Slow day in NY as the market was called lower and managed to get all the way to 53.10 or 100 pts lower than Friday's high before it found some buying support. The rest of the day was spent in a tight range with the volume only showing and estimate of 8,000 contracts.
The specs have been good buyers all last week and recently so there are estimates that the net short position that was 14.8 percent last week might even have reached single digits now.
Technically, the market looks like it wants to go higher in the short term, but there will be plenty of scale up trade selling to keep the market from going too much higher.
This will depend on how much cotton was redeemed last week and how much still needs to be hedged. As of the 28th of November, there were 9.5 million bales registered in the U.S. loan only 660,000 bales have been repaid at this point.
With the A index rising so strongly, there is an estimate up to 1 million bales that might have been redeemed on the AWP from last Thursday of 42.11 compared to 44.59 which is the theoretical for next week.
Demand has slowed down with the market at these levels and most merchants are finding it difficult to make new sales. We estimate that in the short term we will continue to test the highs as speculators liquidate into trade selling, but long term anticipate the H'07 contract having to test the 51.00 level again in order to spark any volume of new sales. March struggled today but stays well within the trading range.
marketing@alchempro.com
