Blue line = BRLUSD
The reports of both markets show that managed money ended as net buyers in a market that dropped 18.45c from high to low. The first four days of the report, the market repeatedly tested the 132.00/133.00 general level but failed each time. During these four days we can assume that funds were still buying, including in the early part of last Monday, the day that prices fell apart. So itís likely that as the market fell at least some funds reversed. Itís worth noting that the fall in prices was more of a result of lack of buyers rather than a preponderance of sellers. Relative to the range of that day, 10.40c, the outright volume was light. As illustrated:
Date Outright Vol Range Lots/penny
9/9 17,546 4.45 3,943
9/10 22,329 5.75 3,883
9/11 19,869 3.25 6,113
9/14 29,490 10.40 2,836*
9/15 36,361 7.60 4,784
What this shows is that buyers withdrew, possibly some turned sellers. The number of long funds dropped by ten traders and 6 new funds went short. 4 large traders got out on the long side and 4 went short. Questions arise about a single sector dominating one side of the market. Commercials were of course on the other side but they have plenty of ammo in the form of delta and physical. Index were slight net buyers. They bought and sold but it could be spreads, as their spread activity does not appear individually but rather as part of the managed money sector.
Spreads were very weak during this time. The ZH began at -.65 and ended at -1.50. The Dec20Dec21 spread dropped -2.35c to -5.90 as a combination of outright pressure on Z and disillusionment by trade, possibly, with the lack of follow-through mostly in ZH. The spread stalled at the outright highs and showed some vulnerability. But warehouse stocks are still dropping and, as reported on 9/9 by Bloomberg:
ďThe ICE exchange certified as deliverable on Friday 855 60kg bags of Brazilian coffee in warehouses in Antwerp.
Another 3,060 bags failed, the data show, without specifying the country of origin.Ē
Iím assuming that these are of Brazil origin? Why did they fail? I havenít read that the crop has been compromised in any way. In any event, the ZH is still young and that game is not over yet.
In Robusta funds continued to cover but there were no new buyers. It appears that selling intensified the days following the COT, at least in KC. The market ended very weak. Further weakness will have to come from funds. Commercials are likely downward buyers and may provide support. As to the macro outlook, it hasnít changed but weíll see if the market still embraces coffee as an investment. Nagualís short term charts are very bearish but the weekly paints a different picture.