May 2012 coffee opened last week at 185.70 and closed at 182.35. Looking at the daily chart below you see that coffee is in a very strong trend with ADX at 59. MACD is riding below the signal line dropping divergence and Stochastics have been oversold since mid February. Price action looks to be rounding just above 180. You can see on the chart exactly when Trends in Futures recommended a short.
On the weekly chart you can see ADX is also show a very strong trend at 50. Weekly Stochastics are in deep oversold territory.
Proceed to Page 2 for the latest COT Data...
If you are wondering when the trend started, look at the COT report. I am looking at the disaggregated report. You can see how currently Producers are continuing to liquidate net shorts now at -19,775 contracts. Managed Money are continuing to add to net shorts now at -8,962 contracts. Other Reportables are 7,831contracts, and our friends the Swap Dealers are net long 21,823 contracts. Here is a perfect example of rising open interest not predicting higher prices. If you are using OI without the COT, you are staring at the sun without eye protection. Keep an eye on when Producers start adding to net shorts and Managed Money start adding net longs.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
Fundamental outlook — Bearish — Coffee prices sank as the Brazilian harvest and an increase in global supplies fueled fund selling. Coffee production in 2010/11 rose +7.6% y/y to a record 136.4 million bags (USDA), but production should fall -1.9% y/y 133.8 million bags in 2011/12 Brazil’s 2011/12 (July-June) production will fall -9.7% y/y to 49.2 million bags on the off-year of the biennial cycle (USDA).
Many coffee experts are predicting coffee to continue to drop into 2012. Curious to know how low coffee can go? See the monthly chart below. First May coffee needs to break below 180.00.