Cotton prices rallied in New York today, with considerable volume changing hands. Prices opened roughly unchanged, but continued to firm, building upon the fruits of yesterday’s recovery. Spec and fund buying was seen early and often, coming in waves sufficient to offset the scale-up selling noted from the trade.
Options also played a role, although not to the extent of that in futures, so in other words “the tale didn’t wag the dog.” The result was that the active December contract, which had traded as low as 54.28¢ per pound yesterday, closed tonight at 56.76¢, and was 148 points higher, an increase of 2.67% on the day. This close now places December above the 100-day moving average, which is likely to attract additional interest.
Today the funds bought steadily, with some profit taking and trade selling found first at 5610, then again at 5650. Both of those areas should now provide some support. When new highs were made on the close, it was accomplished while specs and local traders were loaded up on the long side, positioned to take advantage of expected buying to come in for the close. There was buying, but not in the levels that had been expected, so while some locals took profits, some also appear to have gone home holding longs. This may promise to dull a higher opening for tomorrow, or weaken a softer opening. There was some assertive selling during the close, and why not, since prices have regained over 250 points from yesterday’s lows.
I’m encouraged by:
The way cotton seems to behave; today it never backed off below 5630
I especially like the fact that Dec shows resilience from dips
Positive slopes of the short term moving averages
A bottom seems to be in place
Continued talk of reduced crop estimates
The short covering has been orderly
Today’s Volume
I’m cautious because:
It is healthy to digest recent gains
Locals may bail out on any sign of weakness
We still haven’t received any significant demand news
I wonder how much of this rally is based upon a bullish crop report
The Dec/March spread traded between 290 and 275, Oct/Dec between 180 and 190, while the Dec’06/Dec’07 spread, traded between 625 and 620.
Look for:
Support at: 5650-5630, 5610-5585, 5550-5530, 5455-5440 and 5405.
Resistance at: 5690-5700, 5745-5760, then 5800, 5850, 5890 and 5950.
Moving Averages
December (56.76)
March (59.57)
Options
Volatility
9 Day
55.21
58.15
Sept.
24.00%
18 Day
54.03
56.96
Oct.
26.00%
40 Day
55.14
57.92
Dec.
25.75%
100 Day
56.22
58.71
March
24.50%
Futures
Calls
Puts
May
23.50%
25,000
5,350
4,000
July
22.50%
Jurgens Bauer jurgens@gmail.com PICO-Cotton (212) 748 - 1388 trading floor (973) 652 - 4694 mobile (212) 742-5284 fax
