Cotton futures were initially called to open around 20 higher this morning with reports of good start of week fund buying being active early on.
An ensuing unchanged open can be attributed to what was sturdy commercial selling on the opening. Reports from origin are that at present spot levels good volume is changing hands from origin to merchant hands.
That said there was a notable commercial offer throughout the day on a scale up basis. Specs took over early, managing to push prices up to 55.30 but there was little ability to follow through due to scale up commercial selling.
Bearish options activity was also noticeable today keeping things curbed. For the most part though prices remained in a very tight range between 55.00 and 55.20.
Later in the session some of the selling became a little impatient, whilst some of the locals abandoned any length.
This combination dragged prices to new lows for the session, settling with active month losses of 10-17 points. Estimated volume was fairly lethargic at 9,878 lots.
Tomorrow's spec hedge report is the first piece of worthwhile news this week with most anticipating a flat spec position having been net short 6% of open interest in last week's report.
Another consolidation day for the March contract today. Of minor note is that March has posted a second consecutive lower close and lower low.
There is a well defined up trend channel spanning from the mid November lows. Resistance from this channel lies around 55.50 at present.
The near term expectation is for more consolidation perhaps looking to test the 9 day moving average at 54.30 next.
Momentum is strong, and trending higher, having confirmed the price/momentum divergence put in place in late November. The RSI at 61.22 rising and still a ways from any oversold levels ( over 70.00 ).
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