The market felt friendly on the opening as the stock market was stabilizing and there was good trade scale down buying based on overnight business. However, the market took its normal pattern by failing to break through upside resistance at 60.70 and made a move all the way down under the previous days lows and found support at 60.00.
This triggered some short option covering to the size of over 5,000 contracts of Z'07 out of the money calls which were bought between 40/50 pts. This allowed NY to bounce off the lows quickly and make new highs for the day at 61.20. Volume was above average with 27,000 futures and 23,000 options as the market traded heavily in a fairly narrow 100 point range.
Export sales will be released tomorrow and we are not expecting any huge numbers. Sales to range between 50-150K and exports between 300-350K. This will not be the amount of demand needed to break us out of the current down trend.
Tropical storm Erin will make landfall this afternoon and will dump several inches of unwanted moisture on the open South Texas cotton crop which was hoping to stay dry.
However, this same system could turn and send much wanted moisture over the Delta and Southeast. We are coming down the final stretch for the Northern Hemisphere crop and even though there are some areas of concern, the size of the 07/08 crop does seem to be underestimated and demand continues to remain hand to mouth as the market looks for a bottom.
Technically, the open outcry closed below the 50% retracement of 60.20 @ 60.18. After hours trading allowed the Z'07 to make back some ground to close @ 60.34. In either case, the market is not showing any signs of a bottom and the equity markets and grains continue to struggle.
The stock market especially continues to see daily weakness as it closed down today over 1%. Will have to see how demand and weather events play out over the short term, but the trend remains in place to move lower.
marketing@alchempro.com
