We continue the technical downslide in cotton with Dec'07 liquidation still weighing on the front month which keeps pushing the spreads out wider. There were 1,643 notices issued on Wednesday and it looked like most of the stoppers were funds and not traders.
This was confirmed today as most of those notices were reissued today especially the 662 notices from Morgan Stanley. Cotton was very quiet over the long holiday weekend as we are beginning to feel the slowdown in consumption starting with the extended holiday breaks.
Export sales and shipments last week were friendly with good numbers in sales near 250,000 and shipments close to 200,000. This number should be much lower this week as we are also expecting a smaller spec hedge position closer to 20%. Volume was average today with 25,000 futures and 11,000 options as the H'08 traded in a tight 100 pt range.
We bounced mid session with a strong buyer of the Z'08 75 calls paying as much as 490 pts 1500 times. The other commodities were roughly unchanged during the day as the dollar continued lower and the stock market took another hit late in the day.
Technically, the market is looking like Dec'07 has a good deal of open interest in weak hands that may further lead to more downside. We are seeing pretty good long term buyers in the Z'08, but the short term continues to show weak signals. RSI has reached the mid 20's and open interest is near 210k with a spec long position after last week much closer to 20%.
We may be reaching a bounce off the 8 of 10 lower sessions but the demand still appears weak as most mills are taking big breaks over the next 2 months. The stock market continues to struggle and most of the commodity complex is also very anxious at these lofty levels as we get closer to the year end and potential profit taking.
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