Market traded again in a narrow range on light volume as the price of H'08 settled unchanged. With only 9,000 futures and 9,000 options, the market had very little commitment to break out as we appear to be in holiday mode squaring up before the end of the year.
The export sales report this week is expected to be smaller than last week and fundamentally there is no real big news coming out anytime soon. Most of the bullish arguments are centered around new crop acreage as the competitive crops are well ahead of cotton.
The Farm Bill passed by the Senate is in threat of being vetoed by the President after the WTO announced further claims that the U.S. cotton subsidies still violate the free trade rules. The market seems to be setting up for a sideways to higher range with only 7 trading days left this year ending on Monday, December 31st.
Open interest increased again overnight which seems to be adding to the spec long position in the nearby months. Spreads between H'08 and the back months moved back out, but still are less than the widest levels we reached during the last sell off.
Technically we broke the resistance at the 65.50 cent level, and closed near the high above the 9-day moving average. RSI is back close to 50% and the specs are adding back to their 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 at 70.50.
We may see the market trade sideways in a 63/67 cent range as we get through the holidays and into the new year. We expect heavier scale up selling from the trade as we move higher.
marketing@alchempro.com
