Overnight trading tested the lows of the last several sessions as lower grains on light volume equalled a quiet trading session in cotton. Volume was on the low side with only 18,000 futures and under 6,000 total options as the market looks like it is comfortable waiting until we get more information.
Harvest weather conditions have been ideal which have even added some unseasonably warm weather to finish the crop off in West Texas. The M/E Delta is mixed with some good and bad yield reports, but overall the harvest is picking up speed each week as we get into the 4th quarter.
Spec hedge position fell 2% to 24.4% (page2) which proved there has been some spec selling, but open interest has held firm above 230k. Cert stocks are continuing to grow with over 40,000 b/c awaiting review which goes to show the market is not getting much demand at the moment.
Even though the market has fallen 500 pts from the highs set over a week ago, the export demand does not seem to be heating up and the market looks like it is patiently waiting for lower prices to buy Nov/Dec shipment.
China is back from holiday, but Ramadan is till going until October 12th and the commodity markets seem to be giving back some of the record highs that were posted at the end of September as the USD continues to rebound and the Dow Jones is looking nervous.
Technically, the market is in a downside trend channel, but we are moving sideways at the moment and consolidating for bigger moves down the road. RSI is below 50% and open interest is still over 230k with rising cert stocks and a lack of demand. Grains are off the highs and demand is quiet with the new crop closing in quickly.
Unless the market can break through 65.00, which would represent the top of the new downside trend channel, we will probably be making another test of the 50% retracement level in the near future. This level is almost the same as the 50 day moving average and if this is broken we should see more sell stops and spec liquidation.
marketing@alchempro.com
