Softs Review for The Week of September 12, 2011


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The Softs Review
For the week of September 12, 2011​


Concern over the spreading European debt crisis pressed the soft markets on Friday. Coffee prices, thought by many to be overbought and in need of a correction, dropped hard as October options expiration saw KCZ settle right at 270. The range 18150 points was huge. Early Friday morning, and prior to the massive drop, 3,000 KCZ 255 puts were acquired between 270-290 and thought to have been for a major merchant. Now it looks like there is more in store on the downside, with some of the same traders who had been touting a rally, prior to the 50 cent move up, now looking for 260 in KCZ. If they are right there could be more. The drop this week has now resulted in the market appearing oversold. This is a great example of how swiftly things change as a result of market volatility. There was a time when coffee prices wouldn't move 18 cents in months, now traders see it in a day. What does that tell you? This week look for defensive posture with rally efforts failing. Resistance 280-281, support 265-260, then 256-248.

Cotton prices were up on a breakout, but also dropped Friday. Although the move down wasn't nearly as aggressive and contained less volume. That leaves some, especially longs, to believe that Friday's drop was more in response to the macro picture combined with end of the week profit taking before Monday's crop report. Guess traders will find out early Monday if CTZ can withstand further pressure. Key will be 108.50-107 as support, to 114-115 as resistance. Will that be the new range?

Cocoa appears bearish and headed lower. Under 2825 I would look for a move down to 2650-2700. Above 2970 may bring a chance for a trend change.

On Friday traders saw the Sugar market focus on the rolling of positions as the V/H spread was the feature. That spread ought to remain the focus for much of the coming week. October still looks vulnerable to a move down below 2800.

Update: Seems sugar traders are talking their positions with bears saying there are ample supplies of sugar available with more on the way, and bulls suggesting supplies are tight. The spread still remains the focus.

Cotton little changed from Friday even with macro markets showing additional weakness. Crop number due out at 8:30....

Cocoa little changed, and coffee as well.

Update #2: Sources tell me Sugar Producers in Brazil are lifting hedges as they do not have product to deliver. Cotton reacting more to macro than crop numbers.


***Chart courtesy Gecko Software’s Track n’ Trade Pro
Past performance is not necessarily indicative of future results.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.