Futures tumbled from the open as strong speculative, fund and local selling pushed the December contract to a new contract low of 50.00 cents and finished the week at 50.45.
The Volume was estimated at 24,000 lots with 9,300 calls and 9,100 puts traded.
Most in the trade expect 50.00 cents to hold basis the December contract, the key is where will it test and trade too next week. Some expect it to hold above 50.00 cents while others anticipate it to grind lower.
Most are expecting good demand for cotton around 50.00 cents as it is considered to be cheap by historical standards and will land to most mill destinations sub 60.00 cents per pound.
Recent import quotas being released from China in excess of 894,000 metric tones has encouraged some to think that we may see more released in the near future.
China continues to be the key for this market and whilst their crop is expected to be another record crop and with significant consignment stock still available in bonded warehouses.
They are not expected to be a major importer of US cotton until the first and second quarter of 2007.
The US cotton harvest is well underway in most states. Recent heavy rain in the Northern Delta over the past week as much as 12 inches cause some flooding issues and producers are expecting some yield and quality loss.
The crop is still expected to fall in the range of 20 – 21 million bales.
Technically the December contracts look terrible with no major support level. It closed today below the 10-day moving average of 51.97 cents per pound.
On the resistance side a technical gap remains overhead between 53.25 and 53.41 that may have a chance of filling sometime in the near future.
We continue the down trend and feel that we should see limited downside from here basis the December contract.
marketing@alchempro.com
