The “Smart Money” and Your Morning Cup of Coffee

Market Pulse: October 19, 2010

The “Smart Money” and Your Morning Cup of Coffee

Last week Dec 2010 coffee opened at 18150 and closed at 18640. Back in June I wrote about coffee and how the uptrend was just beginning. I did get some responses on how coffee would not continue going up, even having one trader mention he was shorting coffee. Seeing how the commercials, swap dealers and managed money started posturing in their net positions, the largest percentage of OI, I felt confident in the bull. Along with fundamentals showing tightening supplies and the weakening U.S. dollar (thank you Ben Bernanke), coffee had clear skies to continue the uptrend. We saw Dec 2010 coffee hit a high on Sept. 8 at 19865. Off course, before this happened we did have a cleansing of sorts on Tuesday Aug. 24 when Dec coffee opened at 18275 and closed the volatile day at 16845. Of course many thought coffee was done with the close of 16660 on Wednesday Aug. 25. Of course the next nine days proved the bears wrong with the high being hit on Sept. 8. Since then this has been a volatile market to say the least. We will need to keep an eye on the U.S. dollar because any rally up could cause coffee prices to drop, but the most important thing I will be watching for is the liquidating of positions by the commercials, swaps and managed money. That will tell us when the uptrend is over.

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