After a nice rally on Tuesday, the market was unable to follow through today with a lack of new buyers to support the market above 66 c/lb. The stock market also took the day off as the equities and commodities traded in a narrow range.
Open interest yesterday rose slightly in spite of the rally which is another indicator the markets are looking for more news before they commit to a new test of the highs.
Volume was light today with only 11,000 futures and 8,000 options as the market starts to settle into a range and the dollar starts to stabilize. Overnight business was considered very slow after the jump in cotton prices although we did get a good sales and shipment report in spite of the Thanksgiving holiday.
Also, found out this morning that a large decert of 81,544 bales was made and this combined with previous decerts adds up to a significant cut in cert stocks. Take a look at the technical chart on page 2 in attached PDF which proposes a possible trading range between 62/67 cents based H'08. The market will attract good sellers near 67 based on redeeming new crop and find good demand from mills if the market reaches the low 60's.
We were seeing good long term buyers all week on the downside and expected more follow through higher today with the large decert, but it did not happen. Volume was not behind the rally yesterday and that was emphasized in the small change in open interest. Technically we are holding the H'08 6-month uptrend line, but demand still appears weak and we ran into good trade scale up selling in H'08 over 66.00.
The stock market took a break today after a strong bounce early this week, but the dollar is showing some life despite the market feeling confident we will get another cut in interest rates. Page 2 shows a possible scenario for the H'08 over the next several weeks.
marketing@alchempro.com
