On Wednesday the futures market finally started to trade freely again, in heavy volume of over 74'000 contracts, which should have allowed anybody who still needed to square up his books to do so. In other words, after two days of sheer panic, the market seemed to have found its equilibrium again.
With no more shorts having to get out of the market for the time being, this rocket finally ran out of fuel today and what followed was a typical crash and burn return to reality, with the market falling by over 10 cents intra-day before closing at a synthetic 82.70 cents in May.
The US export sales report, which showed that just 144'900 running bales of Upland and Pima cotton were sold last week, may have served as a reminder to traders that this futures rally occurred in isolation and had no support in the cash market. It was simply a liquidity squeeze of major proportion that claimed a number of unprepared victims.
marketing@alchempro.com
