Early calls this morning pegged the opening unchanged to about 20 lower, which to some seemed like a surprisingly firm call given the absolute bearishness of the USDA world supply and demand estimates.
December came in around 30 lower at 48.10 first tick, however this proved to be the low for the day, as today's report was soon cast aside as a “sell the rumor, but the fact” event.
Indeed many in the trade had anticipated a very bearish report and given the USDA needed to calibrate it's estimates to be closer to the ICAC and Cotton Outlook, most traders had already positioned themselves on the short side of the market.
And hence with a sudden lack of follow through selling albeit at the contract lows, the short term short traders found themselves soon covering above the unchanged level as prices soon leapt into a vacuum of offers above the 49.00 level.
As spec buy stops were quickly run, December advanced all the way through 49 cents and eventually into overhead resistance at the 50.00 mark.
A 162 point gain by mid session was quite surprising and quite remarkable given that the USDA had just found an additional 5.5MB on the global balance sheet.
These gains didn't last all day though, as some local profit taking, mixed with trade selling kept prices in check. Another notable feature today was a dramatic tightening of the Dec / March spread, which moved in from a closing value of 355 to trade momentarily at 290.
Some late profit taking today saw contracts settle with modest gains of 37-55 points in the active months. Estimated volume was a solid 23,000 lots.
marketing@alchempro.com
