USA : Cotton inquiries may not convert to huge sales

After a long holiday weekend, the market was ready to continue feeding off of last weeks gains and break through the 67.00 c/lb. level in H'08. Spreads between the back months remained steady to wider as most specs and trade continue to square up moving into the year end.
Cotton inquiries are not close to generating new sales at the moment and that may weigh on the market more after the year end close and possible profit taking. Volume was average with 16,000 futures and 19,000 options as the market continues to grind higher.
Most all commodities were higher as the stock market remained relatively unchanged as the retail news was slightly negative based on Christmas sales. However, soybeans were pushing limit up at one point and pulled corn and wheat higher as well.
Metals were strong as well as oil prices reaching over 96 dollars a barrel for the first time in several months. Along with a weaker dollar, the commodity market looks ready to push for the highs and end the year on a strong note after several record breaking performances during 2007. The spec hedge report coming out tomorrow should show additional longs pushing
closer to 20% of the open interest as it continues to rise.
Technically we broke the resistance at the 67.00 cent level, and continue to hold the upside trend line started last week. RSI is above 60% and the specs are adding back to their long position. Please see a potential trading range short term for the H’08 onpage 2. 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 run out of steam.