Market traded electronically lower on the pre-open as the market looked like it was taking profits after the several up days over the last two weeks. However, there was good fund buying near yesterday's lows at 63.50 and the market rebounded to close higher on the day.
The biggest move in the morning was option related and bearish as put buying was the main feature which lead to the break in cotton prices over 100 points. Volume was above average at 28,000 futures and 29,000 options as the market continues its uptrend.
The spec hedge report came out late this afternoon with a 23.8% long position which was within expectations and shows the spec funds are willing to add to their long position as open interest pushes toward 215,000.
The Fed announcement today was slightly above expectations cutting the fed funds and discount rate by 50 points, and served to push the stock market to pre sub-prime crisis highs over 13,700.
The 2.5% rally in stocks carried over into several commodity markets as the Commodity index went to new record highs. Grains were mixed to lower as cotton pushed to the 65.00 cent level and we may see further upside tomorrow based on the positive reaction in foreign markets overnight.
Technically, RSI is closing in on 80% which is overdue for a correction, and we are approaching a double top on the chart at 65.00 cents. However, the momentum from the stock market and the fact cotton is still way behind new crop grains prices, we would not be surprised to see further follow through to the upside. Trade scale up selling will get stronger as more cotton can be bought at these levels and higher.
New sales at these levels are very difficult so its hard to see much more upside as so many markets are trading at the highs, but the short term trend remains friendly.
marketing@alchempro.com
