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Market is waiting for fund support
27
Mar '08
We continue to see good selling resistance at 75 cents in K'08 which has kept a short term cap on the market which could extend through FND in options on April 11th. There is a large open interest in the K'08 75 calls that could explain the selling pressure when K'08 breaks this level.

We did get good put selling in the N'08 which allowed the market to rally early into good scale up selling, but as grains started to weaken and soybeans came off the limit, cotton fell back hard and only made back some of the correction on the close. All of this took place in very light volume with only 18,000 futures and 23,000 options.

We are not expecting any significant sales or shipments to show up this week and most traders are more anxious about the acreage report on Monday coming in higher or lower than 9.5 million acres. There is a range of guesses which mostly lean to the lower side as far as 8.5.

The conservative guess would be somewhere in the middle at 9.0 million acres which may not provide enough support to break through the 75 cent resistance and could lead to a retest of the lows. Demand remains weak and the market is waiting for fund support on the dips which does not seem to show up unless the spot month breaks 70 cents.

Technically, the RSI is near 45 and not showing oversold levels. If this market stalls and tries to come down, we will cross the 9 and 50 day moving averages which would be very bearish. This could lead to a technical sell signal and with growing cert stocks and falling open interest, we could break the long term upward trend channel just below 69 cents.

The dollar remains weak, but the hedge funds may take some more profits at the end of the quarter which is bearish. The commodity complex is cooling off right now but could have further downside before a rebound.

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