BLUE LINE = BRLUSD

The market began at the lows, rallied 25.35c and closed 6.35c lower than last week’s COT report. Frost fears prompted specs to buy as funds, including Index, covered 26 short funds and bought 15 new funds. Large traders sold, possibly representing market makers who bought options from commercials. The trade were also big sellers in futures and stymied market advances. The behavior of the market, as well as the weather situation, send a mixed message.

One perspective is that the market has no follow-through on the upside as commercials who are more affected by a damaging frost sell to specs. Although there is no evident origin selling. But with forwards being at a discount to nearby, it may suit producers to sell the front months. Of course, there is trade support as the market eases, preventing sharp drops. There is no evident consumer buying. As to weather, even though there is light damage this morning, it is early in frost season and more serious frosts can occur. Ultimately, however, we continue to have spec driven rallies.

Spreads remain on the weak side in the front and steady in forwards. Warehouse stocks are only slightly lower for the month and, as we see in the OI, N is being liquidated. In the forward months, it appears that spreads are being supported.

For now, trading both ways short term and remaining friendly longer term is recommended.