Jul '08
The report was considered bearish since an average estimate of 9.00 million acres has been factored into the market. Weakness immediately kicked in after release of the report and an intra day low at 81.80 was established basis Z'08. Supported by a trader buying 2,000 contracts December 85/95 strike call spreads for 220 points, Z'08 futures was trading at 160 points lower.
Today marked the last trading day of the second quarter of the year and not much excitement came out of the market. Cotton volume is mediocre at 15,500 contracts in futures and 10,600 contracts in options. West Texas received more rain over the weekend. Most of the hail damage is kept to the west of Lubbock. However, there are still plenty of uncertainties in this market which might take the prices to move either direction.
Technically, we had the biggest pull back during recent sessions driven by the bearish USDA acreage report. December contract made a try to break through the 78.50 level and settled right at the 50 day average price. Cotton futures is finding good resistance around 82 cents basis Z'08.
As there are plenty of uncertainties in the market, we will have to wait and see if it can break through the support level or we will eventually hold here and go higher. Fundamental wise, we will not have another big news until the supply and demand report to be released next Friday. Meanwhile, cotton is likely to continue following the outside markets.
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