Another weak session in NYF cotton as we saw strong U.S. dollar and overall weakness in the commodities markets Tuesday. Cotton futures kept trading lower as we broke several key technical support levels late last week. Technical related selling as well as weaker outside markets and bearish fundamentals all confirmed cotton’s downside movement.
Early morning options trading were featured by large volume of bearish activities which included Z’08 70 cent put buying at 450 points, Z’08 68 cent put and 88 cent call bear fence at 180 point debit for the puts, and U’08 81 cent call selling at 120 points.
All months traded sharply lower upon Chicago grains market re-open, and a loss of over 230 points was posted when N’08 reached the low of the day at 63.10. Cotton eventually regained part of the loss to close near the mid range today. Volume was impressive today with 43,500 contracts in futures and 32,800 contracts in options.
The market feels weak overall considering the bearish fundamentals. Spec funds are reducing their long positions and increasing their shorts. Also, CFTC announced several market initiatives to address the agricultural futures markets, which proposed better tracking procedure for index and spec trading.
On the other hand, mill buying activities should be the supporting factor of the market prices. We’re expecting a decent export report out of this Thursday’s USDA release, which will likely give the market certain support.
Technically, the MACD crossed back down and we broke several key support levels last week. Today’s low is challenging the 63 cent level basis N’08 and the next support lies in 62.90, which was the low created on August 27 last year. Specs and index funds are adding to short positions and we may see the spec position cross into negative territory for the first time in over a year.
As demand remains hand to mouth and the trade are more vulnerable after the market spike in March, we may see more bearish options that could trigger new spec sell stops. N’08 now is significantly below the moving average and the near term trend is looking negative.
Technically, the MACD crossed back down and we broke several key support levels last week. Today’s low is challenging the 63 cent level basis N’08 and the next support lies in 62.90, which was the low created on August 27 last year. Specs and index funds are adding to short positions and we may see the spec position cross into negative territory for the first time in over a year.
As demand remains hand to mouth and the trade are more vulnerable after the market spike in March, we may see more bearish options that could trigger new spec sell stops. N’08 now is significantly below the moving average and the near term trend is looking negative.
