Morgan Stanley Coffee Report

During the early hours of trading New York drifted lower and maintained the pattern of trading in sync with intraday rhythm of the CRB index. However, once the noon hour struck there was a disconnect with the commodity index as the Arabica market rallied from the 13905 low of the day to 14150 on the close, while the CRB traded to new lows.  Sell stops were triggered once Friday’s 14035 low was breached and the 140 strike was violated with surprising ease as a much anticipated industry was nowhere to be found.  After testing the 13905 intraday low for 4 times with no follow through, short term specs stepped back in on the buy side, and, with selling dried up rallied the market over 2 cents into the close.  An interesting note on open interest which fell by 2,796 lots on Friday’s 495 point sell off, suggestive of long liquidation, while the previous Friday’s 460 point loss was accompanied by a 2,194 lot increase a sign of either new fund or commercial shorts into weakness.  Despite the late price recovery the market settled with a loss of 80 points, the lowest close and lowest intraday low for the month of July.    Volume in London was 9,903 while NY trade 25,988 lots.