Market had some follow through buying overnight after the closing rally on Friday, but by the time open outcry began the market had put in a high at 65.25 and had started to run into good scale up selling. The volume was still in the below average category with only 16,000 in futures and 11,000 options.
We did have some volume of bearish options come in near the end of the day buying the H'08 64 puts and selling the 67 H'08 calls for 50 pts debit. All of this contributed to another slow day of trading with the market trading in a narrow range.
Tomorrow will be an active day for commodity reports as well as the big decision from the Federal Reserve whether to continue cutting rates or pause. The majority are expecting a cut in rates of at least 25 basis points as well as friendly S&D reports from cotton and grains.
Calls for minor cuts in production as well as further tightening in grains keep the commodities well supported on dips. The spec hedge report fell slightly last week to 15.6% long from 18.2%. Open interest also rose 2,000 contracts on Friday which would correspond with the mini rally which began on Thursday.
We closed above the 9-day moving average and the market continues to find good scale down buying near 64.50. RSI is about 40% and the specs are only 16% long. The demand has been steady but not overwhelming. However, we were looking oversold and due for a bounce and have to see if this can find some follow through support this week on the reports tomorrow.
The grains were also up very strong again today and showed that they may have some more room to the upside which will drag cotton higher.
marketing@alchempro.com
