Cotton futures were up on the open and looked like they would continue to try and test the highs that were set electronically at 59.25. However, we opened the outcry up to 58.70 but spent the rest of the days on the lows between 58.00 and 58.20. The grains were mixed to slightly higher, but the stock market closed firm up 142 points.
This along with the fact that business based Oct'07 near 56.00 seems to find good demand for all mills who need to cover the gap between crops. Volume was below average again today with just 12,000 futures and 9,000 options.
We still have questions about weather along with good demand under the market, so we should see the market trade in a range between 55/57 for the front month.. Specs and locals were sellers today with good trade scale down buying.
With open interest under 200k and decreasing their longs by 15,000 contracts last week, shows that we are still in a downside pattern. Will have to wait until next week to see which way the market will break out of this sideways range.
Technically, we are forming a flag on the chart as we continue to trade within our limit range that was made last Thursday. The gap down on Thursday has made the upside resistance at 59.50 and the downside at the weekly low of 57.50. RSI has trimmed back up to the mid 30's and the specs still have a significant long position that may put a ceiling on the market short term.
The stock market and grains are holding firm so it looks like there is good support under the market as we get closer to harvest.
marketing@alchempro.com
