Market opened lower, but stayed with the momentum from yesterday and tested the highs from yesterday but could not break them.
However, it was a good volume of over 15,000 contracts and closed near the 4-week highs set on Thursday.
This move is purely technical as we closed above the 10/20 day moving averages, but in order to keep the rally going we need to close above the 40/50 day moving averages over 51.00 c/lb.
As usual, the majority of the trading was in the Dec/March spread which got as wide as 340 today but the majority was done around 320 where the Dec/Mar settled on the close.
There will continue to be heavy trade scale up selling in the H'07 so we probably see more upside, but it may be interrupted with some pull backs and profit taking.
Many feel like the top might be 52.00 Dec and 55.00 c/lb.
March until we find a top to this rally which would be 400 pts off the lows. This will help the spread between the AWP and NY in order to free up old and new crop cotton in the loan.
We still have numbers with the USDA S&D that need to be adjusted, which include U.S. exports and Chinese consumption that could both contribute to higher ending stocks.
This will come out over the next couple of months as well as large cert stocks which will all continue to be big reasons for us not to have much upside potential in the near term.
We have 17 days until FND and that will be mainly occupied with spread activity. But after Dec goes off the board, we will probably see a weaker H'07 contract as we try to reach a level that moves cotton for first quarter shipment.
marketing@alchempro.com
