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The market was down 40 points on the first day of the COT period, up every day thereafter for a net change of +2.35c, amid the roll and prior to option expiration while funds sold 19,009 lots of which 84% were new sales. Funds have turned net short 15,838 lots and gross short 53,450 lots.
Anyone can see that the COT is bullish, and critics will say that itís not helpful to know this three days later and 8.60 cents higher in March. But the COT reports have been bullish for some weeks as new fund selling continued to increase, and often in a flat market. Several traders posted that the market was consolidating at the lows. In addition to funds selling KC, 10,460 RC lots were added. There are other observations that we can make as well.
In both markets every sector except for managed money was a buyer. Fundamentals have taken a back seat. If fundamentals are so bearish why are traders, large and small, institutional firms, roasters and merchants so eager to go long?
At the same time, we have seen this market disappoint the bulls for a few years. The buyers at the bottom are the sellers on the way up. Since the COT report 11,493 lots were liquidated in the OI. Of course, we donít know how much of this is related to spreads and option expiration. Nevertheless, it is obvious that the market is rising on short covering, while longs are happily selling. It is astonishing that the massive selling that took place in both coffee markets met no shortage of buyers and was unable to drive prices lower, but quite the opposite.
On Thursday and Friday the market met plenty of resistance on the way up but large offers were welcoming sights to buyers. Dips were shallow and short-lived. So far there is every indication that it will go higher. Nagualís daily however gives a warning sign and for good reason.
On Monday KC will be closed. In RC the OI increased on Wednesday and Thursday which can mean that funds there are still selling. On Tuesday the arbitrage closed at 42.58. On Friday, it ended at 50.72 in March, indicating a Robusta market thatís not keeping up with Arabica. A lag of prices is typical but RC is also not experiencing the same dynamics as KC. Weíll see how it performs on Monday.