Quiet day in cotton as the bigger markets enjoyed nice gains including a 1% increase in the DOW. Oil was up 4.00 USD a barrel, setting a new record high, along with metals contributed to the rise in the commodity index.
The Dollar index set another record low as the FED decided to lower the discount interest rate another 25 points today but hinting that it may take a pause from further decreases in the future.
In any case, they gave the markets what they were looking for in the short term even though they may have increased the concern over inflation long term. Volume today was average with 22.000 futures and 6,000 options as most traders were in the Halloween mood and not interested in adding new positions.
Options and futures for Z'07 are coming into expiration next month in a market which seems to be trading on the high side, but specs are not allowing it to sell off.
Next Friday will give us the latest USDA report as well as the options expiration. We head into the second half of the fourth quarter with the economy stable to friendly after favorable moves by the FED and may not see any negative effects from inflation until 2008.
Technically, the chart is flagging as we continue to trade in a recent 100 point range between 64/65. The market however seems to be locked into spreading from Dec to March and will unlikely break out of this narrow trading range until after December expires. As funds started their cover month switches, spreads between December 07 and forward cover months continue to widen.
With a record high open interest, it will be interesting to see how far specs are willing to hold their long positions in cotton. The short term fate of the USD will have a big impact on cotton as December expires.
marketing@alchempro.com
