Prices ended for the COT period 5.70c higher with a range of 12.95c. What sticks out in the report is the Index selling via Swap Dealers, reflecting the rebalancing of funds. The buyers were every other sector. In RC, funds sold as well, sending the arb from 125.20 to 134.58. The period was one where profits were taken in both markets it seems. Open interest in H dropped in both markets as the total increased, both in outright and delta. As the week progressed after the COT period, the market rallied close to 245.00 and retraced back to the mid 235.00s as index rebalanced and G option expiration approached, (there were no surprise exercises or abandonments). Warehouse stocks dropped by 129,000 bags in the month of January so far. So there seems to be a mixed bag of indicators.
IMO, index funds are usually a predictor of future prices. The selling that took place by them expresses a bearish sentiment. RC funds as well, who are not momentum funds, seems to be taking profits. The withdrawal of warehouse stocks could mean a shortage of coffee due to weather damage or logistical problems. Either way, spreads are reacting positively, HK to a lesser degree. Finally, the market is behaving as if it is not yet done with the upside. Yes, there are dips and corrections for sure. Sharp rallies seem to attract profit taking. The weak state of the Real and the high Selic attracts more hedging in forwards. Nevertheless, the market isn't exactly crashing. Now that options have expired, we will have a better sense of direction even with H liquidation which has already begun.
« Back to index