Morning Futures Roundup

---

Coffee Bear Market Cools as Prices Consolidate

   Fundamentals
After a decline of over $1 per pound during the past 8 months, Arabica Coffee futures prices have begun to consolidate, hovering just north of 175.00 in the most active July contract. Like many commodities, Coffee prices have hit headwinds from the continuing drama that is Europe, as well as a much stronger U.S. Dollar. Actual Arabica Coffee fundamentals have also been a negative weight on prices, as analysts are looking for potentially record production out of Brazil this season -- which if true, would help replenish tight supplies seen the past few seasons.

Many speculators, both large and small, have been holding net-short positions in Coffee futures for several weeks, but have begun to lighten-up on their short positions as prices begin to consolidate. The most recent Commitment of Traders report shows the combined net-short speculative position was decreased by just over 2,700 contracts to stand at 11,208 contracts as of May 8th.

Arabica Coffee may be seeing some spillover support from Robusta Coffee futures trading in London, where bullish fundamentals, including lower exports from Vietnam, have sent prices to 8-month highs. However, any rally attempts in Arabica futures may be capped by hedge selling, as producers may take advantage of any rally to hedge what may be a record harvest in South America.

   Technical Notes
Looking at the daily chart for July Coffee, we notice prices beginning to consolidate starting in the middle of March. Since that time, we have traded in a relatively narrow 20-cent price range, but have made a series of lower highs and lower lows within the recent price boundaries. The market has been trading on both sides of the 20-day moving average (MA) lately, but remains well below the longer-term 200-day MA, which is currently hovering near the 224.00 price area. The 14-day RSI has turned neutral, with a current reading of 50.30. The May 9th low of 172.20 appears to be support for July Coffee, with the April 4th high of 193.00 appearing to be the next major resistance level.


CLICK HERE FOR THE FULL-SIZED CHART



---------------------------------------------------------------------------------------

Disclaimers
This article is provided for informational purposes only. No statementin this article should be construed as a recommendation to buy or sell asecurity or to provide investment advice. The content provided has beenobtained from sources deemed reliable but is not guaranteed as toaccuracy and completeness. optionsXpress makes every effort to providetimely information to its recipients but cannot guarantee specificdelivery times due to factors beyond our control.

Derivatives involve substantial risk and are not appropriate for all investors. Please read the "Disclosure Statement for Futures and Options" prior to investing in futures or options.

For investments using a straddle or strangle options strategy thepotential loss is unlimited. Multi-leg option strategies are subject tomultiple commissions. Profits may be eroded by the commission expendedto open and close the positions and other risks apply.   

"

---

View Mike Zarembski's post archive >