Softs Review - July 12, 2010

The Softs Pitguru Review
For the week of July 12^th, 2010

The soft markets may receive influence from outside markets, equities and the dollar, yet they have recently provided some movement and thus opportunities. Expect that to continue, but in violent choppy fashion.

Coffee prices have established a wide range, trading between 15685 and 16720 this past week, and settling Friday at 16385. The wide range is keeping traders nervous and the market choppy. And while I fully expect that range to serve as support and resistance until prices either jump over 168 or below 155, even then, stop hunting will fuel volume and another quick 300 points, I still believe that the market has further upside appeal. Having reached that high early Friday, this morning values are under pressure and apt to test last week's low. Fundamentally, there have been no changes, with Brazil's large crop expected to have problems with quality so as to allow differentials to continue to be a focus. Until the market breaks below 155, expect potential on the upside.

Sugar prices dropped late Friday and wiped out the nice rally the market had going. October had traded from a low of 1641 on Wednesday morning to an early 1741 high on Friday, but the price action that followed strongly suggests that the market has found a short-term top. This morning prices are attempting to get back over 17, which if successful, brings Friday's high and 18 cents back into play. Otherwise, sugar will try and build momentum and likely languish.

Cotton has been showing signs of trying to bottom. Friday saw active interest in calls. Although the bigger US crop and weak technicals have kept buyers away. Support ought to be found at 74 cents and resistance at 80 cents, but should 74 give way then 70 cents is the next level to look for. I favor the long side in cotton.

By PitGuru Jurgens H. Bauer

Softs Review in The Week of June 21st - 2010

To keep up with soft market:

"Following the price action of the past week coffee traders have now developed into two basic camps, neither of which believes that the price will stay close to $1.60. I believe that while prices will certainly move up (I've pitched my tent among the bulls,) a key element fueling the bullish camp is the benefit of the flow of money. This is not a subject mentioned often enough and yet it seems responsible in a large part to premier rallies seen in commodities the past two years. The bearish camp seems more focused on warehouse stocks, the Brazilian harvest and the potential for more aggressive producer selling. In some respects the current coffee market reminds me of similar bull moves seen over the past couple of years and it might be worth reviewing moves made in cotton, crude and sugar. One major point is that once those bullish moves were over, and prices retreated, they did so with the help of gravity and moved fast. I don't expect that time has come for coffee values yet and still look for further upside.

Cotton prices are being impacted by the excellent growing conditions for the new crop. That means that the bulls who believe that prices have further to go on the upside will need help. Yes, current supplies remain tight as the transition from old crop to new takes place, but I do not expect any breath taking moves over the near term. Same type of sideways price action expected in juice.

Cocoa ought to provide a reasonable opportunity this week for bears like me to acquire some puts at a reasonable level. I do not have bullish feelings at all towards cocoa and strongly believe that demand is not going to live up to expectations. Sugar on the other hand offers a trading range potential between 15 and 17 basis the October contract."


By Pitguru experts