Having lost 650 points in the last three sessions, and reaching the lowest levels since early August, and helped by the weakness seen in other commodities, it came as no surprise that again values were called 50 lower prior to the opening. And that’s right about where coffee futures in NY came in.
The reopen however saw some buying from specs and funds which propelled December futures back towards unchanged, but not above. So another trip south followed with December this time reaching 103.05. Satisfactory support seemed available, so prices probed the upside again.
A quick move through the earlier high resulted and December coffee improved to the upside, but couldn’t stay there. Instead it managed to find support around 103.50, which led to another move back above 10400. This too failed, but the subsequent pull back seemed to find support around unchanged this time. Another push up followed and new highs were reached, yet no follow through. So, it was back down in search of support. By the close December had retraced its steps and prices settled around unchanged.
For me, it appears as if coffee futures have been attempting to build a foundation of support. Although this support found by coffee prices may prove to be superficial, it seems that momentum is attempting to build. If valid, then this should lead to further attempts on the upside. This leads me to believe that while there may be one more push downward to 10100, prices may instead attempt to break from the down trend by December giving a shot on the upside, fueled perhaps by short covering. While ultimately a move over 108.25 would be needed to signal and end to the trend, and I’m not suggesting that prices will get that far. What I am suggesting is for some additional efforts to push prices higher to be likely. A correction within a down trend you might say.
“Brazil is expected to be mostly dry through Friday, with scattered showers across the far south. Rain over the weekend helped conditions for the spring flowering of trees, expected to start this week and extend into November,” this according to “Metrologix.” With roasters from North America and Europe thought to be acquiring physicals in anticipation of winter demand, Vietnam will also soon be harvesting.
So while the lower trend remains intact, we might see some staged corrections during the next few sessions. What will be limiting will be the gap above the market 107.00-107.50. Therefore, I continue to suggest that area will act as a deterrent and keep any correction upward in check.
Moving Averages 9 Day 18 Day 40 Day 100 Day 200 Day
December (103.65) 107.60 108.62 106.38 107.12 112.17
Momentum 96.80 99.30 103.71 Volatility soft
Today’s Trading Volume Futures13,437 Calls Puts Nov/Dec 32.75%
5,349 1,506 Jan/March 33.25%
Spread Sep/Dec Dec/March March/May
Ranges 310 – 290 385 – 390 240
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