Market opens lower again today as the spread continued to get wider and draw down the open interest in Dec'06. Volume over 40,000 contracts today estimated as the range was narrow trading between 50 pts all day, but lots of rolling was taking place.
The close saw the biggest wave as an estimated 5,000 spreads were done from Dec to March'07 as wide as 3.80 where the market settled. This helped lift the market off the lows where it traded most of the day almost 30 pts as the market closed.
The Goldman move is still coming next week, but it seems that there will be resistance for the spread to go much wider as the volume done on the close brought quite a few sellers. This might set a max for the spread near terms as volume is picking up on a daily basis.
Plus locals covered some short positions and there was some trade scale down buying so we might be back in the 49/50 range for the near term.
Cotton crop conditions are slightly lower than last week and the percentage harvested has reached 50 percent but still lower than a year ago at 53 percent.
Spec short position came in today from 11.9 percent last week to 7.8 percent today. This may be on its way back out after all the spec selling this week. Cert stocks remain roughly the same as they still keep quite a bit of pressure sitting over the market.
52.50 H'07 seems to be setting up to be a short term support line, but this might only be through Dec expiration as new salescontinue to be limited as most buyers are only willing to buy for Dec shipment against Dec futures.
But with almost 4 cents premium to H'07, we will have a lot of trouble making sales for Jan/Feb/March going forward unless we get a correction.
However, in the short term we will see mostly spreading and a trading range between 49/51 and 52/54 H'07.
marketing@alchempro.com
