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Market continues to be choppy & volatile
17
Jul '08
Market continues to be choppy and volatile Wednesday. Overnight session brought lower prices amid thin volume along with weakness in grains. Early bullish options supported the market all the way up to touch 74.20 basis Z'08, the trend line resistance. Crude oil extended yesterday's sell off and tumbled $5 after release of the weekly inventory report.

Cotton traded more in line with outside commodities and also tumbled to today's low at 72.56. It appears that strength from grains finally influenced cotton and more friendly options came later in the session when a group bought 5,000 lots December contract 95 strike calls for 110 points. Z'08 eventually settled nicely at 12 points higher, or 73.83. Tomorrow's export report should give us decent numbers as business was seen done under 72 cents on NYF.

Today's big surprise yet again came from crude oil. Following yesterday's big sell off which was triggered by the negative feeling towards the overall economic situation and the so called definitely possible new legislation regulating energy market speculation, the inventory report came out today at 10:35 in the morning.

The report unexpectedly raised the U.S. inventory by 3 million barrels last week, which prompted the drop in crude price. Stocks market got its breather from this oil price drop and turned higher. More talks were going on in Washington today and apparently the current top priority will be to stabilize the nation's financial system.

At the moment, cotton seems to be forming a long term trading range between 70/80 cents. We find good demand scale down when the front month breaks 70 cents, but there is good trade scale up selling above 80 cents where certing cotton becomes more attractive. Cotton has lost nearly 10 cents since end of June and we have been trading sideways looking for a short term bottom.

The near term trading low of around 71 cents has encouraged some buying interest from the funds and charted two positive candle sticks on the technical picture. We could again test the trend line resistance at 74.20 tomorrow, and the anticipated good export report could provide some support as well.

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