BLUE LINE = BRLUSD
The buying by funds was immense. Eight funds covered shorts in KC and 7 in RC. Twenty funds bought new in KC and 10 in RC. Both markets are now net long in the managed money sector. Options were purchases by the speculative side, in the form of call spreads and outright calls, while commercials added more delta selling. Index, small traders and institutions were among the buyers in KC. The result was a range of 14.10c and a net change of 11.45c. The sellers were, of course, commercials in both markets and to a lesser degree large traders in KC. The elevated prices and generally depressed Real seemed to attract origin selling out to 2023 and sending some spreads to a premium.
The behavior of the market has been such that buying remains steady but selling intensifies as prices rise, creating a ceiling and causing weakness, touching off stops. When the selling ceases, prices firm once again. The activity as shown in the COT may be construed as bearish by many, but, combined with market behavior, the market remains friendly. Fridayís drop may be seen by some as the beginning of a reversal but it could also indicate end of the week/month liquidation. My view is that the 140.00 general area will be a source of support, beautifully depicted by Nagualís charts. Although it appears that forward buying isnít evident until 5 to 8 cents below current levels, commercials will provide plenty of delta buying as prices weaken.
Spreads continue to be interesting. July22 and Sep22 traded at a slight premium and all spreads weakened with Fridayís sell off. The front spreads, NU and UZ have hardly budged. ZH became very weak as a result of strong buying in the -1.90/-2.50 put spreads in the last few days. The more forward spreads have been steady in anticipation of shortages. However, warehouse stocks have been climbing once again. Also, if specs continue to buy outright, the positions to be rolled will create some weakness. But, we are far away from July roll season.
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