Another strong day from the funds as the market was called 10-20 better and ended up rising 80 pts across the board. The firm A index keeps raising the selling target for the trade and now most of the trade are shooting for 57.00 c/lb. in order to redeem cotton.
Technically the market closed very positive breaking through and closing above the short term bullish trend channel that has been forming recently and erasing a bearish evening star formation on the Japanese candlestick charts from Friday.
Volume was healthy considering most of the locals were still on holiday with futures trading above 12,000 and combined options close to 10,000 lots.
Demand for U.S. cotton still remains weak, but there were rumors that China has been buying Indian new crop high grades for first quarter delivery.
Cert stocks remained unchanged @ 629,000 b/c but there is still concern that this might be the cheapest cotton available as the new crop cotton is very difficult to redeem.
Spec hedge report comes out tomorrow and the estimate would be near 10% as they have been big buyers all last week and look like they will continue to stay strong through the end of the year.
Technically, there is a gap to fill between 57.00- 57.20 and this might be the next target as we will see good trade selling. The market is looking overbought as we are reaching a rally of 600 pts from the most recent lows in November.
However, there still seems to bevalue seen by the funds and the firm A index is not allowing cotton to come out of the loan with the ease and this should keep the market friendly in the short term.
Fundamentally, the market still seems long term range bound and we will just have to wait and see how much more buying the funds are willing to do.
marketing@alchempro.com
