Friday's collapse in cotton prices provided the 13th lower close in the last 16 sessions for a net loss during that period of from 4 to 6 cents. Volume also picked up Friday after Thursdays volume had been the lightest in two months.
While markets do tend to fall on their own weight from time to time, this past weeks break was initially sparked by a big hunk of the delivery notices landing on a spec account who aggressively sold December to retender the unwanted notices.
Bottoming action in the US dollar and worries about the economy that led to technical deterioration were also contributing factors. Export demand, while it has picked up some, is still nothing to write home about.
Month end activity, such as seen Friday, can often times be credited to fund money managers adjusting their portfolios. No doubt, this exacerbated the problem to some extent.
Fridays break alone accounted for 75 percent of the weeks losses and 30 percent of the months losses and carried prices to the exact 50% midpoint of the entire move from contract lows to contract highs.
The last 100 points Friday came from massive liquidation of painfully unprofitable option positions by a giant fund. They bought approximately 5,000, deep in the money, March 68 puts. It was most likely liquidating a painfully expensive losing position but we will know for sure early Monday. There were something like 5,900 March 68 puts open going into the session.
March cotton lost 208 for the week and 529 for the month. The Dec 08, finished the week 155 lower
marketing@alchempro.com
