Morgan Stanley Coffee report 1-27-31

The coffee market perked up today to stage the best intraday rally (360 points at the high), we have seen since the 3rd of December.   Once again we opened up on the lows, then, in a sign of things to come, traded through the highs of the previous 3 sessions ahead of the traditional NY opening.  The pace of systems and algo related buying accelerated once the 11805-25 gap was filled which carried the market to 11980 by 9 am EST before the rally took a pause . Short term specs sold ahead of 120, a level we have struggled to get through ever since the sell-off following the rally of New Year’s eve.  Prices quickly pulled back to 11855 before reverting higher to take out the 120 level (high of 12030), as well as the 40 and 50 day moving averages.  With the systems engaged as buyers, the market held steady, that is until sellers came in on the close and sold the market down to settle at 11820 for a less impressive gain of 150 points but the highest close since the 8th of January.  Rallies in the coffee market lately tend to breed distrust, and while the action today was constructive, the proof will be in the pudding .  Open interest should confirm tomorrow that the tenor of the buying was all short covering.   The next level of resistance comes in around 12250 which corresponds with the 100 day moving average and the downtrend line drawn from the 14090 high of the 16th of October and the 12680 high of the 31st of December.             
 
John J. Kelly