The Hightower Report

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

While the coffee market could not return towards the recent highs yesterday, prices were able to avoid losing further ground during this week’s overall commodity weakness. July coffee was unable to take advantage of a weak Dollar and could only finish the session with a minimal gain. While trading was choppy and volatile, prices were able to remain close to last week’s highs for the move. Tight coffee stocks in Europe and North America continue to be the main supportive factors for the market, but coffee prices could not overcome broad-based pressure on commodities in front of the FOMC meeting. There are indications that recent heavy rains in Vietnam may have a negative impact on coffee production during the 2011/12 season. The CEO of major coffee retailer Starbucks said that the current rally in coffee prices was not sustainable. ICE exchange coffee stocks were up 5,300 bags to 1.581 million, with 53,614 bags pending review.

TODAY’S GUIDANCE: July coffee is making an early run at the highs for this rally but may need further support from the supply/demand side to reach new high ground this morning. Given that producers are still showing some reluctance to part with their supplies, this current rally may have plenty of upward momentum left.

TODAY’S MARKET IDEAS: The market remains in a steady uptrend, but there are a few factors which are less than ideal. The technical picture could improve if we begin to see a higher open interest trend. Declining open interest is not a good base of support for an extended bull trend. In addition, the RSI divergence is significant and suggests a loss of upside momentum. At the February peak, RSI was 83. At the March peak, RSI was 82 and at the April 20th peak, RSI was 75. Brazil faces an “off” cycle production year, and the world faces a potential production deficit for the coming season. Outside market factors are also bullish. Uptrend channel support for July coffee comes in at 291.15 today, with some light chart support at 297.00. A resumption of the uptrend leaves 308.45 and 313.95 as the next upside objectives.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market made a strong rebound to the upside yesterday, regaining several days’ worth of losses, as the tone of the market improved dramatically over the course of several hours. May coffee recovered from a new low for the current sell-off and converted a moderate rebound into a very large rally by the close. Coffee overcame a rate hike in China that had put broad-based pressure across a wide range of commodity markets. Coffee exports from Vietnam during April are projected to fall below the 100,000-tonne level, and could drop to as low as 75,000 tonnes due to weaker demand. Exports from Uganda during March were almost 2.5% above last year’s levels. However, exports from Guatemala were down more than 5.5% from a year ago. ICE exchange coffee stocks were down 1,625 bags to 1.568 million, with 11,601 bags pending review.

TODAY’S GUIDANCE: While May coffee has pulled back from yesterday’s sharp rally, prices have been able to take a large step away from the recent lows. Further supportive news for the market could lead to a strong move above the 270.00 level during the next few sessions.

TODAY’S MARKET IDEAS: The longer-term, big picture fundamentals for coffee look supportive for the 2011/12 season, and it is not surprising that the market is beginning to attract increased buying interest. On top of the off-season production from Brazil, Colombia’s production has not recovered as much as expected. In addition, outside market forces (gold, US dollar, monetary liquidity) are all supportive. July coffee close-in support comes in at 258.20 with resistance at 277.45 and 282.30. Don’t rule out an eventual rally to 313.95. Consider buying a setback to 265.90 or consider bull call spreads.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The technical action looks weak, and the market looks somewhat vulnerable to more downside action, but the tightening supply outlook may provide support on a strong corrective break. The coffee market continued to pull back from last week’s rebound yesterday, as prices lost their upward momentum from last week. May coffee sustained heavy losses but was able to hold within the recent trading range, as a lack of fresh supply/demand news nay gave eroded the support from near-term tight supplies. A rebound in the value of the Dollar added to pressure on coffee prices, although indications of lower coffee exports from Uganda provided some mild support. Indonesia has been a more active seller than its neighbor Vietnam, even with projections for a 30% decline from last season’s production. Many traders will continue to watch the daily changes in ICE coffee stocks levels for early indications that coffee supplies are going to relieve the current tight stocks situation in North America and Europe. ICE exchange coffee stocks were down 2,574 bags to 1.583 million, with 2,949 bags pending review.

TODAY’S GUIDANCE: May coffee does not appear to have enough strength to stay near the current price levels. Unless there is more supportive news over the next few sessions, there will likely be an increasing chance of a downside breakout.

TODAY’S MARKET IDEAS: The market’s technical action has turned sour despite help from outside market forces. Stiff resistance for May coffee comes in at 278.80 with some closer-in resistance at 274.20. A resumption of the downtrend would leave 253.25 as the next downside target.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market has fallen back from new high ground, as the currently tight supplies could not sustain the rally. May coffee was able to post a fresh 13-year high on Friday but was unable to sustain the early upside breakout and fell back into negative territory later on during the session. The reversal is a potential sign of a near-term top, but the market will need to confirm that with follow-through selling below 271.15 for the May contract. News of falling cash differentials for Colombian coffee in North America may have eased the market’s upward momentum, as that grade of coffee has recently been in short supply. Cash prices remain high for Vietnamese exporters, who are still hard-pressed to find supplies even with indications of a larger coffee crop this season. A report that coffee exports from key African producer Uganda during February were down more than 25% from last year, for the third month in a row, helped to keep coffee prices fairly well supported during most of the session on Friday. The Carnival holidays in Brazil over the early part of this week may cause a short-term disruption in supplies. ICE certified coffee stocks were down 2,000 bags to 1.584 million, with 9,661 bags pending review. The Commitments of Traders reports as of March 1st showed non-commercial traders were net long 33,139 contracts, a decrease of 6,018 contracts for the week. The selling trend is seen as a short-term negative force. Commodity index traders held a net long position of 41,120 contracts.

