases further, or reverses.
The COT on its own is bullish. Iíd like to think that we have seen the lows for now because of the strong commercial support and the possibility that funds may have a different approach to the market than we are accustomed to seeing. On the other hand, we have notice season coming up and option expiration in a few weeks and the market is not behaving as if it wants to move higher.
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