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The market seemed to have corrected the overbought technical condition on the break off of the highs and held inside of an uptrend channel off of the January 5th and January 21st lows yesterday. Uptrend channel support moves up to 120.10 today basis the May coffee contract. After moving to the lowest level since January 21st, May coffee was able to hold very shallow support yesterday and pushed to higher on the session late in the day. The technical action is positive and the fact that open interest continues to climb is seen as an indication of a developing uptrend. A higher US dollar and selling pressure from a wide range of other commodity markets helped spark some early selling pressure. The 4-day set-back from the highs, however, did not seem to help ease the overbought condition on some technical indicators such as stochastics but RSI did slip to 55 from 73 last week. Honduras exports for the October to January 31st time frame reached 555,190 bags, down 4.5% from last year. Costa Rica exports for the same period reached 324,003 bags, up 6.6% from last year. Coffee exports from Brazil in January came to 2.088 million bags as compared with 2.728 million in December and 1.842 million last year. The Commitments-of-Traders reports showed the coffee market in a more positive set-up as trend-following funds shifted from a net short to a net long position for the week ending January 27th. Exchange stocks are also beginning to fall more rapidly and this could signal that end user demand is picking up due to the high basis levels for other growths. US ICE exchange stocks fell 21,541 bags to 4.239 million with 11,400 bags pending review. Stocks fell for most of January and were near 4.415 million to start the year. Open interest increased to 136,200 contracts from near 107,000 in late November and the rising open interest is considered yet another bullish technical indicator.

This content originated from – The Hightower Report.