Yesterday's late evening announcement that China will produce a 6.46 Million Ton crop by the Chinese National Market Monitoring System had something of a profound effect on prices this morning, with the first call being 40 lower and then the first tick 60 lower.
Market was really playing Defense all day long, as prices bumped down near 100 lower after the reopening and never really managed to either break down further or even recover any of it's losses, instead trading in a very tight intra day range.
Spreads curiously narrowed in even further today, with the December / March trading in as narrow as 305. The tendency to narrow over the last week could have as much to do as order flow as anything, and it appears that the trade order flow is to lift hedges on December and then sell March via the options pit, causing a natural bull effect on this spread.
Little other features today as prices remained weak and somewhat inactive going into the close, settling the day with losses of 87 in December and 102 in March. Estimated volume was decent at 13,000 lots.
Tomorrow's US export report could be similar to last week's, especially given the price behavior last week. WE could expect to see a sales figure close to 300,000 bales with shipments continuing to disappoint around the 125,000 mark.
Technically the December contract continues to adhere to it's bearish down trend channel.
After looking like having an encouraging bounce yesterday, the fact that the market lost it's gains and settled on the lows was a sure sign of weakness, and today's gap lower opening only confirmed this weakness.
Until there can be a price shock to wake the bulls up, it is near impossible to comprehend the market trading anything but lower. Momentum continues negative, trend following indicators such as the MACD and the short term moving averages are negative. Frankly it will take a close above 51.50 or 52.00 to chase the record short fund position out of the market.
marketing@alchempro.com
