All last week the May coffee contract was somewhat quiet based on historical movements such as the Average Trading Range which was less than three cents as compared to nearly five cents at times last year. However, this week is a little different. On Monday the range was over 4 and today the range is well over 3 cents. On Monday the market went up 4.05 cents. Then down 1.35 cents yesterday. Today May is currently down 345 points at 1.1580. I know of no significant news that drove the market up on Monday and drove it down yesterday. Maybe just the switching from March to May contract. What is interesting is that today on the opening May gapped down 55 points and then continued to fall.
Usually the Robusta market follows the Arabica, but last week and this week it appears that the reverse is happening. Except for Monday when the most active month, May, was up 1 cent at 1418, the market was down four out of the last five days. Today London May is down 28 at 1370, the lowest level in over two years.
Arabicas are also at their lowest level in two years. The low of 1.1335 back on January 20th is the lowest for the contract. There is good support below 1.15.
I hope that everyone is having or had a good weekend. For those football fans it looks we should have a great game this evening between the aging, aching, and very skilled Manning and the young energetic ( I am having fun! ) Newton.
On Friday March coffee corrected down 280 points at 1.2040 after having risen 685 over the previous four sessions. The increase has been encouraged by currency changes with fall of the US Dollar and a small increase in the Brazilian Real and dryness in Colombia.
I have attached a Dow Jones article which is a bit bearish.
For the last few weeks the coffee market has been relatively quiet while trading in a narrow range between 1.12 and 1.19. However, this week the market has gone up each over 600 points. It is currently trading at 1.2315, up 160 points and trading above an upper down sloping technical line and the 40 and 60 day moving averages, all which are bullish signs.
But, and there always is a BUT, one of the attached reports is bearish. It says that Brazil’s 16/17 could be a record. The other report indicates that this week is a holiday week in Vietnam and Brazil, Tet and Carnival respectively. Therefore volume is light this week as traders cover shorts and roll from March to May before first notice day.
Here are some comments about yesterday’s market:
HC’15 opened today @ 121.40 (+0.15)
HC’15 Current low: 121.35 (Support 111.00)
HC’15 Current high: 123.00 (Resistance 127.00)
A commodity friendly day included coffee in the performance, opening with a modicum of buying that would keep the market in an extremely tight band for most of the early hours. A generalized 15 minute selloff that coincided with similar action in cocoa and to a lesser extent sugar took the market to its low around 8am EST, but ultimately proved to be a short term buying opportunity. Volume overall was notable as the roll remains on target ahead of FND on the 19th. Weather has been trending in conversation, something that is likely to gain momentum following the FNC’s late day estimate of 1mio bags lost due to drought. Certified stocks drew 13k bags, taking the outright number to 1.59mio, continuing a trend that has caught the attention of the discretionary traders in the market. Spreads continue to tighten, with KC H/K reaching a peak of -1.85 intraday. The BRL rallied back inside 4.00 as January inflows reached 1.5bln per a Brazilian Central Bank report this morning, while embattled Senator Eduardo Cunha stated that formal independence is likely to be granted to the BCB. Meanwhile the BCB reportedly is seeking a 4.5% inflation rate before reducing interest rates, while warning of the potential for increased rates should inflation rise. A suddenly interesting environment has the makings of a two sided trade, however more work needs to be done before the cautiously friendly react in more than a tepid manner.
Today, March coffee closed down 455 points at 1.1445. Depending upon how you look at the market, today marks the sixth straight down day for March. However, last Friday March closed higher than Thursday’s close. If you look at the market with a candle stick presentation, a down day occurs when the market closes lower than the opening rather than lower than the day before.
Something happened last Thursday, Friday, and today that does not normally happen. On Thursday March open down or, as the trader say, gapped down, which means that there were no connecting trades. March closed at 1.1995 on Wednesday, but open on Thursday at 1.1905, down 90 points. On Friday the market opened gapped up 135 points. And then today March opened gapped down 105 points. Gaps in the trading occur when the bid or ask are more than 5 points from the previous sale. The big gaps that we have seen during the last three openings suggest extremely heavy volume in one direction or another at the opening.
I have attached two reports both of which are bearish. The first report forecasts Brazil’s crop size to be bigger than anticipated. The second report says that coffee pricing is still being influence by a strong dollar and a weak Brazilian Real.
The coffee market does have a way of making life interesting (or frustration?).
I hope that everyone behaved themselves New Year’s Eve or at least had a good time that they remember!!!
