Cotton prices continue to grind higher fueled by fund buying and friendly options. The assassination in Pakistan overnight gave the market some geo-political concern as the Dow Jones took some profits, but this news supported oil prices close to record highs near 98 usd/brl.
Grains however, took some profits after yesterdays strong performance as metals were unchanged. Volume was above average today with 29,000 futures and 32,000 options as the bullish momentum keeps adding to the growing open interest and the spec long position.
Spec hedge report today showed the long position now at 21.4% which was almost a 6% rise from last week. This is further proof that the market possibly has higher to go since we have had the specs over 30% and open interest is only 225k compared to the highs over 250k.
Obviously, this rally is approaching 5 cents from the lows and will need some further investments to test the highs near 70 cents. Even though new sales will continue to struggle, the specs do have room to buy and there are rumors of new hedge fund money to enter the market in early 2008 which could add to the upside potential.
Technically, we broke the resistance at the 67.00 cent level, and continue to hold the upside trend line started in early December. RSI is close to 65% and the specs are adding back to their long position which could reach 25% by next week. With the 9 and 50 day moving averages getting closer to crossing, we may have an opportunity to make a run at the high 60's nearby.
However, there will be plenty of scale up trade selling which will keep a lid on the market short term. Once we get into 2008 and new sales continue to struggle and specs get longer, the market should be due for a correction.
marketing@alchempro.com
