Morgan Stanley Coffee Report -Oct.20'17

KC put in its best performance since the 15th of September and was only bested by sister product Cocoa as the top performer in the CRB index.    The  H/H arb widened by 150 points as London put in its strongest performance since October 2nd, whilst the Nov/Jan spread strengthened yet again today to its highest level of 57 over. The primary catalyst for the move in New York was the ever increasing open interest which today rose by another 1,503  to a record 231,461 lots. Traders grow encouraged by the double bottom of Tuesday/Wednesday and the willingness for the market to find support in the 125-127 level since the middle of July when funds have been short in excess of 30,000 lots net.    Today’s high of 13175 was just above the 13165 mid Bollinger band and slow stochastics have crossed positive which is starting to paint a constructive technical picture in what otherwise has been a rather bleak performance on the charts.  Dec/March tightened 10 points to a 370 discount as funds remain short the front contract and trade demonstrate a willingness to position before the non- commercial sector starts to roll what very well could be a record gross short.   Tomorrow should prove interesting especially after today’s pop and ahead of the COT report which will be accompanied by a 13,642 lot increase in open interest.  Keep an eye on the gaps at 13355-13375 followed by 13745-13770, but in the meantime we will take today’s performance…baby steps.