Cotton saw moderate gain this week amid light volume and dropping open interest. The strength in outside commodities markets provided the cotton market with support; however, the lack of strong hands from the big funds, liquidity of the market is suffering.
Overnight ICE opened at around unchanged to slightly lower, and gradually traded higher to the intra day high at 74.90 basis N’08 and 82.59 basis Z’08. Resistance started kicking in at these levels and cotton turned direction before the Chicago market’s re-open. Lackluster described the rest of the trading session with estimated 11,500 contracts in futures and 6,000 in options.
Demand from overseas has dried out at current price levels, as proved by another poor USDA export report yesterday. As demand is bearish, the acreage report to be released next Monday June 30th may add a bullish factor into the market. The market is expecting a cutback on the plantings for the 08/09 crop year.
The commitment of traders report today revealed that as of Tuesday June 24th, non commercials have reduced their net long positions by 1,000 contracts by reducing both their longs and shorts. Commercials also reduced both their longs and shorts with a net effect of going shorter by 1,800 contracts. Index funds, on the other side, increased their net long position by 1,600 contracts. Please see chart on page 2 in attached PDF.
Technically, cotton held up well during today’s session encountering resistance after yesterday’s rally. Crude oil is obviously the most important market driving force short term as the equity markets continue to weaken, thus give strength to commodities if this rally continues.
Although next Monday’s plantings report will provide some fundamental news to the market, cotton will continue to follow the outside markets as the dollar and equity markets struggle. Cotton futures is finding good resistance around 82 cents basis Z’08 and we will have to wait and see if it can break through this level or we eventually go lower.
source:fibre2fashion.com
