Morgan Stanley Report for April 21st 2016

An ultimately strange session in coffee began where it left off, opening higher and trending up throughout the early pre-North American hours.  Brazil was technically closed for a holiday, FND was uneventful with 204 lots changing hands, and a potentially volatile ECB rate announcement came and went with the status quo being maintained as anticipated.  Meanwhile, reports of imminent rains in the Vietnamese Central Highlands were greeted with a shrug as Robusta rose nonetheless.  The wheels fell off abruptly at roughly 9:15 EDT in a broad commodity selloff  which was well summed up by a client who remarked, ‘what are we trading these days, coffee or ten other markets via coffee?’  The question was rhetorical, but the answer is instructive and presents a challenge for fundamental traders and risk managers.  While negative sentiment is broad post-close, the uptrend line of support from the February lows through the mid April bottom held, while barely trading through the 200 day (KC2) moving average before settling above.  The 50 day MA sits a couple of ticks below on the same chart.  If the KCN6 chart is preferred, a less constructive picture presents itself, with today’s settlement falling below both the 50 and 100 day MA, and miles below the 200 and 26 days, though also remaining above the trend line support, which will sit at 123.04 tomorrow.  COT expectations vary widely ahead of yesterday’s report, with option expiration and FND positioning leading to some challenging OI indicators.