Futures were called unchanged to slightly higher on the back of some good demand overnight of physical cotton.
Most active December contract opened at 52.21 slightly above yesterday close before loosing ground and testing the contract lows.
A combination of speculative and fund selling pushed the December contract to a low of 51.31 before finding scale down buying rom the trade.
Option trading volume was estimated at 13,800 lots with 9,500 calls and 4,300 puts traded. Most option activity pressured prices lower.
The market appears to want to retest the contract lows of 51.20 basis the December contract. Local traders will be conscious of major sell stops at 51.20 and below that could provide further downside for this market.
At the same time good international demand for cotton continues to increase as we grind lower and this may offset a move below recent contract lows.
US export sales and shipments were reported as Net upland sales of 189,900 bales, a 14% decrease from the previous week, shipments were reported as 76,000 bales.
US old crop loan stocks remain above 840,000 bales and the trades are expecting some significant volumes of redemptions over the next two weeks due to loan expirations taking effect, this will only weigh on the cotton market as will the certificated stocks building.
Technically the December contract wants to test the contract lows, but continues to hold within the current trading range with good resistance at 53.00 cents. Should we break through 51.30 and the contract low of 51.20 expect new shorts to enter this market.
marketing@alchempro.com