TODAY’S GUIDANCE: The selling trend of the fund traders plus the overbought condition of the market could help spark a near-term correction, but outside market forces remain strong. While the coffee market has remained near these highs for the past few weeks, the support it has garnered from tight near-term supplies could easily erode if producers sense that price levels are not going to remain at elevated levels. Higher export levels from Central America are likely to end up in the North American market.

TODAY’S MARKET IDEAS: Selling resistance today is at the 257.00 to 279.20 zone with 259.85 and 253.85 as the first key support levels if we see a significant correction.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Talk of the overbought short-term technical condition of the market plus global economic concerns which have sparked long liquidation selling in many markets helped to pressure coffee overnight. The coffee market has continued to climb higher, as the near-term situation continues to outweigh the longer-term outlook. May coffee was able to reach new high ground for the third session in a row yesterday and continues to reach up towards price levels not seen since the summer of 1997. Tight near-term supplies continue to be the main factor that drives prices up into new high ground, with reports that producers in Vietnam continue to hold coffee beans in anticipation of even higher prices adding to the positive tone for prices. This support may have been instrumental in coffee prices avoiding the type of washout that other commodity markets went through during the session yesterday. A recovery in the Dollar may have helped to take prices off of their highs later on during the session. While average cash prices for coffee in Kenya have risen since last week, prices for the top-level “AA” coffee have declined over that period. There has been some longer-term forecast calling for a drought in Vietnamese production areas, but there have been few regions around the globe that are projected to have production issue over the next crop year. ICE certified coffee stocks were down 875 bags to 1.601 million with 12,683 bags pending review.

TODAY’S GUIDANCE: Higher energy prices is having an impact on most markets if only to spark a short-term long liquidation trend out of agriculture commodities. It may take a sense of strong global growth to see the market take a run at the 1997 highs but outside market forces look too weak for now.

TODAY’S MARKET IDEAS: May coffee selling resistance is at 274.80 with support back at 259.35. Look for the market to correct the overbought condition.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market has now posted a new high for the move in 3 of the last 4 sessions but has continued to have trouble maintaining early strength throughout the balance of each session. Yesterday, after making a new 13-year high with another excursion above the $2.50 level, March coffee was unable to stay up in that area and gave back a portion of its early gains later in the session. A report that coffee exports from the Indonesian island of Sumatra during January were close to 3 times larger than last season’s levels may have eroded some of the coffee market’s recent strength. A large rise in quarterly Indian coffee exports was also thought to have some limited negative impact on prices as well. However, tight Asian coffee supplies during the Lunar New Year holiday have lent some support to the market. Reports that coffee exports from Guatemala during January were down more than 15% from last year’s level were seen as providing further strength but may have been something of a known factor due to news of export defaults in that nation late last month. A rebound in the Dollar after making a new low for the move applied some modest pressure to the coffee market, but it was unable to pull prices too far below the recent highs. ICE certified coffee stocks increased by 610 bags to 1.623 million with 1,600 bags pending review.

TODAY’S GUIDANCE: The market remains in a slow but steady uptrend, and while there seems to be a little better supply flow, there is still no significant technical sign of a near-term top. While the nearby futures are struggling to add to the recent gains that have pushed the market to its highest level since June 1997, traders should keep in mind that the June 1997 high was up at 275.00 and the May 1997 high was way up at 318.00.

TODAY’S MARKET IDEAS: For now, May coffee support is at 245.90 with 261.35 as next resistance.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market turned sharply towards the upside yesterday, breaking decisively out of the 2011 trading range and quickly reaching new contract highs. March coffee finished the session with large gains while reaching its highest price levels since the summer of 1997. The main source of strength for the coffee market remains tight near-term supplies, as slow sales in Vietnam have led to the highest cash prices there in close to three years. The International Coffee Organization raised its estimate for Vietnam’s production to 18 million bags, which is still down 1.1% from last year but up from their previous estimate of 17.5 million bags. Reports that sales of Kenyan coffee had more than doubled during the 4th quarter of 2010 are thought to be a good indicator of how tight supplies of Arabica coffee have become. A steep sell-off in the Dollar has also added to support for coffee as well as for other commodity markets. The International Coffee Organization lifted their estimate for global coffee production during the 2010/11 crop year by 1.6 million bags to 134.6 million, due mainly to improving growing conditions for African producers. Although March coffee finished with a new high close, a settlement price nearly 4 cents off of the day’s high may indicate a lack of conviction with this current rally. Given that prices are making new 13-year highs without any major headline-generating supply problems, however, further volatile trading is likely to occur during the next few weeks. ICE certified coffee stocks were down 3,150 bags to 1.681 million, with 1,250 bags pending review.

