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Grinding Forward
Grinding Forward
By
JMTG Brokerage’s Head Analyst James Mound
Wednesday, July 2nd,
2003
With recent strength in coffee coming ahead of some potentially
significant events, it is a good time to review and look ahead in this volatile
market.
Today’s 265 point surge topped off several days of short covering from
net short funds. The Commitment of Traders data is overwhelming net short
funds and net long specs. This
could lead to a strong rally during a fundamentally weather dependant time
frame. Winter started last week in
Brazil, the world’s largest producer of coffee.
This critical frost season which exposes the market through late August
can spark tremendous rallies in a market known for unexpected price spikes.
With GWS forecasting colder weather fronts starting on the 7th,
10th and 12th of July, there may be additional short
covering, or for that matter warranted rallies.
Bear in mind that Columbia, Brazil and Central America make up such a
large percentage of the world’s supply that a massive move seems almost normal
when these countries all face hits in supply.
This has been proven time and time again in the futures market.
Additionally, from today through the end of the week, several crop
forecasts on Brazil’s coffee production are expected to have significant
impact on near term prices. Let us
not forget that the Brazilian forecast from Dec. offered over a 40% drop from
last year’s production, and anticipated drops in production estimates may be
all the market needs for another short covering rally and overall bull move from
current levels.
Coffee has a knack for setting up the specs on a bull move and breaking
the market down before you can blink, but the market can’t predict the
weather, and they can only estimate reaction to production info.
That being said, avoid exposed futures, and avoid short option exposure. Look for bull call spreads and overall defined risk
approaches which can include long futures with puts for protection.
Trade Design:
Please contact a JMTG Broker for advice on proper trade
tactics and design. Is your broker
telling you everything you need to know? Maybe
it is time to switch to a firm that gives you all the facts and the power to
make proper trading decisions. Call
1-888-744-8866, visit www.moundreport.com,
or email us at info@moundreport.com .
*Disclaimer: There is risk of loss in all commodities trading. Please consult a James Mound Trading Group Broker before you trade for the first time. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some option strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. James Mound Trading Group, or anyone associated with JMTG or moundreport.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (clients or otherwise). Past results are by no means indicative of potential future returns. Information provided is compiled by sources believed to be reliable. JMTG or its principals assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the express written consent of James Mound Trading Group LLC. Total cost, or cost/credit of trade (as referred to in the trade above), includes the cost/credit of entry, commissions and fees. Typical commission is an approximate mean of commission rates amongst JMTG customers, but can be more or less depending upon the individual account/customer, services rendered, account size, trading volume, etc. Options do not necessarily move in lock step with the underlying futures movement. Commissions at JMTG range from $3 to $27.50 per side depending upon the market traded and specific commission rate charged to the client. Fees range from $2.88 to $7.50 per side depending upon the market traded.
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