Cotton futures were expected to follow through much higher this morning in reaction to yesterday's strong technical close and a continuation of fund buying. Whilst this fund buying turned up, so did the trade selling as March futures opened unchanged.
This began what would turn out to be a very even contest between spec fund buying and commercial hedge selling that kept prices in check for most of the day.
March managed to post an early high at 54.70, however the expected buy stops above 54.50 did not really materialize to screaming higher prices due to the heavy cluster of commercial selling above 54.50.
Options activity was quite friendly throughout, with one of the major merchants being a seller of over 1000 March 53 puts for 95 ticks.
For the most part though prices oscillated just either side of unchanged before some late day fund strength posted positive gains as much from 12 to 35 higher in the active months.
A further widening in carries was noted, with Dec 07 closing at 59.90. Estimated volume was quite decent at 13,847 lots.
This morning's spec hedge report was little changed to last week with the specs net 6.5 percent short compared to 6.0 percent last week.
For the week the specs reduced their longs near 400 lots and increased their shorts near 400 lots.
Following 2 days of good spec buying we believe this figure could now be much closer to even. With March exploding higher yesterday, what was needed today was a consolidation session which the bulls duly got.
marketing@alchempro.com
