"Someone else has to be wrong for you to be right. Not everyone can outperform the market. This is something I don't hear much from the talking heads." while this is somewhat true, i think it pays to remember how futures markets work, and why they exist in the first place the reason they were invented, their primary raison d'etre (so to speak) is to allow commercial producers and consumers to hedge and position. we speculators, are just providing liquidity, etc. if i'm long physical coffee (like i have fields full of it), i'm gonna go short coffee futures. if coffee goes up (iow, it's a losing trade), that's fine with me. because my physical holdings have gone up equally to offset my loss in my futures positions. i'm hedging. the trade itself is losing, but i have protected myself and i'm not in the market to speculate. i'm in the market to protect my product from lower prices. if i'm a consumer, and i think coffee prices are nice here, i go long futures (take the opposite side of above dood's trade) to protect my price that i will be purchasing over the next few months. if coffee goes up, my futures gains offsets my loss (in that i would have to pay more but now don't have to cause i'm long). etc. i realize this is kind of obvious, but i think that we, as speculators, forget that we are just playing around the big commercials that are in the market for entirely different reasons.
I agree to an extent that there are definately some dynamics of commoditities that are not as prevalent in other markets. However, there is a market and just like any other it is driven by fear and greed. This leads to abnormal prices and probable patterns that can be exploited. Im with Buy1Sell2 on coffee, downside is much more limited then upside. Here is my thread on commoditities that has been nothing short of on the money since its inception. http://elitetrader.com/vb/showthread.php?s=&threadid=79854&perpage=6&pagenumber=1
i don't doubt that downside is more limited this is commodities. the cure for low prices is... low prices my point is that not everybody goes long or short to speculate on price. speculators need to remember that.
Ok, we hit 1.30 and backed right off. Is there more correction? Could be. I am in this for the long haul and believe longer term that we go up much higher. Many times with the physical commodities, I look for items that have a chart that I believe has been knocking around at relatively low prices, where there has either been bottoming or some strength off the bottom (as in coffee) and in those markets, I buy and hold. This is much like my corn and bean longs this year. I just endure some pain and don't pay much attention to it and then wake up to a nice move. Of course , it doesn't always work. If March Coffee would pull back into the 100 to 110 area, I would be a glad buyer. Technically the chart shows a bit of top here. Let's see how it plays out long term. If I was overleveraged, I would be freaking out, but I am underleveraged, so it is a value play right now.
Patiently waiting for March Coffee to either reward me greatly or remove my head and deliver it to me on a platter of clay.
B1S2, Go to read this coffee update, http://www.fas.usda.gov/htp/tropical/coffee.html it may change your view. Please read the past figures and compare with the price chart, you will see it can be very accurate.
GrHarvest, The report you cite updates the 2006/2007 crop, which is almost fully harvested and is hitting the cash market right now. The current bull market is driven by fundamentals for the 2007/2008 crop, which is underpinned by a down year in the biennial cycle in Brazil. Despite the hefty supply of cash coffee from the old 06/07 crop over the past few months (and expected over the next couple of months), the market has rallied. This is a testament to the supply deficit expected for the new crop. The fundamentals look bullish through at least May 2007.
janvir19, Yes in the longer term that may be bullish. But now it is just the start of 2007. Look at COT data, the commercial is net short, index is near zero. Last time index was this low was in Jan/Feb 06, the price of coffee drop from $140 in Feb 06 to $100 in Jul 06. At the extreme ends, the commercial was right most of the time.
Hi, I'm new in this forum and quite new in trading. Try to contribute. Don't you think commercials are simply selling the rally to the large traders in the mood of speculation all over the commodities (see grains)? Based on my (humble) multiple linear regression, the contract may should price in april @ over 140 (range 135-150, R2 0,96 StdDev 6%, I'd say a good result; fundamentals were basicly those suggested by Schwager). If I were by chance right, what should happen when large traders will have to flat their positions? Thanks