Futures were down early based on weak overnight grain markets and the small bounce in the dollar. However, we found good technical support under 63.00 cents in Z'07 and the market spend very little time working back toward the highs of the day where we closed.
We continue to trade in a sideways trend channel which continues to lean toward a eventual sell off if we cannot break through 65.00 cents. Volume was average with 20,000 futures and 8,000 options as the majority of the day was spent spreading between Z/H and Z/Z which remained at record highs until the close.
Spec hedge was slightly higher at 25% compared to 24.4% last week. We are not expecting any big export sales report this week, but have been hearing of more inquiry from China and Turkey which are both back from holidays.
The market continues to look for some guidance short term as the demand remains quiet and new crop is coming in slowly with mixed weather news from India and China. The stock market worked lower during the day as energy and metals continued to climb. Grains also closed lower as the markets seem nervous with such strong oil prices.
Technically, cotton tested the downside today, but failed to hold any follow through as we continue to trade in a sideways trading range. Open interest is still over 230k with rising cert stocks and a lack of demand. Unless the market can break through 65.00 or 62.00, we will continue to trade sideways waiting for a break out in either direction.
However, the more we fail to the upside leans toward possible further selling from the specs. We did some damage today to the recent upward trend pattern and will see how the specs react nearby. This will depend on the grains and equity markets since fundamentals in cotton are having very little impact.
marketing@alchempro.com
