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The market is overbought and vulnerable to a set-back as coffee could follow other commodity markets and equity markets over the near-term if there is some support or stability developing for the US dollar. However, the steady rise in open interest and the bullish technical action of the past month leaves the market in a decisive uptrend and correction breaks still look like buying opportunities. December coffee closed sharply lower on the session yesterday giving back all of Monday’s gains and more. Long liquidation selling from speculators helped drive the market lower after futures moved to the highest level since early June on Monday. The sharp jump in the US dollar and a sell-off in most commodity and even equity markets helped to pressure the market. Futures saw a decent recovery off of the morning lows as selling slowed in the afternoon. Ideas that the market is overbought technically and talk of some commercial selling from Central America helped to pressure the market again yesterday. The new disaggregated Futures and Options report data from the CFTC showed that managed money traders (mostly trend-following fund traders) have built a net long position of 21,295 contracts from a net short position earlier this year and a net zero position in the summer and again in the early fall. The position last peaked at 58,370 contracts near mid-February in 2008. This would suggest plenty of buying power left from the funds before reaching an extreme. Bad weather last year has hurt production in Colombia more than traders had expected and exports in September were just 481,000 bags from 939,000 the previous year. Traders expected better harvest this season and harvest of the new crop is ongoing. Daily ICE certified deliverable coffee stocks were down 1,417 bags to 3.299 million with 16,450 bags pending review.

TODAY’S GUIDANCE: Buying support for December coffee comes in at 139.50 and 138.10 with 149.90 and 152.15 as next upside objectives.


This content originated from – The Hightower Report.
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