Commercials were certainly buyers each time the market dropped yet they ended with a sizable number of sold longs. All other groups were net buyers with funds as the biggest buyers of shorts. As the week continued, the market remained strong but also lethargic and with several corrections. Yet we managed to end this Friday on a steady note in spite of the continued long liquidation, options expiration and, as seen at the end of the day, good forward selling. As a result, spreads became firm again.
As we look at Robusta we continue to see a growing disparity between the two markets. It is normal to see RC lag against KC but the interest is certainly greater in KC. We canít ignore the weather reports even though itís only September. My view is that if it remains dry and hot into December, we can start using the word drought. For now, imo, it is a fund short covering rally.
While funds began to cover in KC, funds in RC added. Both markets still have ample fund shorts as of Tuesday. And, for the remainder of the week, as the OI dropped in KC, RCís OI remained stable. The changes in RC are bigger than they have been in the COT. The sharp drop that occurred last Thursday in RC may be attributed to swap dealers, probably institutional, and maybe large traders, or both.
The market is certainly in a short covering mode. The biggest challenge are the eager sellers, mostly commercials. We see how just in this week, they went from being long to being sizable net sellers in a 6 cent move, close to close, and 7.25 cent move from low to high. At the top of this weekís range, the selling seemed to be the greatest, based on the OI changes from Tuesday to Thursday. As stated, long liquidation comes in waves while the short covering seems consistent and methodical, creating sharp corrections and slow grinding rebounds. Monday we start fresh with option expiration out of the way. Maybe if commercials stop sitting on the market we will see some action, maybe.