TODAY’S GUIDANCE: Open interest declining in recent days is not too reassuring to the bulls, but the trend is up and there is little chart resistance overhead. In addition, an inflationary tone to agricultural markets continues.

TODAY’S MARKET IDEAS: The technical action improves with the upside breakout yesterday,
which leaves 147.40 as next swing objective for March coffee with support at 237.05.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The coffee market continues to drive towards new high closing levels, but a sharp contrast between the perception of near-term tight supplies and large production levels coming to market just beyond the horizon has left the market vulnerable to a steep pullback during the next few sessions. However, the turn down in the US dollar is a potential bullish force for most agricultural markets, and funds were active buyers in most agricultural markets for the week ending December 22nd. The post-holiday trading has been indecisive, with a large part of Europe still away and an East Coast snowstorm adding to a typical end-of-year illiquid market. March coffee was able to build upon last week’s gains yesterday and managed to finish the session at the highest close since 1997. News that the People’s Bank of China raised a benchmark Chinese interest rate over the holiday weekend put some limited pressure on the coffee market, but a lack of Arabica supplies in Europe and North America continues to be a significant underlying positive factor for prices. Favorable near-term weather conditions in Vietnam and Colombia may have limited coffee’s ability to retest the recent highs during these thin holiday markets. Given that harvest delays in Vietnam have been remedied and that lower production forecasts for next season’s Colombian and Brazilian coffee crops are still a long way off, the lack of a “current” supply problem with a market approaching new 13-year highs may leave it in search of further fundamental support in order to sustain the current prices levels. Vietnamese officials see production for the 2010/11 season (harvest about 80% complete) falling about 15% from previous forecasts to about 16.7 million bags. ICE daily exchange stocks were down 2,609 bags to 1.709 million bags with 960 bags pending review. The Commitments of Traders reports as of December 21st showed non-commercial traders were net long 39,649 contracts of coffee, an increase of 1,440 for the week. Non-commercial and nonreportable traders combined still hold a hefty net long position of 42,823 contracts, up 1,498 for the week. Commodity index traders held a net long position of 49,332 contracts, up 500 contracts for the week.

TODAY’S GUIDANCE: The surge down in the US dollar is seen as a positive factor for most agricultural markets. There is little in the way of overhead resistance up to the 1997 peak, but the reversal and a lack of a supply-side squeeze should be seen as forces that could spark a year end sell-off. A move under 228.65 for March coffee would help confirm a technical top and leave the market more vulnerable to some long liquidation selling from speculators into the end of the year. If that level is violated, support should emerge near 225.70 and 220.62. If we see new highs, the next resistance is all the way up to 270.00.

TODAY’S MARKET IDEAS: Position traders can wait until outside forces turn negative and also wait for an extreme overbought condition.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Just too much rain for Colombia and Vietnam coffee producers recently appears to be the supportive news to spark the aggressive buying from speculators this week. Speculators already hold a hefty net long position but the recent buying trend has helped support. Colombia officials believe the damage from recent flooding on top of the deaths of 246 people includes damages of near $5.2 billion. Government officials believe that the coffee harvest will not reach the previous estimate near 9 million bags for this season. March coffee made a sharp rally for the second session in a row yesterday and finished the day with huge gains. A turnaround in the Dollar provided support for coffee along with other commodity markets, and took the market towards the highest price levels since early November and to the second highest close in over 13 years. Arabica supplies in the Northern Hemisphere continue to be tight, and origin selling has slowed down as the market approaches the holiday season and year-end. A trade house report indicating that global coffee stocks levels will rise over the next one to two years put some pressure on the market, but did little to stem the market’s overall positive sentiment. Too much rain in Colombia and Honduras recently has helped support cash basis levels and has traders nervous of yet another poor crop in 2011. Rains in the past week in Brazil appear to be beneficial for the 2011 crop but Colombia cash premiums in Europe firmed to 35 cents over the board last week from 29 cents premium the previous week which helped provide some support. Colombia weather is less threatening as rains subside. ICE daily exchange stocks were unchanged at 1.729 million bags with 15,715 bags pending review. The COT report as of December 7th showed fund traders net long 36,473 contracts, up 3,122 contracts for the week and the buying trend is seen as a short-term positive force.

TODAY’S GUIDANCE: The weather appears to be improving in Brazil and Colombia but there are heavier rains in the forecast for portions of Vietnam and this may be providing underlying support.

TODAY’S MARKET IDEAS: The technical action is positive. The close for March coffee above 212.60 (now support) leaves 221.34 and 230.30 as next upside targets.