Morgan Stanley Coffee Report

While futures suffered another slow day, coffee was anything but boring.  KCZ traded a narrow 185 point band, yet there were plenty of fireworks as U/Z weakened out to -3.90 before ripping back into -3.25 in a surprise move to many.  Questions persist on why for the turnabout, and theories are broad if lacking inspiration.  Most agree it was not fundamentally driven but rather some sort of combination of liquidity and momentum.  Spread volume was an impressive 31,498, while options were also active as 16,559 contracts traded on soft early vol and a roughly 3 to 1 call to put ratio.  KC now sits below the recent moving averages, and precisely on the Lower Bollinger Band basis KC2 (141.15), while trading to the lowest level since July 6th on the continuation.  Today’s close was the lowest since June 28th of 140.60 basis KC2 when we noted the possible formation of a flag formation.