Morgan Stanley coffee report - July 29

Arabica posted a 3rd consecutive day of higher highs, closing 111.60, +1.95.  Prices dipped on the opening, and similar to Monday, traded an intraday low for anyone unlucky enough to have MOO selling in.  Positive reports on consumption trends by publicly traded companies helped boost sentiment, along with another new incremental low in the Dollar early on.  The 10/100 moving average cross was a positive short term momentum indicator and trade, spec, and roaster buying was all noted at various points in the day.  The ADX and aggregate trend models point higher as well, although the oscillators are heavily overbought, and Brazilian exporters report a sizeable uptick in producer selling interest.  Most intriguing was post-settlement buying not only in flat price, though KCU did print the high with minutes left, but in structure where KCZ/H in particular exploded on good size volume (see today’s chart for 3 month visual context).  5 separate clips of 500+ volume were noted in the 2:3 spread during the day, and the last was most impressive.  700+ lots traded with 16 minutes left in the day as the spread ripped from -1.70 to an intraday high of -1.35.  This followed another 800+ lot clip half an hour past the settlement marker, urging Z/H 10 points inward, and 450 lots in H/K at about the same time as H/K rallied to -.65.  The high in H/K coincided with the final Z/H bid but did not see similar participation.   The Z/H -2.00/-2.75 PS traded shortly after the final spike, 750x at a 30 premium, which may or may not have been coincidental.  Certs were not a clue as pendings fell 2776 (2251 bags failed, 525 passed) and total stockpiles rose 450 bags, led by 275 Mexicans in Houston.  London realized a similar trading day for nearly the entire session before the arb widened out over the final hour of trading.  U/X closed unchanged at -14, and certs fell 130 tons.  Tomorrow marks the commencement of the Rogers Index Roll.