Market was lower on the open on carryover from yesterday's weak close, but found good buying support under 60 c/lb. Then cotton turned higher as locals started to go long and there was a lack of trade selling until the market crossed 61.00.
There was also scale up selling in the Z'08 as the market is struggling to find buying momentum on limited sales and rumors of crops being much bigger than estimated. Volume was average with 17,000 futures and 9,000 options with one transaction selling 1,000 Z'07 65 puts around 550 pts.
The export sales report tomorrow will reflect business from last week when the market bottomed out on Monday before it started heading higher on Wednesday. Estimates are starting at 300k to 400k which would be lower than the season high last week of 480k. The stock market held up most of the day and had very little negative effects overnight.
Grains gave back some gains today as wheat even closed lower, but the cotton market seems to be forming a short term trading range between 60/62 cents.
Technically on the open outcry chart, we have a triple top near the 61.80 level which is roughly 60 cents on V'07 and 70 cents for Z'08 which is forming strong resistance to a move higher. Cert stocks fell again slightly and the AWP is flirting with 51.00 cents so the market still has an incentive to go higher short term.
However, we would start to see stronger trade scale up selling if we could get the Z'07 contract above 63.00 c/lb which would represent the 1200 pts spread needed to redeem cotton. That will take some cooperation from corn, soybeans and the stock market.
marketing@alchempro.com
