Coffee futures continued rising last week as the September contract opened last week at $1.76 per pound and closed the week at $1.8610. Initially we saw a short covering rally that was triggered by the weather that looks to have started mid-June as coffee prices moved up from $1.50.
Looking at the daily chart below, coffee’s current trend strength is very strong with ADX at 53. MACD is bullish but is dropping a bit of divergence and Stochastics are overbought but look to want to correct as the market is dropping below 185 today.
On the weekly chart below we see ADX dropping after reflecting a very strong trend down and DI+ crossed up over DI- the last week in June. Stochastics on the weekly chart are just entering overbought territory.
Proceed to Page 2 for the latest COT Data...
So, has the posture of “big money” changed? I would say yes. Look at the Legacy report on the weekly chart below and you can see Commercials have been dropping net longs now at 3,175 contracts and Large Spec have been dropping net shorts now at -1,696 contracts. The more transparent Disaggregated report shows the real picture of “big money” as producers are adding to net shorts now at -24,293 contracts and Swap Dealers have been adding to net longs now at 27,468 contracts. Managed Money has been dropping net shorts now at -5,721 contracts. If Managed Money rises into net long territory and continues moving up I think you can see where coffee will head.
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...
So, this coming week we will want to see coffee’s price action close above and stay above $1.85 as it may test $1.90. News from Brazil showing their wet weather is damaging the quality of its crop helped drop Coffee this week. Continued added buying and selling by “big money” will get coffee prices to do just that. We will see if the July 20 report confirms these moves. Ha a prosperous trading week.
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