Cotton traded in a sideways to higher range today as we still find a lack of strong commitment either way. Open interest came down over night slightly where we are holding steady at 220k and the cert stocks have stabilized to slightly higher at 550k.
The trade scale up selling into spec and local buying was the main feature in average volume of 19,000 futures and 12,000 options. Grains were strong today which also fueled the upside pattern today which had trouble breaking the 66.50 level.
We should continue to see this pattern through year end as the specs are determined to end on a strong note. Export sales tomorrow should be within the 4-week average of 250k sales and 250k shipments, but neither of these numbers will get us to the 16.2 mb's that the USDA currently has for 07/08 exports.
This may push ending stocks higher for the current marketing year, but the 08/09 acreage continues to keep NY supported long term.
However, for the short term, H'08 seems to be caught in a year end spec driven rally which may end with some profit taking on Monday the 31st. For that reason, we don't see much upside past 67.00 cents in H'08 and may see a correction early next year.
Technically we broke the resistance at the 65.50 cent level, and continue to hold the upside trend line started last week. RSI is back over 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 with such heavy trade selling.
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
