Tempted as I might have been to try the long side of coffee Wednesday and early Thursday morning, something held me back. It just didn't feel right and I wasn't about to get lured into buying a market that (as I have been touting to readers) is vulnerable, and at risk to selling pressure. Besides, coffee hadn't proven it had the ability to hold yet because it hadn't really been pressed hard since Monday. It got pressed hard on Thursday.

For whatever reason, Thursdays have frequently been down days in coffee trading. This Thursday was no exception, and values plummeted through yesterday's lows in early e-trading. So by the outcry opening, December was already below 125.80 (my bail out number). The outcry open saw stops elected, and after some short covering and bottom picking from locals, additional selling appeared and locals bailed pushing December down to 122.20.

Once down there, albeit briefly, another wave of short covering and bargain hunting helped hold prices-and this time, the semblance of support drew sufficient attention and encouraged more of the same. Trading remained choppy, but what else would you expect in an environment where prices have dropped 1800 points in less than a week? How about another press lower? You got it, but this time it didn't seem to have enough energy. So when new lows were not made, the balance of the session was spent chopping upward-but it never made it back over 125.80. December settled outcry at 125.40, down 4.15. Following outcry, e-trading saw prices back off a little with December futures last 125.40.

I expect to see prices attempt a better bounce, and I did use Thursday weakness to begin nibbling on the long side-but only nibbling. I still need to see this market show that it can hold up under the weight of selling. If I decide to go long (even at higher levels), so be it. But it will be only because the market shows me that it is ready to try the upside. They sure don't ring a bell at the bottom. If prices can rebound a little, and cope with the inevitable battle with another serious wave of selling appropriately-then I will likely add to my longs with vigor. That might take a while, or it could happen next week. Until then, coffee prices are still susceptible to volume in either direction. Thursday, we saw volume take it down. Remember, weather markets can change like the weather. Or maybe it's that the weather can change the weather markets or .... Well, you know, weather can change quickly and so can markets.

December coffee needs to hold 122 on the weekly. Otherwise, a move below 120 and I'm back on the sidelines. I mentioned my intention of acquiring a long position via three ways in March options. I legged into some and will look to do more.  My choice of positions is buying the March 140/160 call spread, and selling the 115 put. 

Support: 122, 120.00, 111?

Resistance: 125.80-126.50, 127.80, 131-132.60,

Cotton Comments

Cotton prices paid no attention to exports. As I have been saying, fundamentals no longer matter. Buying emerged from new players and old alike, and Dec opened 65 higher and never looked back. Market on close buying carried prices toward the upper end of the day's range, and the market looks poised to make a further run up.

There is a lot of money that is flowing into this market and my guess is that it is going to carry values up, just as we have seen in other commodity markets.

I look to buy dips.

Support: 6485, 6440, 6365

Resistance: 6545, 660-6625

The Information and opinions contained herein comes from sources believed to be reliable, but certainly not guaranteed as to accuracy or completeness. No responsibility is assumed with respect to any statement, nor with respect to any expression of opinion herein contained.  All views are the opinions of the author at the time of writing and are subject to change without notice.  No statement should be construed as an offer to buy or sell a commodity. This publication is for information purposes only