Cotton futures started out being called around 20 higher this morning, with some anticipated fund buying, however looming commercial selling around the 53.10 level and up in March capped any chances of an early advance.
Prices broke a little on the re-opening with reports that the locals had taken a sizable long position home. Still activity was reasonably anemic, finding some trade support and mill buying around the 52.70 mark and being unable to really get any momentum going either way.
Co-op and producer led equity hedging was notable above 53 cents, so the range was pretty much set early between the limitations of the commercials.
Volume was light, and it was noted that implied volatility again softened in the options pit, trading close to 19 percent with a soft skew to the calls at the moment.
Position squaring late in the session closed contracts with active month losses of 14-19 points in an otherwise event-less day. Estimated volume was quite fitting at 7,411 lots.
This morning's spec hedge report indicated a trimming in spec short positions over the past week. Having been as much as 17.4 percent short of open interest last week, the net spec position was as of the end of the week was 14.8 percent. This accounts for a net position of 23,070 contracts.
March seems to have put in something of a low last week, bouncing nicely off the 50.80 area whilst also managing to break atop the short term trend channel created from the start of the month. Today's session lacked conviction and follow through, trading a tight range after yesterday's expansion.
The 9 day EMA again proved to be short term support today, whilst the 50 day SMA looms as overhead resistance.
Momentum wise the RSI is now neutral at 51.53. Mentioned last week that the new contract low was not confirmed by a new momentum low, showing lack of conviction to the downtrend as well as the potential for a reversal. For now we anticipate that there will be a myriad of commercial hedging above today's highs.
marketing@alchempro.com
