Market is expected to see some follow through buying after the nice rally yesterday which added almost 3,000 contracts to open interest in an above average volume day. However, despite the strongest export sales in 3 months with 367k and shipments of 270k, the market was unable to push above yesterday's high of 65.50.
The spec and local buyers ran into strong trade selling as the market fell back to last week's highs near 64.50. Volume was back to below average levels of only 16,000 futures and 5,000 options as the market still feels range bound between 63/66 and we closed in the middle.
The stock market continued to be weak after a retracement from the highs yesterday as consumer confidence continues to struggle with the uncertainty over the subprime loan problems.
Grains were off a bit overnight as well as metals and energy which also may have weighed on cotton as the dollar was firm. Expect to continue seeing strong scale up selling above 65 cents in H'08 as there is a great deal of new crop loan cotton that needs to be redeemed.
Technically we made a double top at the 65.50 cent level, but closed above the 9-day moving average. RSI is back close to 50% and the specs look like they are adding back to their 16% long position. The demand has been steady but not overwhelming as the market looks like it cannot find enough ammunition to retest the contract highs any time soon.
We may see the market trade sideways in a 63/66 cent range as we get through the holidays and into the new year.
marketing@alchempro.com
