The market found itself trading in a narrow range most of the day after a busy session on Friday. Volume was back to average levels with 19,000 futures and 14,000 options as cotton tested the lows from Friday and closed near unchanged. There was rumors of good export business over the weekend after the break in NY and this should show up on Thursday.
From another friendly perspective, the spec long position has now fallen to one of the lowest levels it has seen in the last 6 months since this rally began in May of 18.2% as you will see on page 2 in attached PDF.
However, there is still a weak technical chart for H'08 and demand is still yet to show up in large numbers. Cert stocks seem to have stabilized as more than likely any cotton that was attractive has been decerted and the rest of the stock should remain near the current levels of 600k as we look into the next 6-8 weeks.
We are approaching seasonal lows which typically find a bottom near mid-December. Cotton open interest is stable but below average and only rose slightly after Friday's big fall in prices.
Volume was big on Friday, but the open interest only rose slightly so it does not show the commitment that the market wants to go lower. Specs are now under 20% and have room to buy if they get a friendly signal from the market. Technically, we broke the H'08 6-month uptrend line, and demand still appears slow.
The stock market continues moving higher with more confidence in the financial market, and the dollar is showing some life despite the market feeling confident we will get another cut in interest rates. RSI is 31 and we may see a further test of the downside this week.
marketing@alchempro.com
