A fourth gap lower since September 25th of last year started the week on a negative note as KC settled at 121.10 for a loss of 1.10 points. Prices fell to a low of 11995 before industry, and short term specs attracted by the bottom of the range, stepped in to provide cushion. Recapping the gaps, a September 25th gap remains void and sits from 137.45-137.70, followed by October 11th’s from 133.55-133.75, January 8th’s 130.00 to 130.30, and today’s opening of 121.65 to Friday’s low of 121.75 basis May. All of those gaps were formed on the opening print. The previous gap, and the last time a gap lower in KC2 was filled, was the gap from 157.90-158.00 formed on September 23, 2016 and was filled 3 weeks later. The most logical impetus for today’s sell off appeared to be Friday’s COT report which saw the net non-commercial short pared back by 5,199 lots with 3,147 new longs and a reduction of 2,052 gross shorts. Equally if not more interesting was the increase in the gross commercial shorts by 7,689 lots, which if viewed as a proxy for origin indicates there has been active hedging at current levels. If there is a silver lining to today’s performance it might be found in settling .65 points below the high of the gap, while the previous 4 gaps settled between 2.55 and 3.40 points lower.
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