Last week we saw the March coffee contract go up three days in a row for a total of 755 points to close the year at 1.2670 down $0.552 for the year. The general consensus is that activity was mostly profit taking by the shorts.
Yesterday was a down day and today March is down 90 points for a close at 1.2300. March is still trading in the range that I mentioned a few weeks ago of 1.21 +/- 600 points.
I have attached a weather report for a variety of coffee producing countries around the world. Depending upon their geographical location (above or below the Equator) the growing and harvesting seasons vary. Colombia which is on the Equator has two harvesting seasons. The closer one is to the Equator the more opportunity there is for a coffee tree to have flowers and green and red cherries on the tree which makes it difficult to harvest because you do not want to harm the flowers or green cherries while you are picking the ripe beans. For Brazil the report indicates that the rain in the next week will be wide spread, but erratic and light.
Rain fall may be bullish, but the strong dollar and weak Brazilian Real is encouraging producers to sell.
This week should be a quiet week for green coffee. It is a short week and many traders are on vacation.
Today, March closed down 55 points at 1.1915. For the ten past trading days coffee has traded in probably the narrowest range all year – 1.2150 to 1.1750, only 400 points – with a daily trading range of only 300 points. As a contrast during the past year we have seen daily swings of 600 to 800 points. As the ten day trading range narrows the 40 and 60 day averages start to flatten out, but the market is still trading below these averages.
There is not much coffee news, but I have attached a coffee report from the USDA. Included with the report is a list of the marketing years for producing countries and their annual output over the past five years
May all of you have a Happy and Prosperous New Year.
On Friday March coffee closed up 70 points at 1.1900. This up tic represented the first up tic close in seven days. The forty day moving average is at 1.2182. It has been trending down for a few weeks after having flat lined for the month of November. The sixty day moving average is at 1.2436 and has flat lined for the past four weeks. For nearly the past two months March has traded in a rather narrow range of approximately 1.21 +/- 600 points. A close above 1.2750 or below 1.550 would suggest a continued move outside of the above stated trading range. The dollar remains strong and the Brazilian Real remains weak. The weather in Brazil although not perfect it is not terribly unfavorable. All things considered the fundamentals seem to be neutral or have no major influence on the market. If there is bearish sign, the Brazilian agriculture industry, Conab, just increased its coffee crop report for 2015 from 42.1 to 43.2 million bags. Brazil produced 45.6 bags in 2014.
Speaking of coffee production I have attached the International Coffee Organization’s crop report for each country from 1990 to 2014/15.
To my Jewish friends, Happy Hanukkah, this sixth day of Hanukkah!
To my Christian friends, Merry Christmas!
And to everyone, a Happy and Prosperous New Year!!
Today is the seventh day that the March coffee contract has traded generally above both the 60 and 40 day moving averages. Currently, March is at 1.25, down 135 points. For the past six days March has tried to close above 1.2750 without success or close below 1.2400 without success. A 350 point trading range for six days is very narrow when you consider the volatility that we have seen throughout 2015 when the range has risen has high as 550 on average for 14 day period.
Generally, trading above or below the 40 or 60 day moving averages for several days indicates a trend in that direction. However, back in October March was above these averages for ten trading days and then fell below the averages for over a month.
I have attached four reports: a technical analysis, funds going short, and two reports about Vietnam and the Robusta market. The Vietnam report indicates that Vietnam, although holding back awaiting higher prices, has a lot of coffee to sell.
While I type March heads to the cellar, down 475 points at 1.2160. This price is not as low as Tuesday’s price where the low was 1.2100. Let us see where we close.
Last week although the rest of the world was not on vacation or had a short week, coffee’s volume was light and the market traded in a fairly narrow range. But on Monday of this week March coffee moved down nearly 400 points. It then traded flat for two days. On Thursday it moved up over 400 points to right where it was before the Holiday. Except for two days during the past ten days March traded over the 40 and 60 day moving averages.
Today at the time of writing March is trading at 1.2600, up 110 points. If it closes at this level, it will be the highest close since October 21st.
I have attached three articles. One regarding weather forecast for Brazil. This article indicates that although the coffee growing areas of Brazil are receiving some rain, the moisture in the soil is still not at an adequate level. The second speaks to the current condition of the market. The third article is technical. It says that if the market closes at this level or, more specifically, above 1.2660 it would be a near term bullish sign. Open interest has more commercial shorts than longs. If the market looks like it is going higher, these traders could start to get out of their short position by buying the market which would just accelerate the accent.