Dollar & equity markets to determine short term fate for cotton
06 Nov '07
2 min read
Quiet day in cotton as the market continues to be held in a narrow sideways trading range. More spread trading was evident today, but the real push might not start until Wednesday when the large funds traditional begin their roll on the 5th business day of the month.
Volume was average again today with 25,000 futures and 5,000 options as the open interest continues to come down and cert stocks are growing again. Spec hedge report came down for a second straight week as the long position was reduced to 24.1% compared to the 25.3 last week.
The cotton market seems to be struggling to break out of the current 300 pt range that we have been stuck in for the last month. We seem to be waiting for options expiration on Friday or some significant news in the USDA report which comes out the same day.
Oil made another run at 96 usd/barrel today, but was unable to hold those gains as most of the commodity markets were fairly unchanged. The stock market continues to struggle with the current financial crisis and the uncertainty of how bad things really are.
Technically, the chart is flagging, as the 9 and 50 day moving averages are coming close to crossing. 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.
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 uncertainty in the stock market today may show that we are reaching a nearby top. Most commodities look vulnerable for a pull back, but the dollar and equity markets will determine the short term fate for cotton and it appears stable.
marketing@alchempro.com
