Speculators have so far held on or even increased their net long holdings, based on a further increase in total open interest to 214’167 contracts this week. The short-term uptrend, which saw the market gain ten cents since the last USDA report, was broken on Monday and has stalled upside momentum for now. However, we don’t expect speculators to bail out of their positions in greater numbers unless the market falls below 78 cents.
Tomorrow’s USDA report, coupled with options expiration and the Goldman roll, should make for an interesting trading session. The USDA supply/demand report shouldn’t hold any major surprises. We still have a two-tiered global market between high-priced China and a much more affordable rest-of-the-world. We need to watch out for any further tightening in the rest-of-the-world’s balance sheet, since it could provide the base for another jump in prices. However, for now we feel that the market will most likely remain in a 78-84 cents trading range, at least until we get past the March notice period.
Plexus Cotton Limited