NY futures continued to trade sideways this week, with spot December moving 65 points lower to close at 63.74 cents and December'08 giving back 40 points to close at 74.85 cents.
During the month of October, the December contract settled into a fairly tight range of just 350 points, between 62.15 and 65.65 cents, after it had traded in much more volatile fashion during the growing season. As we have explained previously, we believe that this sideways action is caused by two opposing forces that create strong support and resistance.
On the one hand we have speculators, which commit ever increasing amounts to the long side of the market, thereby producing upward pressure, while the trade continues to cap any rallies by increasing its record short holdings in outright futures and options.
Both camps have valid reasons for their respective positions, as speculators see an inflationary macroeconomic environment with rising commodity prices while the trade is engaged in a numbers game against the marketing loan.
Over the last few weeks both sides have been given even more reason to bolster their respective positions and as a result we have seen open interest rise to over 24.8 mio bales this week.
Even though the market traded rather listlessly during the month of October, open interest has increased by around 1.7 mio bales over the last 30 days. Interesting in this regard is that open interest in the December'08 contract has gone up by 7'398 contracts to 25'801 contracts since October 1, as hedge funds continued to place long-term bullish bets.
marketing@alchempro.com
