Market opened higher today and did not take long before we were setting new highs across the board. However, the trade selling got stronger over 53.50 in H'07 and kept the market from reaching 54.00 or 51.00 in Z'06.
We hit some buy stops early and the specs and locals tried to push the market up as the trade sold futures and did bearish options.
Volume today was above average at 23,500 contracts and represented a large volume of spreads as usual. Z/H came in again today as there seems to be a rush to roll cotton even though the cert stocks continue to rise on a daily basis with 785,619 bales in stock and 43,148 awaiting review.
Sales and shipments were also average again this week, with just 195,900 b/c in sales which was higher than last week, but 17% below the 4-week average.
Shipments of 137,200 b/c was in line with the last several weeks with the usual largest destination being China.
Technically we did cross the 9 day moving average today but still have not reached the 40/50 days levels above 51.00 cents in Dec. We seem to be in a friendly trend at the moment which may have some more room to the upside.
We may have some profit taking in the process, but the specs and locals seem committed to push the market higher into steady trade selling.
There is old crop loan cotton that is still being redeemed and new crop equities as well that will provide plenty of selling pressure in NY.
The AWP jumped today from 41.30 to 41.79 so we may have seen a large amount of cotton redeemed today out of expiring old crop stocks. Harvest should be reaching 50% completion this week and West Texas has ideal condition to increase this amount very quickly.
The Delta on the other hand has been fighting rain and moisture that is slowing them down, but does not seem to be a concern yet.
We probably will move higher in the short term as spreading is the main feature and there is still over 100,000 in Z'06 open interest.
marketing@alchempro.com
