BLUE LINE = USDBRL

The COT week began on a steady note as any selling was absorbed by commercials and put longs. Still, the market revisited near the week’s lows on Friday the 5th and Monday the 8th. The market remains very volatile but, as we see, the percentage of outright to total volume drifted into the 20% area and the outright volume never rose above 20k per day even with a 13.40 range on Friday the 5th. On Monday the 8th, option expiration week, prices began to end higher each day for the remainder of the week. The market ended the COT period 2.85c higher with a range of 14.55c.

The COT report indicates the net result of two way activity but of the substantial moves higher, we see commercial selling and every spec group buying, including Index. In RC, we have the same picture except for swap dealers. We can assume that this same pattern continued for the remainder of the week. On expiration day, the 12th, prices settled at the highs and not seen since July 1st. I believe that the buying came from specs, and market makers and others who were short delta. Prices rallied to above the 227.50 strike on the post-close. We will see what Monday brings and will tell us whether Friday was related to options expiring or it was the makings of more strength to come. At the 227.50 strike 59 Calls were exercised while 53 were abandoned. On the Put side, 3 lots were exercised 36 were abandoned. Although these are small irregularities, they indicate a bullish sentiment.

Spreads continue to be steady but less so in a weak market. Although pending stocks are sharply higher, the 233,402 bags waiting to be certified don’t seem to matter as they are not addressed by many market reporters except possibly for Ryan Delaney. He points to a more universal increase in stocks. Thank you Potifar. None of the coffee have been processed, coming in and going out, possibly indicating the heavy work load suddenly presented by the incoming bags in Antwerp. It seems to me that stocks were not reaching ICE warehouses because of logistical issues and now shipping is correcting itself. Whatever, there doesn’t seem to be a pinch in coffee supplies.

UZ lagged other spreads as it approached expiration. The spread settled at 4.20c but traded above 4.50 on the post close. Yet, no calls were exercised at the 4.50 strike. The market ended on a steady note. It can be bullied either way because of the volatile situation with thin volume. But, shorts need to cover at some point, providing support and longs need to liquidate as resistance builds on the upside. The market remains with lack of clear direction but with resiliency and recovery.