Market bounced on a decrease in crop progress and technical oversold signs after Monday's test of the 3 month lows. However, the volume was light with only 13,000 futures and 12,000 options as the market traded in a very narrow range most of the day near 57.20.
Crop progress showed some big reductions of quality in Alabama, Louisiana, Tennessee and North Carolina. However, we did get some beneficial rain over the weekend so some of these areas have received some relief since this progress report was released.
Spec hedge report came in today within expectations at 19.5% compared to 22.8% last week. This still shows a considerable long position as it continues to drop each week. Options were mixed today as the market drifted higher on some trade buying as business is being done at these levels with mills rush to get their nearby purchases bought based V'07 before in expires on Sep. 24.
However, the stock market fell hard again today as we continue to get negative feedback from the real estate markets and this led to weakness across the commodity complex which may feed lower tomorrow.
Technically, we broke out of the flag pattern on Monday to the lower side as we are now trading under the 200 day moving average (59.00). The gap down on Thursday has made the upside resistance at 59.50 hold but we broke the downside at 57.00. At this point, the next level of significant support would be the bottom of the downside trend channel at 55.00 based Z'07.
The stock market and grains continue to struggle as fundamental and technical signals in cotton remain weak. Take a look in attached PDF to see a correlation between the spec position and open interest.
marketing@alchempro.com
