Although managed money added over 9,000 new lots, according the disaggregated, the number of traders going short did not change from the previous week. This may mean that only a few funds have launched an aggressive selling program. We will need to wait until next Friday to see if more funds joined in.
The market has certainly been one where strength is a sale. It has been so for several weeks. From a COT/OI point of view however, spec shorts continue to build while commercials keep buying. Is this a setup for a reversal or are commercials temporarily holding the dam from bursting. The buyers in the front months are likely hedging delta while forward buying is probably roaster/processor/merchant. But who are these funds that are so intensely selling? If someone has a clue has to what is motivating them, please share. It certainly is not momentum, as they have created their own and are maintaining it.
The bigger picture is not optimistic. Consumption seems to be as best as we can possibly see. But production is the focus of the day. The cover story on this week’s Economist is the destruction of Brazil’s rain forests. It is an article relating to global warming but the potential of coffee supply increases are obvious. And so it is not a market that attracts investment.
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