Market opened mixed with Dec jumping around with some more cert stock trading hands, but eventually fell lower. There seems to be a compromise between the longs and shorts in Dec and most of the open interest has found a home.
There were only 30 more contracts issued today as we may be seeing the end of Dec moving to March which has been as wide as 640 pts at one point. This should be more than enough to cover the carry and penalties for taking old crop cotton.
Volume was strong today with 24,000 futures and 29,000 options which were a mix of bullish long term and bearish short term strategies. Volatility has gotten very flat with most months all the way to Z'08 trading around 20%.
Open interest has come down significantly which may answer why the spec long position came in longer than expected at 27.1% compared to 24.6 last week. We are not expecting any large sales report on Thursday as demand continues to struggle even though the market is starting to reach an oversold level.
However, short term, the dollar bounced back today and the commodity index fell almost 2%. We may start to see a range form in H'08, but we broke the August low today of 64.75 so we may see some more technical weakness short term.
We are seeing pretty good long term buyers in the Z'08 and N'08, but the short term continues to show weak signals. RSI has reached the mid 20's and open interest is near 210k but the spec long position continues to remain at the upper end of the range at 27%.
We may be reaching a bounce off the string of current lower sessions but the demand still appears weak as most mills are taking big breaks over the next 2 months. The stock market bounced back today but most of the commodity complex is very anxious at these lofty levels as we get closer to the year end and potential profit taking.
marketing@alchempro.com
